<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1997
REGISTRATION NO. 333-33027
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
BIG DOG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
-------------------
<TABLE>
<S> <C> <C>
DELAWARE 5651 52-1868665
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
-------------------
121 GRAY AVENUE
SANTA BARBARA, CALIFORNIA 93101
(805) 963-8727
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
ANTHONY J. WALL
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
BIG DOG HOLDINGS, INC.
121 GRAY AVENUE
SANTA BARBARA, CALIFORNIA 93101
(805) 963-8727
FAX: (805) 962-9460
(Name and address, including zip code and telephone and fax number, of agent for
service)
-------------------
COPIES TO:
<TABLE>
<S> <C>
JEFFREY M. WEINER, ESQ. THOMAS A. BEVILACQUA, ESQ.
Kimball & Weiner LLP Brobeck, Phleger & Harrison LLP
555 S. Flower Street Two Embarcadero Place
Suite 4540 2200 Geng Road
Los Angeles, CA 90071 Palo Alto, CA 94303-0913
(213) 538-3800 (415) 424-0160
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
-------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Amendment No. 2 is being filed by Big Dog Holdings, Inc., a Delaware
corporation (the "Company"), in order to amend certain portions of Part II of
the Company's Registration Statement on Form S-1. Accordingly, Part I of the
Form S-1 is not included in this Amendment No. 2.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation*
3.1A Certificate of Correction
3.2 Amended and Restated Bylaws*
4.1 Reference is hereby made to Exhibits 3.1*, 3.1A and 3.2*
4.2 Specimen Stock Certificate*
5.1 Opinion of Kimball & Weiner LLP
10.1 Amended and Restated Credit Agreement dated as of June 30, 1995 between Big Dog Holdings,
Inc., Big Dog USA, Inc. and Fortune Dogs, Inc., as amended by First Amendment, dated as
of February 15, 1996, Second Amendment dated as of April 30, 1996, and Third Amendment
dated as of May 3, 1997*
10.2 Form of Stockholder Agreement made as of January 2, 1996 between Big Dog Holdings, Inc.
and certain stockholders*
10.3 Forms of Notes and Warrants issued November 4, 1996*
10.4 Consulting Agreement between Big Dog Holdings, Inc. and Fortune Financial dated as of
March 1, 1997*
10.5 Buy-Sell Agreement among Big Dog Holdings, Inc., Fred Kayne and Andrew D. Feshbach dated
as of January 1, 1997*
10.6 1996 Stock Incentive Plan*
10.7 Form of Purchase Agreement under the Big Dog Holdings, Inc. 1996 Stock Incentive Plan*
10.8 1997 Stock Option Plan*
10.9 Form of Stock Option Agreement under the 1997 Stock Option Plan*
10.10 Amended and Restated 1997 Performance Award Plan
10.10A Form of Stock Option Agreement under 1997 Performance Award Plan*
10.11 Lease Agreement between Big Dog Holdings, Inc. and State of California Public Retirement
System dated January 13, 1995*
10.12 Lease Agreement between Big Dog Holdings, Inc. and S.V.B. Properties dated as of June 1,
1994, as amended by Lease Agreement dated as of December 1, 1994, Second Lease
Amendment dated as of March 1, 1996 and Third Lease Amendment dated as of July 22,
1996*
10.13 Lease Agreement between Big Dog Holdings, Inc. and the Eldred Family Trust & Jason Eldred
Trust dated as of April 4, 1996*
10.14 Form of Indemnification Agreement*
11.1 Statement regarding computation of per share earnings (loss)*
21.1 List of Subsidiaries of Big Dog Holdings, Inc.*
23.1 Consent of Kimball & Weiner LLP (included in Opinion filed in Exhibit 5.1)*
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (included in signature page)*
27.1 Financial data schedule*
99.1 Consent of Robert Schnell*
99.2 Consent of Steven C. Good*
99.3 Consent of David J. Walsh*
99.4 Consent of NPD Group*
</TABLE>
- -------
* Previously Filed
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Santa
Barbara, State of California, on September 19, 1997.
<TABLE>
<S> <C> <C>
BIG DOG HOLDINGS, INC.
By: /s/ ANTHONY J. WALL
-----------------------------------------
Anthony J. Wall
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
*
- ------------------------------ Chairman of the Board September 19, 1997
Fred Kayne
President, Chief Executive
* Officer (Principal
- ------------------------------ Executive Officer) and September 19, 1997
Andrew D. Feshbach Director
/s/ ANTHONY J. WALL Executive Vice President,
- ------------------------------ General Counsel, Secretary September 19, 1997
Anthony J. Wall and Director
* Chief Financial Officer
- ------------------------------ (Principal Financial September 19, 1997
Jonathan Howe Officer)
Senior Vice President,
* Finance
- ------------------------------ (Principal Accounting September 19, 1997
Roberta Morris Officer)
*By: /s/ ANTHONY J. WALL
-------------------------
Anthony J. Wall
(ATTORNEY-IN-FACT)
II-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation*
3.1A Certificate of Correction
3.2 Amended and Restated Bylaws*
4.1 Reference is hereby made to Exhibits 3.1*, 3.1A and 3.2*
4.2 Specimen Stock Certificate*
5.1 Opinion of Kimball & Weiner LLP
10.1 Amended and Restated Credit Agreement dated as of June 30, 1995 between Big Dog Holdings, Inc., Big
Dog USA, Inc. and Fortune Dogs, Inc., as amended by First Amendment, dated as of February 15, 1996,
Second Amendment dated as of April 30, 1996, and Third Amendment dated as of May 3, 1997*
10.2 Form of Stockholder Agreement made as of January 2, 1996 between Big Dog Holdings, Inc. and certain
stockholders*
10.3 Forms of Notes and Warrants issued November 4, 1996*
10.4 Consulting Agreement between Big Dog Holdings, Inc. and Fortune Financial dated as of March 1, 1997*
10.5 Buy-Sell Agreement among Big Dog Holdings, Inc., Fred Kayne and Andrew D. Feshbach dated as of January
1, 1997*
10.6 1996 Stock Incentive Plan*
10.7 Form of Purchase Agreement under the Big Dog Holdings, Inc. 1996 Stock Incentive Plan*
10.8 1997 Stock Option Plan*
10.9 Form of Stock Option Agreement under the 1997 Stock Option Plan*
10.10 Amended and Restated 1997 Performance Award Plan
10.10A Form of Stock Option Agreement under 1997 Performance Award Plan*
10.11 Lease Agreement between Big Dog Holdings, Inc. and State of California Public Retirement System dated
January 13, 1995*
10.12 Lease Agreement between Big Dog Holdings, Inc. and S.V.B. Properties dated as of June 1, 1994, as
amended by Lease Agreement dated as of December 1, 1994, Second Lease Amendment dated as of March 1,
1996 and Third Lease Amendment dated as of July 22, 1996*
10.13 Lease Agreement between Big Dog Holdings, Inc. and the Eldred Family Trust & Jason Eldred Trust dated
as of April 4, 1996*
10.14 Form of Indemnification Agreement*
11.1 Statement regarding computation of per share earnings (loss)*
21.1 List of Subsidiaries of Big Dog Holdings, Inc.*
23.1 Consent of Kimball & Weiner LLP (included in Opinion filed in Exhibit 5.1)*
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (included in signature page)*
27.1 Financial data schedule*
99.1 Consent of Robert Schnell*
99.2 Consent of Steven C. Good*
99.3 Consent of David J. Walsh*
99.4 Consent of NPD Group*
</TABLE>
- -------
* Previously Filed
<PAGE>
3,500,000 SHARES (1)
BIG DOG HOLDINGS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
September__, 1997
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
NEEDHAM & COMPANY, INC.
As Representatives of the several Underwriters
c/o Robertson, Stephens & Company LLC
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Big Dog Holdings, Inc., a Delaware corporation (the "Company"), and
certain stockholders of the Company named in Schedule B hereto (hereafter called
the "Selling Stockholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
2,800,000 shares of its authorized and unissued Common Stock, $.01 par value per
share, to the several Underwriters. Certain Selling Stockholders, acting
severally and not jointly, propose to sell an aggregate of 700,000 shares of the
Company's authorized and outstanding Common Stock, $.01 par value per share, to
the several Underwriters. The 2,800,000 shares of Common Stock, $.01 par value
per share, of the Company to be sold by the Company are hereinafter called the
"Company Shares" and the 700,000 shares of Common Stock, $.01 par value per
share, to be sold by the Selling Stockholders are hereinafter called the
"Selling Stockholder Shares." The Company Shares and the Selling Stockholder
Shares are hereinafter collectively referred to as the "Firm Shares." Certain
Selling Stockholders also propose to grant, severally and not jointly, to the
Underwriters an option to purchase up to 525,000 additional shares of the
Company's Common Stock, $.01 par value per share (the "Option Shares"), as
provided in Section 7 hereof. As used in this Agreement, the term "Shares"
shall include the Firm Shares and the Option Shares. All shares of Common
Stock, $.01 par value per share, of the Company to be outstanding after giving
effect to the sales contemplated hereby, including the Shares, are hereinafter
referred to as "Common Stock."
- ------------------
(1) Plus an option to purchase up to 525,000 additional shares from certain
Selling Stockholders to cover over-allotments, if any.
<PAGE>
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
MAJOR SELLING STOCKHOLDERS.
I. The Company and each of Fred Kayne and Andrew Feshbach (the
"Major Selling Stockholders"), jointly and severally, represents and warrants to
and agrees with each Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-33027)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
pursuant to Rule 462(b) of the Rules and Regulations as may have been required
prior to the date hereof have been similarly prepared and filed with the
Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses subject to completion and such
abbreviated registration statements as may hereafter be required. Copies of
such registration statement and amendments, of each related prospectus subject
to completion (the "Preliminary Prospectuses"), and of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations have
been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the registration
statement pursuant to Rule 430A(a), (i) pursuant to subparagraph (1), (4) or (7)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the registration statement (including a final form of prospectus),
or (ii) if Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations. If
the registration statement relating to the Shares has not been declared
effective under the Act by the Commission, the Company will prepare and promptly
file an amendment to the registration statement, including a final form of
prospectus, or, if Robertson, Stephens & Company LLC, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement, including financial statements, schedules and exhibits,
in the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) or Rule
434(d) of the Rules and Regulations) and, in the event of any amendment thereto
or the filing of any abbreviated registration statement pursuant to Rule 462(b)
of the Rules and Regulations relating thereto after the effective date of such
registration statement, shall also mean (from and after the effectiveness of
such amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); PROVIDED, HOWEVER, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of Robertson, Stephens & Company LLC,
on behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus subject to
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Underwriters by the Company and circulated by the Underwriters
to all prospective purchasers of the Shares (including the information deemed to
be a part of the Registration Statement at the time it became effective pursuant
to Rule 434(d) of the Rules and Regulations). Notwithstanding the foregoing, if
any revised prospectus shall be provided to the Underwriters by
2
<PAGE>
the Company for use in connection with the offering of the Shares that differs
from the prospectus referred to in the immediately preceding sentence (whether
or not such revised prospectus is required to be filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations), the term "Prospectus"
shall refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use. If in reliance on Rule 434 of the
Rules and Regulations and with the consent of Robertson, Stephens & Company LLC,
on behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the Prospectus and the term sheet, together, will not be
materially different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of the Registration Statement (including any Preliminary
Prospectus contained therein) or the Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased,
(i) the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations
(including, without limitation, the inclusion of all exhibits required to be
filed therewith pursuant to Item 601 of Regulation S-K under the Act) and will
in all material respects conform to the requirements of the Act and the Rules
and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include 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 (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include 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; PROVIDED, HOWEVER, that none of the
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter or any of the Representatives specifically for
use in the preparation thereof.
(c) Each of the Company and its subsidiaries (the term
"subsidiaries" shall include for all purposes in this Agreement, any
subsidiaries of any of the Company's subsidiaries) has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation with full power and authority (corporate and
other) to own, lease and operate its properties and conduct its business as
described in the Prospectus; the Company owns all of the outstanding capital
stock of its subsidiaries (and each subsidiary owns all of the capital stock of
its subsidiaries) free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal, foreign and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect;
neither the Company nor any of its subsidiaries is in violation of its
respective charter or bylaws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material bond, debenture, note or other evidence of indebtedness, or in any
material lease, contract, license, indenture, mortgage, deed of trust, loan
agreement, joint venture or other material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective properties
3
<PAGE>
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than Big Dog
U.S.A., Inc., a California corporation and Big Dog International, Inc., a
California corporation.
(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company
and is a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a material
default under, (i) any material bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, license, indenture, mortgage, deed
of trust, loan agreement, joint venture or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or any of
its subsidiaries or their respective properties may be bound, (ii) the charter
or bylaws of the Company or any of its subsidiaries, or (iii) any law, order,
rule, regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its subsidiaries or over their respective properties. No
consent, approval, authorization or order of or qualification with any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or over their
respective properties is required for the execution and delivery of this
Agreement and the consummation by the Company or any of its subsidiaries of the
transactions herein contemplated, except such as may be required under the Act
or under state or other securities or Blue Sky laws, all of which requirements
have been satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
and each Major Selling Stockholder's knowledge, threatened action, suit, claim
or proceeding against the Company, any of its subsidiaries or any of their
respective officers or any of their respective properties, assets or rights
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective officers or properties or otherwise which (i) is reasonably
likely to result in any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise or is reasonably likely to
materially and adversely affect their properties, assets or rights, (ii) might
reasonably be expected to prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company or any of its subsidiaries of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by the Act
or the Rules and Regulations which have not been accurately described in all
material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares and the Option Shares) have been duly
authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
and conforms to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state in all
material respects the substance of the instruments defining the capitalization
of the Company); the Company Shares have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right,
4
<PAGE>
registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Company Shares or the issuance
and sale thereof other than those that have been expressly waived prior to the
date hereof and those that will automatically expire upon and will not apply to
the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act or under state or other
securities or Blue Sky laws. All issued and outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and are owned by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as disclosed in the
Prospectus and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(g) Deloitte & Touche LLP, which has audited the consolidated
financial statements of the Company, together with the related schedules and
notes, as of June 30, 1997 and for each of the years in the three (3) years
ended December 31, 1996 filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods to which
they apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may be
otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been
(i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (iii) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the Company
(other than indebtedness incurred under its credit facility with Israel Discount
Bank in the ordinary course of business) or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (vi) any loss or
damage (whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which is
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a material adverse effect on the condition (financial or
5
<PAGE>
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise, (ii) the agreements to which
the Company or any of its subsidiaries is a party described in the Registration
Statement and Prospectus are valid agreements, enforceable by the Company and
its subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and neither the Company nor any of its subsidiaries
is in material breach of any such agreements and, to the best of the Company's
and each Major Selling Stockholder's knowledge, the other contracting party or
parties thereto are not in material breach or material default under any of such
agreements, and (iii) each of the Company and its subsidiaries has valid and
enforceable leases for all material properties described in the Registration
Statement and Prospectus as leased by it, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as set forth in the Registration Statement
and Prospectus, the Company owns or leases all such properties as are necessary
to its operations as now conducted.
(j) The Company and its subsidiaries have timely filed
(including extensions) all necessary federal, state and foreign income and
franchise tax returns and have paid all taxes shown thereon as due, and there is
no tax deficiency that has been or, to the best of the Company's and each Major
Selling Stockholder's knowledge, might be asserted against the Company or any of
its subsidiaries that might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise; and all tax
liabilities are adequately provided for on the books of the Company and its
subsidiaries.
(k) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility of the types and in the amounts
generally deemed adequate for their respective businesses, and to the Company's
knowledge is consistent with insurance coverage maintained by similar companies
in similar businesses, including, but not limited to, insurance covering real
and personal property owned or leased by the Company or its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect; neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for on its general liability policy during the past three (3) years;
and neither the Company nor any such subsidiary nor any Major Selling
Stockholder has any reason to believe that the Company and its subsidiaries 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, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(l) No labor disturbance by the employees of the Company or any
of its subsidiaries exists or, to the Company's knowledge, is imminent; and
neither the Company nor any Major Selling Stockholder is aware of any existing
or imminent labor disturbance by the employees of any of its principal
suppliers, subcontractors, manufacturers, or distributors that might be expected
to result in a material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise. No collective bargaining
agreement exists with any of the Company's employees and, to the best of the
Company's and each Major Selling Stockholder's knowledge, no such agreement is
imminent.
(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all inventions, trade secrets, know-how, trademarks,
trademark registrations, service marks, service mark registrations, tradenames,
copyrights, approvals and government authorizations, described in the
Registration Statement and Prospectus as being owned by it or useful in the
conduct of its businesses as now conducted or proposed to be conducted as
described in the Registration Statement and Prospectus. To the Company's
knowledge, all trademarks, trademark registrations, service marks and service
mark registrations are valid and enforceable and are not under imminent threat
of termination or expiration; the Company and its subsidiaries has not received
any notice
6
<PAGE>
of, and has no knowledge of, any infringement of or conflict with asserted
rights of the Company or its subsidiaries by others with respect to any
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which might reasonably be expected to have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise; and the Company and its subsidiaries and the Major Selling
Stockholders have not received any notice of, and have no knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, is reasonably likely to have a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as one
enterprise.
(n) The Company has filed a registration statement pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended, to register
the Common Stock and the Common Stock has been approved for quotation on The
Nasdaq National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) Neither the Company nor any of its subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any foreign, federal or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company, each Selling
Stockholder and each securityholder (other than certain optionholders holding
options which do not vest, and are thus not exercisable, until after the
expiration of the Lock-up Period) has agreed in writing that such person will
not, for a period of 180 days from the date that the Registration Statement is
declared effective by the Commission (the "Lock-up Period"), offer to sell,
contract to sell (including, without limitation, in a short sale), or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to limited
partners or stockholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (iii) with the
prior written consent of Robertson, Stephens & Company LLC, provided that the
foregoing shall not apply to any Shares sold to the Underwriters under this
Agreement. The foregoing restriction has been expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even
7
<PAGE>
if such Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Furthermore, such person has also agreed and
consented to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person except in
compliance with this restriction. The Company has provided to counsel for the
Underwriters a complete and accurate list of all securityholders of the Company
and the number and type of securities held by each securityholder. The Company
has provided to counsel for the Underwriters true, accurate and complete copies
of all of the agreements pursuant to which its officers, directors and
stockholders have agreed to such or similar restrictions (the "Lock-up
Agreements") presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other stockholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of Robertson, Stephens &
Company LLC.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business and which might reasonably be expected to
have a material adverse effect on the Company's business, financial condition or
results of operations, (ii) the Company has received no notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the Registration Statement and
the Prospectus, (iii) the Company will not be required to make future material
capital expenditures to comply with Environmental Laws, and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.), or
otherwise designated as a contaminated site under applicable state or local law.
(u) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurances that
its and its subsidiaries' (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 accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus and except
such as individually do not exceed $50,000 or, in aggregate, exceed $100,000.
The transactions, arrangements, agreements and understandings set forth in the
Registration Statement and the Prospectus under the caption "Certain
Relationships and Related Transactions" are the only transactions, arrangements,
agreements and understandings required to be therein disclosed.
(w) The Company has not had any disagreements, during its two
most recent fiscal years or any subsequent interim period, with an independent
accountant who was previously engaged as the principal accountant to audit the
Company's financial statements and on whom the principal accountant expressed
reliance in its report (either of whom resigned, indicated that it declined to
stand for re-election after the completion of the current audit, or was
dismissed), on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s)
would require disclosure in the Registration Statement.
(x) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
8
<PAGE>
II. Each Selling Stockholder (including each Major Selling
Stockholder), severally and not jointly, represents and warrants to and agrees
with each Underwriter and the Company that:
(a) Such Selling Stockholder now has and on the Closing Date,
and on any later date on which Option Shares are purchased, will have valid
marketable title to the Shares to be sold by such Selling Stockholder, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than (i) pursuant to this Agreement and (ii) pursuant to the
pledge of the Shares to secure a promissory note issued to purchase the Shares
(which lien shall be released in full on or prior to the Closing Date or Option
Closing Date, as applicable); and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right exists with
respect to such Shares; and upon delivery of such Shares hereunder and payment
of the purchase price as herein contemplated, each of the Underwriters will
obtain valid marketable title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest pertaining to
such Selling Stockholder or such Selling Stockholder's property, encumbrance,
claim or equitable interest, including any liability for estate or inheritance
taxes, or any liability to or claims of any creditor, devisee, legatee or
beneficiary of such Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "Power of Attorney")
appointing Andrew D. Feshbach and Anthony J. Wall as attorneys-in-fact
(collectively, the "Attorneys" and individually, an "Attorney") and a Custody
Agreement (the "Custody Agreement") with U.S. Stock Transfer Corporation, as
custodian (the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such Selling
Stockholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Stockholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(i) hereof on behalf of
such Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in Section 3
hereof, to authorize the delivery of the Selling Stockholder Shares and any
Option Shares to be sold by such Selling Stockholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Shares or a stock power or powers with respect thereto, to
accept payment therefor, and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required
for the execution and delivery by such Selling Stockholder of the Power of
Attorney and the Custody Agreement, the execution and delivery by or on behalf
of such Selling Stockholder of this Agreement and the sale and delivery of the
Selling Stockholder Shares and any Option Shares to be sold by such Selling
Stockholder under this Agreement (other than, at the time of the execution
hereof (if the Registration Statement has not yet been declared effective by the
Commission), the issuance of the order of the Commission declaring the
Registration Statement effective and such consents, approvals, authorizations or
orders as may be necessary under state or other securities or Blue Sky laws)
have been obtained and are in full force and effect; such Selling Stockholder,
if other than a natural person, has been duly organized and is validly existing
in good standing under the laws of the jurisdiction of its organization as the
type of entity that it purports to be; and such Selling Stockholder has full
legal right, power and authority to enter into and perform its obligations under
this Agreement and such Power of Attorney and Custody Agreement, and to sell,
assign, transfer and deliver the Shares to be sold by such Selling Stockholder
under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter acquired
directly by such Selling Stockholder or with respect to which such Selling
Stockholder has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts or by will or intestacy or to a revocable
family trust, provided the donee or donees or other transferee thereof agree in
writing to be bound by this restriction, (ii) as a distribution to limited
partners or stockholders of such Selling Stockholder, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction,
9
<PAGE>
or (iii) with the prior written consent of Robertson, Stephens & Company LLC,
provided that the foregoing shall not apply to any Shares sold to the
Underwriters under this Agreement. The foregoing restriction is expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than the Selling Stockholder.
Such prohibited hedging or other transactions include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Such Selling Stockholder also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the securities held by such Selling Stockholder
except in compliance with this restriction.
(e) Certificates in negotiable form for all Shares to be sold by
such Selling Stockholder under this Agreement, together with a stock power or
powers duly endorsed in blank by such Selling Stockholder, have been placed in
custody with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification and contribution hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of or constitute a default under
any material bond, debenture, note or other evidence of indebtedness, or under
any material lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder, or any Selling
Stockholder Shares or any Option Shares to be sold by such Selling Stockholder
hereunder, may be bound or, to the best of such Selling Stockholders' knowledge,
result in any violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over such Selling Stockholder or over
the properties of such Selling Stockholder, or, if such Selling Stockholder is
other than a natural person, result in any violation of any provisions of the
charter, bylaws or other organizational documents of such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder and the Selling Stockholder
Shares that is contained in the representations and warranties of such Selling
Stockholder in such Selling Stockholder's Power of Attorney or set forth in the
Registration Statement or the Prospectus is, and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date, and on any later date on which
Option Shares are to be purchased, was or will be, true, correct and complete,
and does not, and at the time the Registration Statement became or becomes, as
the case may be, effective and at all times subsequent thereto up to and on the
Closing Date (hereinafter defined), and on any later date on which Option Shares
are to be purchased, 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 such information not misleading.
10
<PAGE>
(j) Such Selling Stockholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing Date, or
any later date on which Option Shares are to be purchased, as the case may be,
and will advise one of its Attorneys and Robertson, Stephens & Company LLC prior
to the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, if any statement to be made on behalf of such
Selling Stockholder in the certificate contemplated by Section 6(i) would be
inaccurate if made as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be.
(k) Such Selling Stockholder does not have, or has waived prior
to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company or any of the other Selling Stockholders to the Underwriters
pursuant to this Agreement; such Selling Stockholder does not have, or has
waived prior to the date hereof, any registration right or other similar right
to participate in the offering made by the Prospectus, other than such rights of
participation as have been satisfied by the participation of such Selling
Stockholder in the transactions to which this Agreement relates in accordance
with the terms of this Agreement; and such Selling Stockholder does not own any
warrants, options or similar rights to acquire, and does not have any right or
arrangement to acquire, any capital stock, rights, warrants, options or other
securities from the Company, other than those described in the Registration
Statement and the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and each of the Selling
Stockholders selling Selling Stockholder Shares agrees, severally and not
jointly, to sell to the Underwriters, and each Underwriter agrees, severally and
not jointly, to purchase from the Company and the Selling Stockholders,
respectively, at a purchase price of $_____ per share [IPO PRICE LESS DISCOUNT],
the respective number of Company Shares and Selling Stockholder Shares set forth
opposite the names of the Company and the Selling Stockholders in Schedule B
hereto. The obligation of each Underwriter to the Company and to each Selling
Stockholder shall be to purchase from the Company or such Selling Stockholder
that number of Company Shares or Selling Stockholder Shares, as the case may be,
which (as nearly as practicable, as determined by you) is in the same proportion
to the number of Company Shares or Selling Stockholder Shares, as the case may
be, set forth opposite the name of the Company or such Selling Stockholder in
Schedule B hereto as the number of Firm Shares which is set forth opposite the
name of such Underwriter in Schedule A hereto (subject to adjustment as provided
in Section 10) is to the total number of Firm Shares to be purchased by all the
Underwriters under this Agreement.
The certificates in negotiable form for the Selling Stockholder Shares
have been placed in custody (for delivery under this Agreement) under the
Custody Agreement. Each Selling Stockholder agrees that the certificates for
the Selling Stockholder Shares of such Selling Stockholder so held in custody
are subject to the interests of the Underwriters hereunder, that the
arrangements made by such Selling Stockholder for such custody, including the
Custody Agreement and the Power of Attorney is to that extent irrevocable and
that the obligations of such Selling Stockholder hereunder shall not be
terminated by the act of such Selling Stockholder or by operation of law,
whether by the death or incapacity of such Selling Stockholder or the occurrence
of any other event, except as specifically provided herein or in the Custody
Agreement or Power of Attorney. If any Selling Stockholder should die or be
incapacitated, or if any other such event should occur, before the delivery of
the certificates for the Selling Stockholder Shares hereunder, the Selling
Stockholder Shares to be sold by such Selling Stockholder shall, except as
specifically provided herein or in the Custody Agreement, be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death or other event.
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by wire
transfer, certified or official bank check or checks drawn in same-day funds,
payable to the order of the Company with regard to the Shares being purchased
from the Company, and to the order of the Custodian for the respective
11
<PAGE>
accounts of the Selling Stockholders with regard to the Shares being purchased
from such Selling Stockholders, at the offices of Kimball & Weiner LLP, 555 S.
Flower Street, suite 4540, Los Angeles, California, 90071 (or at such other
place as may be agreed upon among the Representatives and the Company and the
Attorneys), at 7:00 A.M., San Francisco time (a) on the third (3rd) full
business day following the first day that Shares are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M., San Francisco time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company and the Attorneys may determine (or at such time
and date to which payment and delivery shall have been postponed pursuant to
Section 10 hereof), such time and date of payment and delivery being herein
called the "Closing Date;" PROVIDED, HOWEVER, that if the Company has not made
available to the Representatives copies of the Prospectus within the time
provided in Section 4(d) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in San
Francisco or New York City, as you may reasonably request for checking at least
one (1) full business day prior to the Closing Date and will be in such names
and denominations as you may request, such request to be made at least two (2)
full business days prior to the Closing Date. If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose wire transfer(s), check or checks shall not have been received by you
prior to the Closing Date for the Firm Shares to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization and over-allotment by the Underwriters, and
under the table of Underwriters, second and eighth paragraphs under the caption
"Underwriting" in any Preliminary Prospectus and in the Prospectus constitutes
the only information furnished by the Underwriters to the Company for inclusion
in any Preliminary Prospectus, the Prospectus or the Registration Statement and
you, on behalf of the respective Underwriters, represent and warrant to the
Company and the Selling Stockholders that the statements made therein do not
include 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, in
the light of the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best efforts
to cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at
12
<PAGE>
the time it was originally declared effective in reliance upon Rule 430A(a) of
the Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus contains such information and has been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission; if the Company files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the Company will provide
evidence satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and Regulations,
have been filed, within the time period prescribed, with the Commission pursuant
to subparagraph (7) of Rule 424(b) of the Rules and Regulations; if for any
reason the filing of the final form of Prospectus is required under
Rule 424(b)(3) of the Rules and Regulations, it will provide evidence
satisfactory to you that the Prospectus contains such information and has been
filed with the Commission within the time period prescribed; it will notify you
promptly of any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which, in
the opinion of counsel for the several Underwriters ("Underwriters' Counsel"),
may be necessary or advisable in connection with the distribution of the Shares
by the Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have occurred
as a result of which the Prospectus or any other prospectus relating to the
Shares as then in effect would include 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; in
case any Underwriter is required to deliver a prospectus nine (9) months or more
after the effective date of the Registration Statement in connection with the
sale of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act; and it will file no amendment
or supplement to the Registration Statement or Prospectus which shall not
previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing, subject,
however, to compliance with the Act and the Rules and Regulations and the
provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to cooperate with you
to qualify the Shares for offering and sale under the securities laws of such
jurisdictions as you may designate and to continue such qualifications in effect
for so long as may be required for purposes of the distribution of the Shares,
except that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term
sheet under Rule 434, in no event later than the first (1st) full business
day following the first day that Shares are traded, copies of the
Registration Statement (three of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments
or supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you
may from time to time reasonably request. Notwithstanding the foregoing, if
Robertson, Stephens & Company LLC, on behalf of the several Underwriters,
shall agree to the utilization of Rule
13
<PAGE>
434 of the Rules and Regulations, the Company shall provide to you copies of
a Preliminary Prospectus updated in all respects through the date specified
by you in such quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal
year, and will furnish to you and the other several Underwriters hereunder,
upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange
or the National Association of Securities Dealers, Inc. ("NASD"), (v) every
material press release and every material news item or article in respect of
the Company or its affairs which was generally released to stockholders or
prepared by the Company or any of its subsidiaries, and (vi) any additional
information of a public nature concerning the Company or its subsidiaries, or
its business which you may reasonably request. During such five (5) year
period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company or any Selling Stockholder to perform any agreement on their
respective parts to be performed hereunder or to fulfill any condition of the
Underwriters' obligations hereunder, or if the Company shall terminate this
Agreement pursuant to Section 11(a) hereof, or if the Underwriters shall
terminate this Agreement pursuant to Section 11(b)(i), the Company will
reimburse the several Underwriters for all reasonable out-of-pocket expenses
(including fees and disbursements of Underwriters' Counsel) incurred by the
Underwriters in investigating or preparing to market or marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock 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 written notice from you advising the Company to the effect set
forth above, forthwith prepare,
14
<PAGE>
consult with you concerning the substance of and disseminate a press release
or other public statement, reasonably satisfactory to you, responding to or
commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without
the prior written consent of Robertson Stephens & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares and the Option Shares to be sold by the Company hereunder,
the Company's issuance of options or Common Stock under the Company's
presently authorized 1997 Stock Option Plan and the 1997 Performance Award
Plan (collectively, the "Option Plans") and presently outstanding warrants.
(m) During a period of ninety (90) days from the effective
date of the Registration Statement, the Company will not file a registration
statement registering shares under the Option Plans or other employee benefit
plan.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses
in connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the copying and/or printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and the
Custody Agreement and Power of Attorney, and any instruments related to any
of the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants; the
cost of furnishing to the several Underwriters copies of the Registration
Statement (including appropriate exhibits), Preliminary Prospectus and the
Prospectus, and any amendments or supplements to any of the foregoing; NASD
filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and reasonable fees
and disbursements of Underwriters' Counsel in connection with such NASD
filings and Blue Sky qualifications); and all other expenses directly
incurred by the Company and the Selling Stockholders in connection with the
performance of their obligations hereunder. Any additional expenses incurred
as a result of the sale of the Shares by the Selling Stockholders will be
borne collectively by the Company or the Selling Stockholders. The
provisions of this Section 5(a)(i) are intended to relieve the Underwriters
from the payment of the expenses and costs which the Selling Stockholders and
the Company hereby agree to pay, but shall not affect any agreement which the
Selling Stockholders and the Company may make, or may have made, for the
sharing of any of such expenses and costs. Such agreements shall not impair
the obligations of the Company and the Selling Stockholders hereunder to the
several Underwriters.
(ii) In addition to its other obligations under Section
8(a) hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) listed
from time to time in The Wall Street Journal which represents the base rate
on corporate loans posted by a substantial majority of the nation's thirty
(30) largest banks
15
<PAGE>
(the "Prime Rate"). Any such interim reimbursement payments which are not
made to the Underwriters within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(iii) In addition to their other obligations under
Section 8(b) hereof, each Selling Stockholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to such Selling
Stockholder, it will reimburse the Underwriters on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of such Selling Stockholder's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have been
improper, the Underwriters shall promptly return such payment to the Selling
Stockholders, together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section 8(c)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(c) hereof, they will reimburse the
Company and each Selling Stockholder on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Underwriters' obligation to reimburse the Company and each such Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Stockholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company and each such Selling Stockholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in
Sections 5(a)(ii), 5(a)(iii) and 5(b) hereof, including the amounts of any
requested reimbursement payments, the method of determining such amounts and the
basis on which such amounts shall be apportioned among the reimbursing parties,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock Exchange,
Inc. or pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Any such
arbitration will be limited to the operation of the interim reimbursement
provisions contained in Sections 5(a)(ii), 5(a)(iii) and 5(b) hereof and will
not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections 8(a), 8(b)
and 8(c) hereof or the obligation to contribute to expenses which is created by
the provisions of Section 8(e) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
16.
<PAGE>
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, any Selling Stockholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus.
(d) The Company's Common Stock shall have been approved for
inclusion on The Nasdaq National Market and the Company's registration statement
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended,
shall have been declared effective by the Commission.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of counsel for the Company and the Selling Stockholders, dated
the Closing Date or such later date on which Option Shares are to be purchased
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) The Company and each subsidiary (including all
subsidiaries of any Company subsidiary) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each subsidiary (including all
subsidiaries of any Company subsidiary) has the corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus;
(iii) The Company and each subsidiary (including all
subsidiaries of any Company subsidiary) is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or be
in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the Company and
its subsidiaries considered as one enterprise. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than Big Dog U.S.A., Inc. and Big Dog International, Inc.
(iv) The authorized, issued and outstanding capital stock of
the Company is, in all material respects, as set forth in the Prospectus under
the caption "Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company (including the Selling
Stockholder Shares) have been duly and validly issued and are fully paid and
nonassessable, and to such counsel's knowledge after due inquiry, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal
17.
<PAGE>
or other similar right; and, except as disclosed in or specifically contemplated
by the Registration Statement and the Prospectus, to the best of such counsel's
knowledge, there are no outstanding options, warrants or other rights calling
for the issuance of, and no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company;
(v) All issued and outstanding shares of capital stock of
each subsidiary of the Company (including all subsidiaries of any Company
subsidiary) have been duly authorized and validly issued and are fully paid and
nonassessable, and to such counsel's knowledge have not been issued in violation
of or subject to any preemptive right, co-sale right, registration right, right
of first refusal or other similar right and are owned by the Company, or in the
case of Big Dog International, Inc. by Big Dog U.S.A., Inc., free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest;
(vi) The Firm Shares to be issued by the Company pursuant to
the terms of this Agreement have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable, and to such counsel's
knowledge after due inquiry will not have been issued in violation of or subject
to any preemptive right, co-sale right, registration right, right of first
refusal or other similar right.
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement and the transactions herein contemplated
have been duly authorized by all necessary corporate action on the part of the
Company and this Agreement has been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(ix) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial and statistical data derived therefrom as to
which such counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the captions
"Risk Factors - Conflicts of Interest; Certain Related Transactions," "Risk
Factors - Shares Eligible for Future Sale," "Certain Relationships and Related
Transactions," "Description of Capital Stock," and "Shares Eligible for Future
Sale," in so far as such information constitutes a summary of documents referred
to therein, matters of law or legal conclusions has been reviewed by such
counsel and is a fair and accurate summary of such matters and conclusions and
does not omit to such counsel's knowledge any information required to be stated
therein; and the form of certificate evidencing the Common Stock and filed as an
exhibit to the Registration Statement complies with Delaware law;
(xii) The descriptions in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of the Delaware General
Corporation Law are accurate in all material respects and fairly present the
information required to be presented by the Act and the applicable Rules and
Regulations;
18.
<PAGE>
(xiii) To such counsel's knowledge, there are no agreements,
contracts, licenses, leases or other documents to which the Company or any of
its subsidiaries (including any subsidiaries of Company subsidiaries) is a party
of a character required to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the Registration
Statement which are not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation
of the transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws, or (b) to such counsel's knowledge result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or its
subsidiaries (including any subsidiary of a Company subsidiary), is a party or
by which its or their properties are bound, or any applicable statute, rule or
regulation or to such counsel's knowledge any order, writ or decree of any
court, government or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries, or its subsidiaries (including any
subsidiary of a Company subsidiary) or over any of their properties or
operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or its subsidiaries
(including any subsidiary of a Company subsidiary) or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act, from the Nasdaq National Market or such as may be
required under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge there are no legal or
governmental actions, suits or proceedings pending or threatened against the
Company or any of its subsidiaries or its subsidiaries (including any subsidiary
of a Company subsidiary) of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(xvii) Neither the Company nor any of its subsidiaries
(including any subsidiary of a Company subsidiary) is presently (a) in
material violation of its respective charter or bylaws, (b) to such counsel's
knowledge in material breach of any applicable statute, rule or regulation or
any order, writ or decree of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, (including any
subsidiary of a Company subsidiary) or over any of their properties or
operations, or (c) to such counsel's knowledge in breach of or default with
respect to any material provision of any material agreement, mortgage,
license, lease or other instrument to which the Company or any subsidiary
(including any subsidiary of a Company subsidiary) is a party or by which any
of its or their properties are bound, except for such default or breach as
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company or its
subsidiaries (including any subsidiary of any Company subsidiary) considered
as one enterprise; and
(xviii) To such counsel's knowledge, except as set forth
in the Registration Statement and Prospectus, no holders of Common Stock or
other securities of the Company or any subsidiary (including any subsidiary
of a Company subsidiary) have registration rights with respect to securities
of the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights to
registration of such shares of Common Stock or other securities, because of
the filing of the Registration Statement by the Company have, with respect to
the offering contemplated thereby, waived such rights or such rights have
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement or have included securities in the
Registration Statement pursuant to the exercise of and in full satisfaction
of such rights;
19.
<PAGE>
(xix) Each Selling Stockholder which is not a natural person
has full right, power and authority to enter into and to perform its obligations
under the Power of Attorney and Custody Agreement to be executed and delivered
by it in connection with the transactions contemplated herein; the Power of
Attorney and Custody Agreement of each Selling Stockholder that is not a natural
person has been duly authorized by such Selling Stockholder; the Power of
Attorney and Custody Agreement of each Selling Stockholder has been duly
executed and delivered by or on behalf of such Selling Stockholder; and the
Power of Attorney and Custody Agreement of each Selling Stockholder constitutes
the valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; each Selling Stockholder which is not a natural person has full
right, power and authority to enter in to and perform its obligations under this
Agreement and to sell, transfer, assign and deliver the Shares to be sold by
such Selling Stockholder hereunder;
(xx) Each of the natural person Selling Stockholders has
full right, power and authority to enter into and to perform its obligations
under this Agreement and to sell, transfer, assign and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(xxi) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of each Selling Stockholder; and
(xxii) Upon the Underwriters obtaining control of the Shares
to be sold by the Selling Stockholders and assuming the Underwriters purchased
such Shares in good faith, for value and without notice of any adverse claim to
such Shares within the meaning of Section 8302 of the California Commercial Code
as in effect in the State of California, the Underwriters will have acquired all
rights of the Selling Stockholders in such Shares free of any adverse claim, any
lien in favor of the Company and any restrictions on transfer imposed by the
Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel which leads
them to believe that, at the time the Registration Statement became effective
and at all times subsequent thereto up to and on the Closing Date and up to
and on any later date on which Option Shares are to be purchased, the
Registration Statement and any amendment or supplement thereto (other than
the financial statements including supporting schedules and other financial
and statistical information derived therefrom, as to which such counsel need
express no comment) 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.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the States of
California and Delaware upon opinions of local counsel, and as to questions
of fact upon representations or certificates of officers of the Company, the
Selling Stockholders or officers of the Selling Stockholders (when the
Selling Stockholder is not a natural person), and of government officials, in
which case their opinion is to state that they are so relying, and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be attached to the
foregoing opinion and shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters
20.
<PAGE>
relating to this Agreement and the transactions contemplated hereby as you
may reasonably require, and the Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from Deloitte & Touche LLP addressed to the Underwriters, dated the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be, confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from Deloitte & Touche LLP shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) refer to their opinion with respect to their audit of the
consolidated balance sheets of the Company as of December 31, 1996 and 1995 and
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the period ended December 31, 1997 and 1996,
(iii) state that Deloitte & Touche LLP has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of Deloitte & Touche LLP as
described in SAS 71 on the financial statements for the six month periods ended
June 30, 1996 and 1997 (the "Interim Financial Statements"), (iv) state that in
the course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Interim
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by Deloitte & Touche LLP
and you. In addition, you shall have received a copy of a letter addressed to
the Company from Deloitte & Touche LLP and made available to you for the use of
the Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their audit of the Company's consolidated financial statements as of
December 31, 1996, and as performed as part of such audit, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(h) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied 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 or
any later date on which Option Shares are to be purchased, as the case may be,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
21.
<PAGE>
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
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, the Prospectus, and any amendment or supplement thereto, did not and
does not include 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, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries (including any subsidiary of a Company subsidiary) considered as
one enterprise, (b) any transaction that is material to the Company and its
subsidiaries (including any subsidiary of a Company subsidiary) considered as
one enterprise, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material to the
Company and its subsidiaries (including any subsidiary of a Company subsidiary)
considered as one enterprise, incurred by the Company or its subsidiaries
(including any subsidiary of a Company subsidiary), except obligations incurred
in the ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries, other than
indebtedness incurred under the Company's credit facility with Israel Discount
Bank in the ordinary course of business (including any subsidiary of a Company
subsidiary) that is material to the Company and its subsidiaries (including any
subsidiary of a Company subsidiary) considered as one enterprise, (e) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company or any of its subsidiaries (including any subsidiary of a Company
subsidiary), or (f) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries (including any subsidiary of a Company
subsidiary) which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
(including any subsidiary of a Company subsidiary) considered as one enterprise.
(i) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from each Selling Stockholder or its
Attorney to the effect that, as of the Closing Date, or any later date on which
Option Shares are to be purchased, as the case may be:
(i) The representations and warranties made by such Selling
Stockholder herein are true and correct in all material respects on the Closing
Date or on any later date on which Option Shares are to be purchased, as the
case may be; and
(ii) Such Selling Stockholder has complied with all
obligations and satisfied all conditions which are required to be performed or
satisfied on the part of such Selling Stockholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
(j) The Company shall have obtained and delivered to you Lock-up
Agreements from each officer and director of the Company, each Selling
Stockholder and each securityholder (other than certain optionholders holding
options which do not vest, and are thus not exercisable, until after the
expiration of the Lock-up Period) of the Company.
22.
<PAGE>
(k) The Company and the Selling Stockholders shall have furnished to
you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholders or
officers of the Selling Stockholders (when the Selling Stockholder is not a
natural person)) as to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder
and as to the other conditions concurrent and precedent to the obligations of
the Underwriters hereunder.
(l) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Anthony J. Wall, Executive Vice President and General Counsel of the
Company, dated the Closing Date or such later date on which Option Shares are to
be purchased addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) he has participated in the preparation of the Registration
Statement and the Prospectus and has participated in conferences with other
officials and representatives of the Company, the Representatives, Underwriters'
Counsel and the independent certified public accountants of the Company, at
which such conferences the contents of the Registration Statement and Prospectus
and related matters were discussed, and that at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
Closing Date and up to and on any later date on which Option Shares are to be
purchased, the Registration Statement, the Prospectus, and any amendments or
supplements thereto (other than financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which he need express no opinion) did not contain any untrue statement of a
material fact nor omitted 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, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which he need
express no opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of the Act
and the applicable Rules and Regulations;
(iii) The information in the Prospectus under the captions
"Risk Factors - Conflicts of Interest and Certain Related Transactions," "Risk
Factors - Shares Eligible for Future Sale," "Certain Transactions," "Description
of Capital Stock," and "Shares Eligible for Future Sale," is a fair and accurate
summary of such matters and conclusions and does not omit any information
required to be stated therein; and the forms of certificates evidencing the
Common Stock and filed as exhibits to the Registration Statement comply with
Delaware law;
(iv) The descriptions in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
in all material respects and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(v) There are no agreements, contracts, licenses, leases or
other documents to which the Company or any of its subsidiaries (including any
subsidiaries of Company subsidiaries) is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(vi) The authorized, issued and outstanding capital stock of the
Company has not been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal, or other similar
right, and all issued and outstanding securities of the Company have been issued
in compliance with all applicable federal and state securities laws.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholders
23.
<PAGE>
will furnish you with such number of conformed copies of such opinions,
certificates, letters and documents as you shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, those Selling Stockholders listed on SCHEDULE B as selling Option Shares
pursuant hereto, hereby severally and not jointly, grant to the several
Underwriters, for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares only, a nontransferable option to
purchase up to an aggregate of 525,000 Option Shares at the purchase price per
share for the Firm Shares set forth in Section 3 hereof. Such option may be
exercised by the Representatives on behalf of the several Underwriters on one
(1) or more occasions in whole or in part during the period of thirty (30) days
after the date on which the Firm Shares are initially offered to the public, by
giving written notice to the Attorneys. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the same
proportion of the total number of Option Shares to be purchased by the several
Underwriters pursuant to the exercise of such option as the number of Firm
Shares purchased by such Underwriter (set forth in Schedule A hereto) bears to
the total number of Firm Shares purchased by the several Underwriters (set forth
in Schedule A hereto), adjusted by the Representatives in such manner as to
avoid fractional shares and the number of Option Shares to be purchased from
[each Selling Stockholder] shall be determined in accordance with the
proportions set forth on Schedule B, as adjusted by the Representatives to avoid
fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer, certified or official
bank check or checks drawn in same-day funds, payable to the Selling
Stockholders, as applicable. Such delivery and payment shall take place at the
offices of Kimball & Weiner LLP 555 S. Flower Street, Suite 4540, Los Angeles,
CA 90071 or at such other place as may be agreed upon among the Representatives
and the Company (i) on the Closing Date, if written notice of the exercise of
such option is received by the Company at least two (2) full business days prior
to the Closing Date, or (ii) on a date which shall not be later than the third
(3rd) full business day following the date the Company receives written notice
of the exercise of such option, if such notice is received by the Company less
than two (2) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in San Francisco or New York City, as you may reasonably request for
checking at least one (1) full business day prior to the date of payment and
delivery and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to such date of
payment and delivery. If the Representatives so elect, delivery of the Option
Shares may be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose wire transfer, check or checks shall not have been received by you prior
to the date of payment and delivery for the Option Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and the Selling
Stockholders herein, to the accuracy of the statements of the Company, the
Selling Stockholders and officers of the Company made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder, to the conditions
24.
<PAGE>
set forth in Section 6 hereof, and to the condition that all proceedings taken
at or prior to the payment date in connection with the sale and transfer of such
Option Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may request in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants or agreements of the Company
and the Selling Stockholders or the satisfaction of any of the conditions herein
contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, (ii) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, PROVIDED FURTHER, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees
to indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject (including, without limitation, in its capacity as an Underwriter or as
a "qualified independent underwriter" within the meaning of Schedule E or the
Bylaws of the NASD) under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus
25.
<PAGE>
or the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement provided in this Section 8(b) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, damages, liabilities or actions
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission to state therein a material fact purchased
Shares, if a copy of the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected had not been sent
or given to such person within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance by the Company
with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which
such Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the Company
or such Selling Stockholder may become subject under the Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(c) 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, directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company and each such Selling Stockholder
for any legal or other expenses reasonably incurred by the Company and each such
Selling Stockholder in connection with investigating or defending any such loss,
claim, damage, liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which
each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8 unless the indemnifying party is prejudiced
thereby. In case any such action is brought against any indemnified party, and
it notified the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it shall
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel reasonably 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
26.
<PAGE>
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 8(a),
8(b) or 8(c) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; PROVIDED that such
consent shall not be unreasonably withheld or delayed. No indemnifying party
shall, without the prior written consent of the indemnified party, which shall
not be unreasonably delayed or withheld, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(e) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Stockholders are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise been required to pay and (ii) no person guilty of
a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
any Selling Stockholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Shares
sold by such Selling Stockholder to the Underwriters minus the amount of the
underwriting discount paid thereon to the Underwriters by such Selling
Stockholder. The Company and such Selling Stockholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including,
27.
<PAGE>
without limitation, the provisions of this Section 8, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 8 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Act and the Exchange Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of their officers, directors or controlling persons within the meaning of
the Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or
underwriters shall have been substituted as aforesaid by such postponed Closing
Date, the Closing Date may, at the option of the Company, be postponed for a
further twenty-four (24) hours, if necessary, to allow the Company the privilege
of finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement, supplements to the Prospectus
or other such documents which may thereby be made necessary, and (ii) the
respective number of Firm Shares to be purchased by the remaining Underwriters
and substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and
pay for all such Firm Shares so agreed to be purchased by the defaulting
Underwriter or Underwriters or substitute another underwriter or underwriters as
aforesaid and the Company shall not find or shall not elect to seek another
underwriter or underwriters for such Firm Shares as aforesaid, then this
Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Stockholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the
28.
<PAGE>
other Underwriters for damages, if any, resulting from such default) be liable
to the Company or any Selling Stockholder (except to the extent provided in
Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be,
(i) if the Company or any Selling Stockholder shall have failed, refused or been
unable to perform any agreement on its part to be performed, or because any
other condition of the Underwriters' obligations hereunder required to be
fulfilled is not fulfilled, including, without limitation, any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse, or (ii) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or
(iv) if there shall have been a material adverse change in the general political
or economic conditions or financial markets as in your reasonable judgment makes
it inadvisable or impracticable to proceed with the offering, sale and delivery
of the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the reasonable opinion of
the Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. Any
termination pursuant to subparagraph (i) above, shall be without liability of
any party to any other party except as provided in Sections 4(j), 5 and 8
hereof. Any termination pursuant to any of subparagraphs (ii) through (v) above
shall be without liability of any party to any other party except as provided in
Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, facsimile, telecopy or telegram, in each case
confirmed by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone,
facsimile, telecopy or telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o Robertson, Stephens & Company LLC, 555
California Street, Suite
29.
<PAGE>
2600, San Francisco, California 94104, telecopier number (415) 781-0278,
Attention: General Counsel; if sent to the Company, such notice shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to Big Dog Holdings, Inc., telecopier number (805)
962-9460, Attention: Andrew Feshbach, Chief Executive Officer; if sent to one or
more of the Selling Stockholders, such notice shall be sent mailed, delivered,
telegraphed (and confirmed by letter) or telecopied (and confirmed by letter) to
Andrew Feshbach, as Attorney-in-Fact for the Selling Stockholders, at Big Dog
Holdings, Inc., telecopier number (805) 962-9460.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and the Selling
Stockholders and their respective executors, administrators, successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person or entity, other than the parties hereto and
their respective executors, administrators, successors and assigns, and the
controlling persons within the meaning of the Act or the Exchange Act, officers
and directors referred to in Section 8 hereof, any legal or equitable right,
remedy or claim 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 the parties hereto and their
respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of no
other person or entity. No purchaser of any of the Shares from any Underwriter
shall be construed a successor or assign by reason merely of such purchase.
Notwithstanding the foregoing, in the event that either Fred Kayne or Andrew
Feshbach, who as Selling Stockholders have agreed to sell to the Underwriters
the number of Option Shares shown on Schedule B hereto, shall donate shares of
Common Stock owned by them to the United Jewish Fund (the "Fund"), the
Representatives shall offer to the Fund the right to sell up to 210,000 of such
shares to the Underwriters as Option Shares to the extent the Underwriters
exercise in full the option provided in Section 7. If the Fund elects to sell
any such Option Shares in accordance with the foregoing sentence, the Fund shall
be required as a condition of its ability to so sell such Shares that it assume
the obligations of a Selling Stockholder by timely executing and delivering or
having the Attorney execute and deliver to the Underwriters a copy of this
Agreement and all ancillary documents required of Selling Stockholders under
this Agreement. Upon the execution and delivery of this Agreement and
documents, as applicable, the obligation of Fred Kayne and/or Andrew Feshbach,
as applicable, under this Agreement to sell the Option Shares listed on Schedule
B shall be reduced by the number of Option Shares being sold by the Fund and the
other obligations and liabilities of Fred Kayne and/or Andrew Feshbach, as
applicable, under this Agreement shall be reduced proportionately to reflect
such reduction in Option Shares being sold by them.
In all dealings with the Company and the Selling Stockholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
Robertson, Stephens & Company LLC on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
30.
<PAGE>
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Stockholders
and the several Underwriters.
Very truly yours,
BIG DOG HOLDINGS, INC.
By:
-------------------------------------------
SELLING STOCKHOLDERS LISTED ON SCHEDULE B
By:
-------------------------------------------
Attorney-in-Fact for the Selling Stockholders
named in Schedule B hereto
POTENTIAL ADDITIONAL SELLING STOCKHOLDER LISTED ON SCHEDULE B
By:
-------------------------------------------
Attorney-in-Fact for the Potential Additional Selling Stockholder
listed on Schedule B
Accepted as of the date first above written:
ROBERTSON, STEPHENS & COMPANY LLC
HAMBRECHT & QUIST LLC
NEEDHAM & COMPANY, INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY GROUP, L.L.C.
By:
-------------------------------
Authorized Signatory
31.
<PAGE>
SCHEDULE A
Underwriters Number of
Firm Shares
- -------------------- To Be
Purchased
-----------
Robertson, Stephens & Company LLC.................................
Hambrecht & Quist LLC
Needham & Company, Inc.
[NAMES OF OTHER UNDERWRITERS]
Total........................................................ -------
-------
-------
<PAGE>
SCHEDULE B
Number of Firm Shares
Company To Be Sold
----------------------- ----------------------
Big Dog Holdings, Inc. 2,800,000
Total 2,800,000
---------
---------
Number Of Selling
Stockholder Shares
Name of To Be Sold
Selling Stockholder As Firm Shares As Option Shares
-------------------- ---------------- -------------------
Fred Kayne................. 335,000 440,000*
Andrew D. Feshbach......... 135,000 85,000*
Robert H. Schnell.......... 50,000
Richard Scott.............. 35,000
Andrea and Jacob Kaufman... 35,000
Stephen Kayne.............. 35,000
Jonathan Hirsh............. 37,500
Lee Rosenblatt............. 37,500
----------- ------------
Total 700,000 525,000
----------- ------------
----------- ------------
Number Of Potential Additional Selling
Name of Potential Stockholder Shares to be Sold
Additional Selling Stockholder As Option Shares
------------------------------- ------------------------
United Jewish Fund................. 210,000*
Total 210,000*
--------
--------
- ------------------
* Subject to reduction pursuant to Section 13.
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF BIG DOG HOLDINGS, INC. FILED IN THE
OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON AUGUST 4, 1997
Big Dog Holdings, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Big Dog Holdings, Inc.
2. That an Amended and Restated Certificate of Incorporation of Big Dog
Holdings, Inc. was filed by the Secretary of State of Delaware on August 4,
1997 and that said Certificate requires correction as permitted by Section
103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Amended and Restated Certificate to be
corrected is as follows: the expiration dates of the classes of directors is
to be corrected.
4. Article Seventh(b) of the Amended and Restated Certificate is corrected
to read as follows:
(b) The Directors shall be classified with respect to the time for
which they severally hold office into three classes designated Class
I, Class II and Class III, as nearly equal in number as possible, as
shall be provided in the manner specified in the Bylaws of the
Corporation. Each Director shall serve for a term ending on the date
of the third annual meeting of stockholders following the annual
meeting at which the Director was elected; provided, however, that
each initial Director in Class I shall hold office until the annual
meeting of stockholders in 1998, each initial Director in Class II
shall hold office until the annual meeting of stockholders in 1999,
and each initial Director in Class III shall hold office until the
annual meeting of stockholders in 2000. Notwithstanding the foregoing
provisions of this Article, each Director shall serve until his
successor is duly elected and qualified or until his death,
resignation or removal.
<PAGE>
IN WITNESS WHEREOF, said Big Dog Holdings, Inc. has caused this Certificate
to be signed by Anthony J. Wall, its Executive Vice President and General
Counsel on this 15th day of September, 1997.
/s/ ANTHONY J. WALL
-----------------------------
Executive Vice President and
General Counsel
<PAGE>
[LETTERHEAD]
September 19, 1997
Big Dog Holdings, Inc.
121 Gray Avenue
Santa Barbara, California 93101
Ladies and Gentlemen:
We have acted as special counsel to Big Dog Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing of
the Registration Statement (File No. 333-33027) of the Company on Form S-1 (as
amended, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the public offering (the "Offering")
by the Company and the Selling Stockholders identified as such in the
Registration Statement of an aggregate of 4,025,000 shares (including 525,000
shares subject to an over-allotment option) of Common Stock, par value $.01 per
share of the Company ("Common Stock").
As such counsel, we have participated in the preparation of the
Registration Statement, including the Prospectus contained therein (the
"Prospectus"), and have reviewed certain corporate proceedings. In addition, we
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records and other documents, and such
certificates or comparable documents of public officials and of officers and
representatives, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, and the conformity to original documents of all documents
submitted to us as certified or photostatic copies. As to all questions of fact
material to this opinion that have not been independently established, we have
relied upon statements and certificates of officers and representatives of the
Company.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that the shares of Common Stock to be registered for sale by
the Company and the Selling Stockholders under the Registration Statement have
been duly authorized, and the shares to be sold by the Selling Stockholders are,
and the shares to be sold by the Company, when issued and paid for as
contemplated by the Prospectus, will be, validly issued, fully paid and
nonassessable.
<PAGE>
Big Dog Holdings, Inc.
September 19, 1997
Page 2
The opinion expressed herein is limited to the corporate laws of the State
of Delaware, and we express no opinion as to the effect on the matters covered
by this letter of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and consent to the use of our name under the heading
"Legal Matters" in the Prospectus.
Very truly yours,
/s/ KIMBALL & WEINER LLP
<PAGE>
BIG DOG HOLDINGS, INC.
AMENDED AND RESTATED
1997 PERFORMANCE AWARD PLAN
<PAGE>
TABLE OF CONTENTS
Page
1. THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration and Authorization; Power and Procedure . . . . 1
1.2.1 Committee . . . . . . . . . . . . . . . . . . . . . 1
1.2.2 Plan Awards; Interpretation; Powers of
Committee . . . . . . . . . . . . . . . . . . . . . 1
1.2.3 Binding Determinations. . . . . . . . . . . . . . . 2
1.2.4 Reliance on Experts . . . . . . . . . . . . . . . . 2
1.2.5 Delegation. . . . . . . . . . . . . . . . . . . . . 2
1.3 Participation . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Shares Available for Awards; Share Limits . . . . . . . . . . 3
1.4.1 Shares Available. . . . . . . . . . . . . . . . . . 3
1.4.2 Share Limits. . . . . . . . . . . . . . . . . . . . 3
1.4.3 Share Reservation; Replenishment and
Reissue of Unvested Awards . . . . . . . . . . . . 3
1.5 Grant of Awards . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Award Period. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Limitations on Exercise and Vesting of Awards . . . . . . . . 4
1.7.1 Provisions for Exercise . . . . . . . . . . . . . . 4
1.7.2 Procedure . . . . . . . . . . . . . . . . . . . . . 4
1.7.3 Fractional Shares/Minimum Issue . . . . . . . . . . 4
1.8 Acceptance of Notes to Finance Exercise . . . . . . . . . . . 4
1.8.1 Principal . . . . . . . . . . . . . . . . . . . . . 5
1.8.2 Term. . . . . . . . . . . . . . . . . . . . . . . . 5
1.8.3 Recourse; Security. . . . . . . . . . . . . . . . . 5
1.8.4 Termination of Employment . . . . . . . . . . . . . 5
1.9 No Transferability; Limited Exception to Transfer
Restrictions. . . . . . . . . . . . . . . . . . . . 5
1.9.1 Limit On Exercise and Transfer. . . . . . . . . . . 5
1.9.2 Exceptions. . . . . . . . . . . . . . . . . . . . . 6
1.9.3 Further Exceptions to Limits On Transfer. . . . . . 6
2. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Option Price. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2.1 Pricing Limits. . . . . . . . . . . . . . . . . . . 7
2.2.2 Payment Provisions. . . . . . . . . . . . . . . . . 7
2.3 Limitations on Grant and Terms of Incentive Stock
Options . . . . . . . . . . . . . . . . . . . . . . 7
2.3.1 $100,000 Limit. . . . . . . . . . . . . . . . . . . 7
2.3.2 Option Period . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
2.3.3 Other Code Limits . . . . . . . . . . . . . . . . . 8
2.4 Limits on 10% Holders . . . . . . . . . . . . . . . . . . . . 8
2.5 Option Repricing/Cancellation and Regrant/Waiver of
Restrictions. . . . . . . . . . . . . . . . . . . . 8
2.6 Effects of Termination of Employment; Termination of
Subisidiary Status; Discretionary Provisions. . . . . . . . . 8
2.6.1 Options - Resignation or Dismissal. . . . . . . . . 9
2.6.2 Options - Death or Disability . . . . . . . . . . . 9
2.6.3 Options - Retirement. . . . . . . . . . . . . . . . 9
2.6.4 Certain SARs. . . . . . . . . . . . . . . . . . . . 10
2.6.5 Other Awards. . . . . . . . . . . . . . . . . . . . 10
2.6.6 Committee Discretion. . . . . . . . . . . . . . . . 10
2.7 Options and Rights in Substitution for Stock Options
Granted by Other Corporations . . . . . . . . . . . 10
3. STOCK APPRECIATION RIGHTS
(INCLUDING LIMITED STOCK APPRECIATION RIGHTS). . . . . . 10
3.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Exercise of Stock Appreciation Rights . . . . . . . . . . . . 11
3.2.1 Exercisability. . . . . . . . . . . . . . . . . . . 11
3.2.2 Effect on Available Shares. . . . . . . . . . . . . 11
3.2.3 Stand-Alone SARs. . . . . . . . . . . . . . . . . . 11
3.2.4 Proportionate Reduction . . . . . . . . . . . . . . 11
3.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3.1 Amount. . . . . . . . . . . . . . . . . . . . . . . 11
3.3.2 Form of Payment . . . . . . . . . . . . . . . . . . 12
3.4 Limited Stock Appreciation Rights . . . . . . . . . . . . . . 12
4. RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2.1 Pre-Vesting Restraints. . . . . . . . . . . . . . . 13
4.2.2 Dividend and Voting Rights. . . . . . . . . . . . . 13
4.2.3 Cash Payments . . . . . . . . . . . . . . . . . . . 13
4.3 Return to the Corporation . . . . . . . . . . . . . . . . . . 13
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES . . . . . . . . . . . . 13
5.1 Grants of Performance Share Awards. . . . . . . . . . . . . . 13
5.2.1 Eligible Class. . . . . . . . . . . . . . . . . . . 14
5.2.2 Maximum Award . . . . . . . . . . . . . . . . . . . 14
5.2.3 Committee Certification . . . . . . . . . . . . . . 15
5.2.4 Terms and Conditions of Awards. . . . . . . . . . . 15
5.2.5 Stock Payout Features . . . . . . . . . . . . . . . 15
5.3 Grants of Stock Bonuses . . . . . . . . . . . . . . . . . . . 15
5.4 Deferred Payments . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Cash Bonus Awards . . . . . . . . . . . . . . . . . . . . . . 15
5.5.1 Performance Goals . . . . . . . . . . . . . . . . . 15
5.5.2 Maximum Annual Amount . . . . . . . . . . . . . . . 16
5.5.3 Payment in Restricted Stock . . . . . . . . . . . . 16
ii
<PAGE>
6. OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Rights of Eligible Persons, Participants and
Beneficiaries . . . . . . . . . . . . . . . . . . . 16
6.1.1 Employment Status . . . . . . . . . . . . . . . . . 16
6.1.2 No Employment Contract. . . . . . . . . . . . . . . 16
6.1.3 Plan Not Funded . . . . . . . . . . . . . . . . . . 16
6.2 Adjustments; Acceleration . . . . . . . . . . . . . . . . . . 17
6.2.1 Adjustments . . . . . . . . . . . . . . . . . . . . 17
6.2.2 Acceleration of Awards Upon Change in
Control . . . . . . . . . . . . . . . . . . . . . . 18
6.2.3 Possible Early Termination of Accelerated
Awards . . . . . . . . . . . . . . . . . . . . . . 18
6.2.4 Golden Parachute Limitations. . . . . . . . . . . . 19
6.3 Effect of Termination of Employment . . . . . . . . . . . . . 19
6.4 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 19
6.5 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . 19
6.5.1 Provision for Tax Withholding . . . . . . . . . . . 19
6.5.2 Tax Loans . . . . . . . . . . . . . . . . . . . . . 20
6.6 Plan Amendment, Termination and Suspension. . . . . . . . . . 20
6.6.1 Board Authorization . . . . . . . . . . . . . . . . 20
6.6.2 Stockholder Approval. . . . . . . . . . . . . . . . 20
6.6.3 Amendments to Awards. . . . . . . . . . . . . . . . 20
6.6.4 Limitations on Amendments to Plan and Awards . . . 20
6.7 Privileges of Stock Ownership . . . . . . . . . . . . . . . . 21
6.8 Effective Date of the Plan. . . . . . . . . . . . . . . . . . 21
6.9 Term of the Plan. . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Governing Law/Construction/Severability . . . . . . . . . . . 21
6.10.1 Choice of Law . . . . . . . . . . . . . . . . . . . 21
6.10.2 Severability . . . . . . . . . . . . . . . . . . . 21
6.10.3 Plan Construction . . . . . . . . . . . . . . . . . 21
6.11 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Effect of Change of Subsidiary Status . . . . . . . . . . . . 22
6.13 Plan Not Exclusive. . . . . . . . . . . . . . . . . . . . . . 22
7. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8. NON-EMPLOYEE DIRECTOR OPTIONS . . . . . . . . . . . . . . . . . . 28
8.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Annual Option Grants. . . . . . . . . . . . . . . . . . . . . 28
8.2.1 Time of Initial Award . . . . . . . . . . . . . . . 28
8.2.2 Subsequent Annual Awards. . . . . . . . . . . . . . 28
8.2.3 Maximum Number of Shares. . . . . . . . . . . . . . 28
8.3 Option Price. . . . . . . . . . . . . . . . . . . . . . . . . 28
8.4 Option Period and Exercisability. . . . . . . . . . . . . . . 29
8.5 Termination of Directorship . . . . . . . . . . . . . . . . . 29
8.6 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Acceleration Upon a Change in Control Event . . . . . . . . . 29
iii
<PAGE>
BIG DOG HOLDINGS, INC.
AMENDED AND RESTATED
1997 PERFORMANCE AWARD PLAN
1. THE PLAN
1.1 PURPOSE. The purpose of this Plan is to promote the success of the Company
and the interests of its stockholders by attracting, motivating, retaining
and rewarding directors, officers, employees and others eligible persons
with awards and incentives for high levels of individual performance and
improved financial performance of the Company and to attract, motivate and
retain experienced and knowledgeable independent directors through the
benefits provided under Section 8. "CORPORATION" means Big Dog Holdings,
Inc. and "COMPANY" means the Corporation and its Subsidiaries, collectively.
These terms and other capitalized terms are defined in Section 7.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
1.2.1 COMMITTEE. This Plan will be administered by and all Awards to
Eligible Employees will be authorized by the Committee. Action of
the Committee with respect to the administration of this Plan will
be taken pursuant to a majority vote or by written consent of its
members.
1.2.2 PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan, the Committee will have the
authority to:
(a) determine eligible the particular Eligible Employees who will
receive Awards;
(b) grant Awards to Eligible Employees, determine the price at
which securities will be offered or awarded and the amount of
securities to be offered or awarded to any of such persons,
and determine the other specific terms and conditions of such
Awards consistent with the express limits of this Plan, and
establish the installments (if any) in which such Awards will
become exercisable or will vest, or determine that no delayed
exercisability or vesting is required, and establish the
events of termination or reversion of such Awards;
1
<PAGE>
(c) approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
(d) construe and interpret this Plan and any agreements defining
the rights and obligations of the Company and Employee
Participants under this Plan, further define the terms used in
this Plan, and prescribe, amend and rescind rules and
regulations relating to the administration of this Plan;
(e) cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Employees, subject to any
required consent under Section 6.6;
(f) accelerate or extend the exercisability or extend the term of
any or all such outstanding Awards within the maximum ten-year
term of Awards under Section 1.6; and
(g) make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable
for the administration of this Plan and the effectuation of
its purposes.
but the provisions of Section 8 relating to Non-Employee Director Awards will
be automatic and, to the maximum extent possible, self-effectuating.
1.2.3 BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan will be within the absolute discretion of
that entity or body and will be conclusive and binding upon all
persons. No member of the Board or Committee, or officer of the
Corporation or any Subsidiary, will be liable for any such action
or inaction of the entity or body, of another person or, except in
circumstances involving bad faith, of himself or herself. Subject
only to compliance with the express provisions hereof, the Board
and Committee may act in their absolute discretion in matters
within their authority related to this Plan.
1.2.4 RELIANCE ON EXPERTS. In making any determination or in taking or
not taking any action under this Plan, the Committee or the Board,
as the case may be, may obtain and may rely upon the advice of
experts, including professional advisors to the Corporation. No
2
<PAGE>
director, officer or agent of the Company will be liable for any
such action or determination taken or made or omitted in good faith.
1.2.5 DELEGATION. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or
employees of the Company.
1.3 PARTICIPATION. Awards may be granted by the Committee only to those
persons that the Committee determines to be Eligible Persons.
An Eligible Person who has been granted an Award may, if
otherwise eligible, be granted additional Awards if the
Committee so determines.
1.4 SHARES AVAILABLE FOR AWARDS; SHARE LIMITS.
1.4.1 SHARES AVAILABLE. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan will be shares
of the Corporation's authorized but unissued Common Stock and any
shares of its Common Stock held as treasury shares. The shares may
be delivered for any lawful consideration.
1.4.2 SHARE LIMITS. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards granted to Eligible Persons
under this Plan will not exceed one million (1,000,000) shares (the
"SHARE LIMIT"). The maximum number of shares subject to those
options and Stock Appreciation Rights that are granted during any
calendar year to any individual will be limited to two hundred
thousand (200,000) and the maximum individual limit on the number
of shares in the aggregate subject to all Awards that during any
calendar year are granted under this Plan will be two hundred fifty
thousand (250,000). Each of the foregoing numerical limits will be
subject to adjustment as contemplated by this Section 1.4 and
Section 6.2.
1.4.3 SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED AWARDS.
No Award may be granted under this Plan unless, on the date of
grant, the sum of (a) the maximum number of shares issuable at any
time pursuant to such Award, plus (b) the number of shares that
have previously been issued pursuant to Awards granted under this
Plan, other than reacquired shares available for reissue consistent
with any applicable legal limitations, plus (c) the maximum number
of shares that may be issued at any time after such date of grant
pursuant to Awards that are outstanding on such date, does not
exceed the Share Limit. Shares that are subject to or underlie
Awards that expire or for any reason are canceled or terminated, are
3
<PAGE>
forfeited, fail to vest, or for any other reason are not paid or
delivered under this Plan, as well as reacquired shares, will
again, except to the extent prohibited by law, be available for
subsequent Awards under the Plan. Except as limited by law, if an
Award is or may be settled only in cash, such Award need not be
counted against any of the limits under this Section 1.4.
1.5 GRANT OF AWARDS. Subject to the express provisions of this Plan, the
Committee will determine the number of shares of Common Stock subject to
each Award, the price (if any) to be paid for the shares or the Award
and, in the case of performance share awards, in addition to matters
addressed in Section 1.2.2, the specific objectives, goals and
performance criteria (such as an increase in sales, market value,
earnings or book value over a base period, the years of service before
vesting, the relevant job classification or level of responsibility or
other factors) that further define the terms of the performance share
award. Each Award will be evidenced by an Award Agreement signed by the
Corporation and, if required by the Committee, by the Participant.
1.6 AWARD PERIOD. Any Option, SAR, warrant or similar right shall expire and
any other Award shall either vest or be forfeited not more than 10 years
after the date of grant; provided, however, that any payment of cash or
delivery of stock pursuant to an Award may be delayed until a future date
if specifically authorized by the Committee in writing.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
1.7.1 PROVISIONS FOR EXERCISE. Unless the Committee otherwise expressly
provides, no Award will be exercisable or will vest until at least
six months after the initial Award Date, and once exercisable an
Award will remain exercisable until the expiration or earlier
termination of the Award.
1.7.2 PROCEDURE. Any exercisable Award will be deemed to be exercised
when the Corporation receives written notice of such exercise from
the Participant, together with any required payment made in
accordance with Section 2.2.2 or 8.4, as the case may be.
1.7.3 FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests will
be disregarded, but may be accumulated. The Committee, however, may
determine in the case of Eligible Persons that cash, other
securities, or other property will be paid or transferred in lieu
of any fractional share interests. No fewer than 100 shares may be
purchased on exercise of any Award at one time unless the number
4
<PAGE>
purchased is the total number at the time available for purchase
under the Award.
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE. The Corporation may, with the
Committee's express approval, accept one or more notes from any Eligible
Person in connection with the exercise or receipt of any outstanding
Award; but any such note will be subject to the following terms and
conditions:
1.8.1 PRINCIPAL. The principal of the note will not exceed the amount
required to be paid to the Corporation upon the exercise or receipt
of one or more Awards under the Plan and the note will be delivered
directly to the Corporation in consideration of such exercise or
receipt.
1.8.2 TERM. The initial term of the note will be determined by the
Committee; but the term of the note, including extensions, will not
exceed a period of five years.
1.8.3 RECOURSE; SECURITY. The note will provide for full recourse to the
Participant and will bear interest at a rate determined by the
Committee but not less than the interest rate necessary to avoid
the imputation of interest under the Code. If required by the
Committee or by applicable law, the note will be secured by a
pledge of any shares or rights financed thereby in compliance with
applicable law. The terms, repayment provisions, and collateral
release provisions of the note and the pledge securing the note
will conform with applicable rules and regulations of the Federal
Reserve Board as then in effect.
1.8.4 TERMINATION OF EMPLOYMENT. If the employment of the Participant
terminates, the unpaid principal balance of the note will become
due and payable on the 10th business day after such termination;
but if a sale of such shares would cause such Participant to incur
liability under Section 16(b) of the Exchange Act, the unpaid
balance will become due and payable on the 10th business day after
the first day on which a sale of such shares could have been made
without incurring such liability assuming for these purposes that
there are no other transactions (or deemed transactions in
securities of this Corporation) by the Participant after such
termination.
1.9 NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.
5
<PAGE>
1.9.1 LIMIT ON EXERCISE AND TRANSFER. Unless otherwise expressly
provided in (or pursuant to) this Section 1.9, by applicable law
and by the Award Agreement, as the same may be amended, (a) all
Awards are non-transferable and will not be subject in any manner
to sale, transfer, anticipation, alienation, assignment, pledge,
encumbrance or charge; Awards will be exercised only by the
Participant; and (b) amounts payable or shares issuable pursuant to
an Award will be delivered only to (or for the account of) the
Participant.
1.9.2 EXCEPTIONS. The Committee may permit Awards to be exercised by and
paid only to certain persons or entities related to the Participant
pursuant to such conditions and procedures as the Committee may
establish. Any permitted transfer will be subject to the condition
that the Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning purposes and
without consideration (other than nominal consideration). ISOs and
Restricted Stock Awards, however, will be subject to any and all
additional transfer restrictions under the Code.
1.9.3 FURTHER EXCEPTIONS TO LIMITS ON TRANSFER. The exercise and
transfer restrictions in Section 1.9.1 will not apply to:
(a) transfers to the Corporation,
(b) the designation of a beneficiary to receive benefits if the
Participant dies or, if the Participant has died, transfers to
or exercise by the Participant's beneficiary, or, in the
absence of a validly designated beneficiary, transfers by will
or the laws of descent and distribution,
(c) transfers pursuant to a QDRO if approved or ratified by the
Committee,
(d) if the Participant has suffered a disability, permitted
transfers or exercises on behalf of the Participant by the
Participant's legal representative, or
(e) the authorization by the Committee of "cashless exercise"
procedures with third parties who provide financing for the
purpose of (or who otherwise facilitate) the exercise of
Awards consistent with applicable laws and the express
authorization of the Committee.
6
<PAGE>
2. OPTIONS
2.1 GRANTS. One or more Options may be granted under this Section to any
Eligible Person. Each Option granted will be designated in the
applicable Award Agreement, by the Committee as either an Incentive Stock
Option, subject to Section 2.3, or a Non-Qualified Stock Option.
2.2 OPTION PRICE.
2.2.1 PRICING LIMITS. The purchase price per share of the Common Stock
covered by each Option will be determined by the Committee at the
time of the Award, but in the case of Incentive Stock Options will
not be less than 100% (110% in the case of a Participant described
in Section 2.4) of the Fair Market Value of the Common Stock on the
date of grant and in all cases will not be less than the par value
thereof.
2.2.2 PAYMENT PROVISIONS. The purchase price of any shares purchased on
exercise of an Option granted under this Section will be paid in
full at the time of each purchase in one or a combination of the
following methods: (a) in cash or by electronic funds transfer;
(b) by certified or cashier's check payable to the order of the
Corporation; (c) if authorized by the Committee or specified in the
applicable Award Agreement, by a promissory note of the Participant
consistent with the requirements of Section 1.8; (d) by notice and
third party payment in such manner as may be authorized by the
Committee; or (e) by the delivery of shares of Common Stock of the
Corporation already owned by the Participant, but the Committee may
in its absolute discretion limit the Participant's ability to
exercise an Award by delivering such shares, and any shares
delivered that were initially acquired upon exercise of a stock
option must have been owned by the Participant at least six months
as of the date of delivery. Shares of Common Stock used to satisfy
the exercise price of an Option will be valued at their Fair Market
Value on the date of exercise. Without limiting the generality of
the foregoing, the Committee may provide that the Option can be
exercised and payment made by delivering a properly executed
exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Corporation the amount of sale proceeds
necessary to pay the exercise price and, unless otherwise
prohibited by the Committee or applicable law, any applicable tax
withholding under Section 6.5. The Corporation will not be
obligated to deliver certificates for the
7
<PAGE>
shares unless and until it receives full payment of the exercise price
therefor and any related withholding obligations have been satisfied.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
2.3.1 $100,000 LIMIT. To the extent that the aggregate "FAIR MARKET
VALUE" of stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year exceeds
$100,000, taking into account both Common Stock subject to
Incentive Stock Options under this Plan and stock subject to
incentive stock options under all other plans of the Company or any
parent corporation, such options will be treated as Nonqualified
Stock Options. For this purpose, the "FAIR MARKET VALUE" of the
stock subject to options will be determined as of the date the
options were awarded. In reducing the number of options treated as
incentive stock options to meet the $100,000 limit, the most
recently granted options will be reduced first. To the extent a
reduction of simultaneously granted options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the
extent permitted by law, designate which shares of Common Stock are
to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
2.3.2 OPTION PERIOD. Subject to Section 1.6, each Option and all rights
thereunder will expire no later than 10 years after the Award Date.
2.3.3 OTHER CODE LIMITS. Incentive Stock Options may only be granted to
Eligible Employees of the Corporation or a Subsidiary that
satisfies the other eligibility requirements of the Code. There
will be imposed in any Award Agreement relating to Incentive Stock
Options such other terms and conditions as from time to time are
required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
2.4 LIMITS ON 10% HOLDERS. No Incentive Stock Option may be granted to any
person who, at the time the Option is granted, owns (or is deemed to own
under Section 424(d) of the Code) shares of outstanding Common Stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation, unless the exercise price of such
Option is at least 110% of the Fair Market Value of the stock subject to
the Option and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
8
<PAGE>
2.5 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS. Subject
to Section 1.4 and Section 6.6 and the specific limitations on Awards
contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible
Person any adjustment in the exercise or purchase price, the vesting
schedule, the number of shares subject to, the restrictions upon or the
term of, an Award granted under this Section by cancellation of an
outstanding Award and a subsequent regranting of an Award, by amendment,
by substitution of an outstanding Award, by waiver or by other legally
valid means. Such amendment or other action may result among other
changes in an exercise or purchase price that is higher or lower than the
exercise or purchase price of the original or prior Award, provide for a
greater or lesser number of shares subject to the Award, or provide for a
longer or shorter vesting or exercise period.
2.6 EFFECTS OF TERMINATION OF EMPLOYMENT; TERMINATION OF SUBSIDIARY STATUS;
DISCRETIONARY PROVISIONS.
2.6.1 OPTIONS - RESIGNATION OR DISMISSAL. If the Participant's
employment by (or other service specified in the Award Agreement
to) the Company terminates for any reason (the date of such
termination being referred to as the "SEVERANCE DATE") other than
Retirement, Total Disability or death, or "FOR CAUSE" (as
determined in the discretion of the Committee), the Participant
will have, unless otherwise provided in the Award Agreement and
subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, three months after the Severance Date to
exercise any Option to the extent it has become exercisable on the
Severance Date. In the case of a termination "for cause", the
Option will terminate on the Severance Date. In other cases, the
Option, to the extent not exercisable on the Severance Date, will
terminate.
2.6.2 OPTIONS - DEATH OR DISABILITY. If the Participant's employment by
(or specified service to) the Company terminates as a result of
Total Disability or death, the Participant, Participant's Personal
Representative or the Participant's Beneficiary, as the case may
be, will have, unless otherwise provided in the Award Agreement and
subject to earlier termination pursuant to or as contemplated by
Section 1.6 or 6.2, until 12 months after the Severance Date to
exercise any Option to the extent it will have become exercisable
by the Severance Date. Any Option to the extent not exercisable on
the Severance Date will terminate.
9
<PAGE>
2.6.3 OPTIONS - RETIREMENT. If the Participant's employment by (or
specified service to) the Company terminates as a result of
Retirement, the Participant, Participant's Personal Representative
or the Participant's Beneficiary, as the case may be, will have,
unless otherwise provided in the Award Agreement and subject to
earlier termination pursuant to or as contemplated by Section 1.6
or 6.2, until 12 months after the Severance Date to exercise any
Nonqualified Stock Option (three months after the Severance Date in
the case of an Incentive Stock Option) to the extent it will have
become exercisable by the Severance Date. The Option, to the
extent not exercisable on the Severance Date, will terminate.
2.6.4 CERTAIN SARS. Any SAR granted concurrently or in tandem with an
Option will have the same post-termination provisions and
exercisability periods as the Option to which it relates, unless
the Committee otherwise provides.
2.6.5 OTHER AWARDS. The Committee will establish in respect of each
other Award granted hereunder the Participant's rights and benefits
(if any) if the Participant's employment is terminated and in so
doing may make distinctions based upon the cause of termination and
the nature of the Award.
2.6.6 COMMITTEE DISCRETION. Notwithstanding the foregoing provisions of
this Section 2.6, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other
than discharge for cause, the Committee may increase the portion of
the Participant's Award available to the Participant, or
Participant's Beneficiary or Personal Representative, as the case
may be, or, subject to the provisions of Section 1.6, extend the
exercisability period upon such terms as the Committee determines
and expressly sets forth in or by amendment to the Award Agreement.
2.7 OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options and Stock Appreciation Rights may be granted to
Eligible Persons under this Plan in substitution for employee stock
options granted by other entities to persons who are or who will become
Eligible Persons in respect of the Company, in connection with a
distribution, merger or reorganization by or with the granting entity or
an affiliated entity, or the acquisition by the Company, directly or
indirectly, of all or a substantial part of the stock or assets of the
employing entity.
10
<PAGE>
3. STOCK APPRECIATION RIGHTS
(INCLUDING LIMITED STOCK APPRECIATION RIGHTS)
3.1 GRANTS. The Committee may grant to any Eligible Person Stock
Appreciation Rights either concurrently with the grant of another Award
or in respect of an outstanding Award, in whole or in part, or
independently of any other Award. Any Stock Appreciation Right granted
in connection with an Incentive Stock Option will contain such terms as
may be required to comply with the provisions of Section 422 of the Code
and the regulations promulgated thereunder, unless the holder otherwise
agrees.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
3.2.1 EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another
Award will be exercisable at such time or times, and to the extent,
that the related Award will be exercisable.
3.2.2 EFFECT ON AVAILABLE SHARES. To the extent that a Stock
Appreciation Right is exercised, only the actual number of
delivered shares of Common Stock will be charged against the
maximum amount of Common Stock that may be delivered pursuant to
Awards under this Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant will,
however, be reduced by the number of underlying shares as to which
the exercise related, unless the Award Agreement otherwise
provides.
3.2.3 STAND-ALONE SARS. A Stock Appreciation Right granted independently
of any other Award will be exercisable pursuant to the terms of the
Award Agreement but in no event earlier than six months after the
Award Date, except in the case of death or Total Disability.
3.2.4 PROPORTIONATE REDUCTION If an SAR extends to less than all the
shares covered by the related Award and if a portion of the related
Award is thereafter exercised, the number of shares subject to the
unexercised SAR shall be reduced only if and to the extent that the
remaining number of shares covered by such related Award is less
than the remaining number of shares subject to such SAR.
3.3 PAYMENT.
11
<PAGE>
3.3.1 AMOUNT. Unless the Committee otherwise provides, upon exercise of
a Stock Appreciation Right and the attendant surrender of an
exercisable portion of any related Award, the Participant will be
entitled to receive subject to Section 6.5 payment of an amount
determined by multiplying
(a) the difference obtained by subtracting the exercise price per
share of Common Stock under the related Award (if applicable)
or the initial share value specified in the Award from the
Fair Market Value of a share of Common Stock on the date of
exercise of the Stock Appreciation Right, by
(b) the number of shares with respect to which the Stock
Appreciation Right has been exercised.
3.3.2 FORM OF PAYMENT. The Committee, in its sole discretion, will
determine the form in which payment will be made of the amount
determined under Section 3.3.1 above, either solely in cash, solely
in shares of Common Stock (valued at Fair Market Value on the date
of exercise of the Stock Appreciation Right), or partly in such
shares and partly in cash, but the Committee will have determined
that such exercise and payment are consistent with applicable law.
If the Committee permits the Participant to elect to receive cash
or shares (or a combination thereof) on such exercise, any such
election will be subject to such conditions as the Committee may
impose.
3.4 LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant to any
Eligible Person Stock Appreciation Rights exercisable only upon or in
respect of a change in control or any other specified event ("LIMITED
SARS") and such Limited SARs may relate to or operate in tandem or
combination with or substitution for Options, other SARs or other Awards
(or any combination thereof), and may be payable in cash or shares based
on the spread between the base price of the SAR and a price based upon or
equal to the Fair Market Value of the Shares during a specified period or
at a specified time within a specified period before, after or including
the date of such event.
4. RESTRICTED STOCK AWARDS
4.1 GRANTS. The Committee may grant one or more Restricted Stock Awards to
any Eligible Person. Each Restricted Stock Award Agreement will specify
the number of shares of Common Stock to be issued to the Participant, the
12
<PAGE>
date of such issuance, the consideration for such shares (but not less
than the minimum lawful consideration under applicable state law) by the
Participant, the extent (if any) to which and the time (if ever) at which
the Participant will be entitled to dividends, voting and other rights in
respect of the shares prior to vesting, and the restrictions (which may
be based on performance criteria, passage of time or other factors or any
combination thereof) imposed on such shares and the conditions of release
or lapse of such restrictions. Such restrictions will not lapse earlier
than six months after the Award Date, except to the extent the Committee
may otherwise provide. Stock certificates evidencing shares of Restricted
Stock pending the lapse of the restrictions ("RESTRICTED SHARES") will
bear a legend making appropriate reference to the restrictions imposed
hereunder and will be held by the Corporation or by a third party
designated by the Committee until the restrictions on such shares have
lapsed and the shares have vested in accordance with the provisions of
the Award and Section 1.7. Upon issuance of the Restricted Stock Award,
the Participant may be required to provide such further assurance and
documents as the Committee may require to enforce the restrictions.
4.2 RESTRICTIONS.
4.2.1 PRE-VESTING RESTRAINTS. Except as provided in Sections 4.1 and
1.9, restricted shares comprising any Restricted Stock Award may
not be sold, assigned, transferred, pledged or otherwise disposed
of or encumbered, either voluntarily or involuntarily, until the
restrictions on such shares have lapsed and the shares have become
vested.
4.2.2 DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted
Stock Award will be entitled to cash dividend and voting rights for
all shares issued even though they are not vested, but such rights
will terminate immediately as to any Restricted Shares which cease
to be eligible for vesting.
4.2.3 CASH PAYMENTS. If the Participant has been paid or received cash
(including any dividends) in connection with the Restricted Stock
Award, the Award Agreement will specify whether and to what extent
such cash will be returned (with or without an earnings factor) as
to any restricted shares that cease to be eligible for vesting.
4.3 RETURN TO THE CORPORATION. Unless the Committee otherwise expressly
provides, Restricted Shares that remain subject to restrictions at the
time of termination of employment or are subject to other conditions to
vesting that
13
<PAGE>
have not been satisfied by the time specified in the applicable Award
Agreement will not vest and will be returned to the Corporation in such
manner and on such terms as the Committee provides.
5. PERFORMANCE SHARE AWARDS AND STOCK BONUSES
5.1 GRANTS OF PERFORMANCE SHARE AWARDS. The Committee may grant Performance
Share Awards to Eligible Employees based upon such factors as the
Committee deems relevant in light of the specific type and terms of the
award. An Award Agreement will specify the maximum number of shares of
Common Stock (if any) subject to the Performance Share Award, the
consideration (but not less than the minimum lawful consideration) to be
paid for any such shares as may be issuable to the Participant, the
duration of the Award and the conditions upon which delivery of any
shares or cash to the Participant will be based. The amount of cash or
shares or other property that may be deliverable pursuant to such Award
will be based upon the degree of attainment over a specified period of
not more than 10 years (a "PERFORMANCE CYCLE") as may be established by
the Committee of such measure(s) of the performance of the Company (or
any part thereof) or the Participant as may be established by the
Committee. The Committee may provide for full or partial credit, prior
to completion of such performance cycle or the attainment of the
performance achievement specified in the Award, in the event of the
Participant's death, Retirement, or Total Disability, a Change in Control
Event or in such other circumstances as the Committee (consistent with
Section 6.10.3(b), if applicable) may determine.
5.2 SPECIAL PERFORMANCE-BASED SHARE AWARDS. Options or SAR's granted with an
exercise price not less than Fair Market Value at the applicable date of
grant for Section 162(m) purposes to Eligible Employees which otherwise
satisfy the conditions to deductibility under Section 162(m)of the Code
are deemed "Qualifying Awards". Without limiting the generality of the
foregoing, and in addition to Qualifying Awards granted under other
provisions of this Plan, other performance-based awards within the
meaning of Section 162(m) of the Code ("PERFORMANCE-BASED AWARDS"),
whether in the form of restricted stock, performance stock, phantom stock
or other rights, the vesting of which depends on the performance of the
Company on a consolidated, segment, subsidiary, or division basis, with
reference to revenue growths, net earnings (before or after taxes or
before or after taxes, interest, depreciation, and/or amortization), cash
flow, return on equity or on assets or on net investment, or cost
containment or reduction, or any combination thereof (the "BUSINESS
CRITERIA") relative to preestablished performance goals, may be granted
under this Plan. To the extent so defined, these terms are used as
applied under generally accepted accounting principles and in the
Company's financial reporting. The applicable business criterion or
criteria and the specific performance goals must be approved by the
Committee in advance of applicable deadlines under the Code and while the
performance relating to such goals remains substantially uncertain. The
applicable performance measurement period may be not less than one
(except as provided in Section 1.6) nor more than 10 years.
14
<PAGE>
Other types of performance and non-performance awards may also be granted
under the other provisions of this Plan. The following provisions relate
to all Performance-Based Awards (other than Qualifying Awards) granted
under this Plan;
5.2.1 ELIGIBLE CLASS. The eligible class of persons for Awards under
this Section is executive officers of the Corporation.
5.2.2 MAXIMUM AWARD. Subject to Section 1.4.2, in no event will grants in
any calendar year to any one individual under this Section 5.2 relate
to more than two hundred fifty thousand (250,000) shares or, (if
payable solely in cash) a cash amount of more than one million dollars
($1,000,000).
5.2.3 COMMITTEE CERTIFICATION. To the extent required by Section 162(m)
before any Performance-Based Award under this Section 5.2 is paid, the
Committee must certify that the material terms of the Performance-
Based Award were satisfied.
5.2.4 TERMS AND CONDITIONS OF AWARDS. The Committee will have discretion
to determine the restrictions or other limitations of the
individual Awards under this Section 5.2 (including the authority
to reduce Awards, payouts or vesting or to pay no Awards, in its
sole discretion, if the Committee preserves such authority at the
time of grant by language to this effect in its authorizing
resolutions or otherwise).
5.2.5 STOCK PAYOUT FEATURES. In lieu of cash payment of an Award, the
Committee may require or allow all or a portion of the Award to be
paid in the form of stock, Restricted Shares, an Option, or another
Award.
5.2.6 ADJUSTMENTS FOR MATERIAL CHANGES. Performance goals or other
features of an Award under this Section 5.2 may provide that they
(a) shall be adjusted to reflect a change in corporate
capitalization, a corporate transaction (such as a reorganization,
combination, separation, or merger) or a complete or partial
corporate liquidation, or (b) shall be calculated either without
regard for or to reflect any change in accounting policies or
practices affecting the Company and/or the business criteria or
performance goals or targets, or (c) shall be adjusted for any
other circumstance or event, or (d) any combination of (a) through
(c), but only to the extent in each case that such adjustment or
determination in respect of Performance-Based Awards would be
consistent with the requirements of Section 162(m) to qualify as
performance-based compensation.
5.3 GRANTS OF STOCK BONUSES. The Committee may grant a Stock Bonus to any
Eligible Person to reward exceptional or special services, contributions
or achievements in the manner and on such terms and conditions (including
any restrictions on such shares) as determined from time to time by the
Committee. The number of shares so awarded will be determined by the
Committee. The Award may be granted independently or in lieu of a cash
bonus.
5.4 DEFERRED PAYMENTS. The Committee may authorize for the benefit of any
Eligible Person the deferral of any payment of cash or shares that may
become due or of cash otherwise payable under this Plan, and provide for
accredited benefits thereon based upon such deferment, at the election or
at the request of such Participant, subject to the other terms of this
Plan.
15
<PAGE>
Such deferral will be subject to such further conditions, restrictions or
requirements as the Committee may impose, subject to any then vested
rights of Participants.
5.5 CASH BONUS AWARDS.
5.5.1 PERFORMANCE GOALS. The Committee may establish a program of annual
incentive awards that are payable in cash to Eligible Persons based
upon the extent to which performance goals are met during the
performance period. The performance goals may depend upon the
performance of the Company on a consolidated, subsidiary division
basis with reference to revenues, net earnings (before or after
interest, taxes, depreciation, or amortization), cash flow, return
on equity or on assets or net investment, cost containment or
reduction, or achievement of strategic goals (or any combination of
such factors). In addition, the award may depend upon the Eligible
Employee's individual performance.
5.5.2 PAYMENT IN RESTRICTED STOCK. In lieu of cash payment of an Award,
the Committee may require or allow all or a portion of the Award
to be paid in the form of stock, Restricted Stock, an Option or
other Award.
6. OTHER PROVISIONS
6.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
6.1.1 EMPLOYMENT STATUS. Status as an Eligible Person will not be
construed as a commitment that any Award will be made under this
Plan to an Eligible Person or to Eligible Persons generally.
6.1.2 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) will confer
upon any Eligible Person or other Participant any right to continue
in the employ or other service of the Company or constitute any
contract or agreement of employment or other service, nor will
interfere in any way with the right of the Company to otherwise
change such person's compensation or other benefits or to terminate
the employment of such person, with or without cause, but nothing
contained in this Plan or any related document will adversely affect
16
<PAGE>
any independent contractual right of such person without the
Participant's consent.
6.1.3 PLAN NOT FUNDED. Awards payable under this Plan will be payable in
shares or from the general assets of the Corporation, and (except
as provided in Section 1.4.3) no special or separate reserve, fund
or deposit will be made to assure payment of such Awards. No
Participant, Beneficiary or other person will have any right, title
or interest in any fund or in any specific asset (including shares
of Common Stock, except as expressly otherwise provided) of the
Company by reason of any Award hereunder. Neither the provisions of
this Plan (or of any related documents), nor the creation or
adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan will create, or be construed to create, a
trust of any kind or a fiduciary relationship between the Company
and any Participant, Beneficiary or other person. To the extent
that a Participant, Beneficiary or other person acquires a right to
receive payment pursuant to any Award hereunder, such right will be
no greater than the right of any unsecured general creditor of the
Company.
6.2 ADJUSTMENTS; ACCELERATION.
6.2.1 ADJUSTMENTS. The following provisions will apply if any
extraordinary dividend or other extraordinary distribution occurs
in respect of the Common Stock (whether in the form of cash, Common
Stock, other securities, or other property), or any
reclassification, recapitalization, stock split (including a stock
split in the form of a stock dividend), reverse stock split,
reorganization, merger, combination, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Common Stock or
other securities of the Corporation, or any similar, unusual or
extraordinary corporate transaction (or event in respect of the
Common Stock) or a sale of substantially all the assets of the
Corporation as an entirety occurs. The Committee will, in such
manner and to such extent (if any) as it deems appropriate and
equitable
(a) proportionately adjust any or all of (i) the number and type
of shares of Common Stock (or other securities) that
thereafter may be made the subject of Awards (including the
specific maxima and numbers of shares set forth elsewhere in
this Plan), (ii) the number, amount and type of shares of
Common Stock (or other securities or property) subject to any
or all outstanding Awards,(iii) the grant, purchase, or
exercise price
17
<PAGE>
of any or all outstanding Awards, (iv) the securities, cash or
other property deliverable upon exercise of any outstanding
Awards, or (v) the performance standards appropriate to any
outstanding Awards, or
(b) in the case of an extraordinary dividend or other
distribution, recapitalization, reclassification, merger,
reorganization, consolidation, combination, sale of assets,
split up, exchange, or spin off, make provision for a cash
payment or for the substitution or exchange of any or all
outstanding Awards or the cash, securities or property
deliverable to the holder of any or all outstanding Awards
based upon the distribution or consideration payable to
holders of the Common Stock of the Corporation upon or in
respect of such event. In each case, with respect to Awards
of Incentive Stock Options, no such adjustment will be made
that would cause the Plan to violate Section 424(a) of the
Code or any successor provisions without the written consent
of holders materially adversely affected thereby. In any of
such events, the Committee may take such action sufficiently
prior to such event if necessary to permit the Participant to
realize the benefits intended to be conveyed with respect to
the underlying shares in the same manner as is available to
stockholders generally.
6.2.2 ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. Unless prior to a
Change in Control Event the Committee determines that, upon its
occurrence, benefits under any or all Awards will not accelerate or
determines that only certain or limited benefits under any or all
Awards will be accelerated and the extent to which they will be
accelerated, and/or establishes a different time in respect of such
Event for such acceleration, then upon the occurrence of a Change
in Control Event
(a) each Option and Stock Appreciation Right will become
immediately exercisable,
(b) Restricted Stock will immediately vest free of restrictions,
and
(c) each Performance Share Award will become payable to the
Participant.
However, in the case of a transaction intended to
be accounted for as a pooling of interests transaction, the
Committee shall have no discretion with respect to the
foregoing acceleration of Awards.
18
<PAGE>
The Committee may override the limitations on acceleration in this
Section 6.2.2 by express provision in the Award Agreement and may
accord any Eligible Person a right to refuse any acceleration,
whether pursuant to the Award Agreement or otherwise, in such
circumstances as the Committee may approve. Any acceleration of
Awards will comply with applicable legal requirements.
6.2.3 POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option or
other right to acquire Common Stock under this Plan (other than
under Section 8) has been fully accelerated as required or
permitted by Section 6.2.2 but is not exercised prior to (a) a
dissolution of the Corporation, or (b) an event described in
Section 6.2.1 that the Corporation does not survive, or (c) the
consummation of an event described in Section 6.1 involving a
Change of Control approved by the Board, such Option or right will
terminate, subject to any provision that has been expressly made by
the Committee through a plan of reorganization approved by the
Board or otherwise for the survival, substitution, assumption,
exchange or other settlement of such Option or right.
6.2.4 GOLDEN PARACHUTE LIMITATIONS. Unless otherwise specified in an
Award Agreement, no Award be accelerated under this Plan to an
extent or in a manner that would not be fully deductible by the
Company for federal income tax purposes because of Section 280G of
the Code, nor will any payment hereunder be accelerated if any
portion of such accelerated payment would not be deductible by the
Company because of Section 280G of the Code. If a holder would be
entitled to benefits or payments hereunder and under any other plan
or program that would constitute "parachute payments" as defined in
Section 280G of the Code, then the holder may by written notice to
the Company designate the order in which such parachute payments
will be reduced or modified so that the Company is not denied
federal income tax deductions for any "parachute payments" because
of Section 280G of the Code.
6.3 EFFECT OF TERMINATION OF EMPLOYMENT. The Committee will establish in
respect of each Award granted to an Eligible Person the effect of a
termination of employment on the rights and benefits thereunder and in so
doing may make distinctions based upon the cause of termination.
6.4 COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Awards
under this Plan and the offer, issuance and delivery of shares of Common
Stock and/or the payment of money under this Plan or under Awards granted
hereunder are subject to compliance with all applicable federal and
19
<PAGE>
state laws, rules and regulations (including but not limited to state and
federal securities law, federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in
the opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Any securities delivered under this Plan will be
subject to such restrictions, and to any restrictions the Committee may
require to preserve a pooling of interests under generally accepted
accounting principles, and the person acquiring such securities will, if
requested by the Corporation, provide such assurances and representations
to the Corporation as the Corporation may deem necessary or desirable to
assure compliance with all applicable legal requirements.
6.5 TAX WITHHOLDING.
6.5.1 PROVISION FOR TAX WITHHOLDING OFFSET. Upon any exercise, vesting,
or payment of any Award or upon the disposition of shares of Common
Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to satisfaction of the holding period requirements of
Section 422 of the Code, the Company shall have the right at its
option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the
amount of any taxes which the Company may be required to withhold with
respect to such Award event or payment or (ii) deduct from any amount
payable in cash the amount of any taxes which the Company may be
required to withhold with respect to such cash payment. In any case
where a tax is required to be withheld in connection with the delivery
of shares of Common Stock under this Plan, the Committee may in its
sole discretion (subject to Section 6.4) grant (either at the time of
the Award or thereafter) to the Participant the right to elect,
pursuant to such rules and subject to such conditions as the Committee
may establish, to have the Corporation reduce the number of shares to
be delivered by (or otherwise reacquire) the appropriate number of
shares valued at their then Fair Market Value, to satisfy such
withholding obligation.
6.5.2 TAX LOANS. If so provided in the Award Agreement, the Company may,
to the extent permitted by law, authorize a loan to an Eligible
Person in the amount of any taxes that the Company may be required
to withhold with respect to shares of Common Stock received (or
disposed of, as the case may be) pursuant to a transaction
described in Section 6.5.1. Such a loan will be for a term, at a
rate of interest and pursuant to such other terms and conditions as
the Company, under applicable law may establish and such loan need
not comply with the provisions of Section 1.8.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
6.6.1 BOARD AUTHORIZATION. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or
in part. No Awards may be granted during any suspension of this
Plan or after termination of this Plan, but the Committee will
retain jurisdiction as to Awards then outstanding in accordance
with the terms of this Plan.
20
<PAGE>
6.6.2 STOCKHOLDER APPROVAL. To the extent then required under Sections
422 and 424 of the Code or any other applicable law, or deemed
necessary or advisable by the Board, any amendment to this Plan
shall be subject to shareholder approval.
6.6.3 AMENDMENTS TO AWARDS. Without limiting any other express authority
of the Committee under but subject to the express limits of this
Plan, the Committee by agreement or resolution may waive conditions
of or limitations on Awards to Eligible Persons that the Committee
in the prior exercise of its discretion has imposed, without the
consent of a Participant, and may make other changes to the terms
and conditions of Awards that do not affect in any manner
materially adverse to the Participant, the Participant's rights and
benefits under an Award.
6.6.4 LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of this Plan or change of or affecting
any outstanding Award will, without written consent of the
Participant, affect in any manner materially adverse to the
Participant any rights or benefits of the Participant or
obligations of the Corporation under any Award granted under this
Plan prior to the effective date of such change. Changes
contemplated by Section 6.2 will not be deemed to constitute
changes or amendments for purposes of this Section 6.6.
6.7 PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise expressly authorized
by the Committee or this Plan, a Participant will not be entitled to any
privilege of stock ownership as to any shares of Common Stock not
actually delivered to and held of record by the Participant. No
adjustment will be made for dividends or other rights as a stockholder
for which a record date is prior to such date of delivery.
6.8 EFFECTIVE DATE OF THE PLAN. This Plan is effective as of August 1, 1997,
and was restated in its entirety as of September 12, 1997. The Plan was
approved by the Company's stockholders on August 1, 1997 and the
restatement was approved by the Company's stockholders on September 12,
1997.
6.9 TERM OF THE PLAN. No Award will be granted under this Plan
more than ten years after July 31, 2007 (the "TERMINATION DATE").
Unless otherwise expressly provided in this Plan or in an applicable Award
Agreement, any Award granted prior to the termination date may extend
beyond such date, and all authority of the Committee with respect to Awards
hereunder, including the authority to amend an Award, will continue
21
<PAGE>
during any suspension of this Plan and in respect of Awards
outstanding on the termination date.
22
<PAGE>
6.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
6.10.1 CHOICE OF LAW. This Plan, the Awards, all documents
evidencing wards and all other related documents will be overned
by, and construed in accordance with the aws of the state of
California.
6.10.2 SEVERABILITY. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of
this Plan will continue in effect.
6.10.3 PLAN CONSTRUCTION.
(a) RULE 16b-3. It is the intent of the Corporation that the
Awards hereunder satisfy and be interpreted in a manner that,
in the case of Participants who are or may be subject to
Section 16 of the Exchange Act, satisfies the applicable
requirements of Rule 16b-3 so that such persons (unless they
otherwise agree) will be entitled to the benefits of Rule
16b-3 or other exemptive rules under Section 16 of the
Exchange Act in respect of those transactions and will not be
subjected to avoidable liability thereunder. If any provision
of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed above, that provision to
the extent possible will be interpreted as to avoid such
conflict. If the conflict remains irreconcilable, the
Committee may disregard the provision if it concludes that to
do so furthers the interest of the Corporation, is fair to the
affected Participant, and is consistent with the purposes of
this Plan as to such persons in the circumstances.
(b) SECTION 162(m). It is the further intent of the Company that
Options or SARs with an exercise or base price not less than
Fair Market Value on the date of grant and performance awards
under Section 5.2 of this Plan that are granted to or held by
a person subject to Section 162(m) of the Code will qualify as
performance-based compensation under Section 162(m) of the
Code, and this Plan will be interpreted consistent with such
intent.
6.11 CAPTIONS. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference.
23
<PAGE>
Such headings will not be deemed in any way material or relevant to the
construction or interpretation of this Plan or any provision thereof.
6.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS. For purposes of this Plan and
any Award hereunder, if an entity ceases to be a Subsidiary a termination
of employment and service will be deemed to have occurred with respect to
each Eligible Person in respect of such Subsidiary who does not continue
as an Eligible Person in respect of another entity within the Company.
6.13 NON-EXCLUSIVITY OF PLAN. Nothing in this Plan will limit or be deemed
to limit the authority of the Board or the Committee to grant awards or
authorize any other compensation, with or without reference to the Common
Stock, under any other plan or authority.
7. DEFINITIONS
"AWARD" means an award of any Option, Stock Appreciation Right, Restricted
Stock, Stock Bonus, performance share award, dividend equivalent or deferred
payment right or other right or security that would constitute a "derivative
security" under Rule 16a-1(c) of the Exchange Act, or any combination
thereof, whether alternative or cumulative, authorized by and granted under
this Plan.
"AWARD AGREEMENT" means any writing setting forth the terms of an Award that
has been authorized by the Committee.
"AWARD DATE" means the date upon which the Committee took the action granting
an Award or such later date as the Committee designates as the Award Date at
the time of the Award or, in the case of Awards under Section 8, the
applicable dates set forth therein.
"AWARD PERIOD" means the period beginning on an Award Date and ending on the
expiration date of such Award.
"BENEFICIARY" means the person, persons, trust or trusts designated by a
Participant or, in the absence of a designation, entitled by will or the laws
of descent and distribution, to receive the benefits specified in the Award
Agreement and under this Plan if the Participant dies, and means the
Participant's executor or administrator if no other Beneficiary is designated
and able to act under the circumstances.
"BOARD" means the Board of Directors of the Corporation.
24
<PAGE>
"CHANGE IN CONTROL EVENT" means any of the following:
(a) Approval by the stockholders of the Corporation of the dissolution
or liquidation of the Corporation;
(b) Approval by the stockholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or
more entities that are not Subsidiaries or other affiliates, as a
result of which less than 50% of the outstanding voting securities
of the surviving or resulting entity immediately after the
reorganization are, or will be, owned, directly or indirectly, by
stockholders of the Corporation immediately before such
reorganization (assuming for purposes of such determination that
there is no change in the record ownership of the Corporation's
securities from the record date for such approval until such
reorganization and that such record owners hold no securities of
the other parties to such reorganization), but including in such
determination any securities of the other parties to such
reorganization held by affiliates of the Corporation);
(c) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a
person or entity that is not a Subsidiary or other affiliate; or;
(d) Any "PERSON" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(1) thereunder), other
than a Current Affiliate, becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of the
combined voting power of the Corporation's then outstanding
securities entitled to then vote generally in the election of
directors of the Corporation; provided, however, that a Change of
Control will not be deemed to have occurred if a Current Affiliate
transfers to an organization described under Section 501 of the
Code beneficial ownership of more than 50% of the combined voting
power of the Corporation's then outstanding securities entitled to
then vote generally in the election of directors of the
Corporation; or
(e) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of each
new Board member was approved by a vote of at least three-fourths
25
<PAGE>
of the Board members then still in office who were Board members at
the beginning of such period (including for these purposes, new
members whose election or nomination was so approved).
"CURRENT AFFILIATE" means Fred Kayne or any of his affiliates (within the
meaning of the Exchange Act), successors, heirs, descendants or members of
his immediate family.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMITTEE" means the Board or a committee appointed by the Board to
administer this Plan, which committee will be comprised only of two or more
directors or such greater number of directors as may be required under
applicable law, each of whom, in respect of any decision involving a
Participant affected by the decision who may be subject to Section 162(m) of
the Code, will be Disinterested. In acting on any transaction with or for the
benefit of a Section 16 Person, all acting members of the Committee shall be
Non-Employee Directors within the meaning of Rule 16b-3 under the Exchange
Act.
"COMMON STOCK" means the Common Stock of the Corporation and such other
securities or property as may become the subject of Awards, or become subject
to Awards, pursuant to an adjustment made under Section 6.2 of this Plan.
"COMPANY" means, collectively, the Corporation and its Subsidiaries.
"CORPORATION" means Big Dog Sportswear, a Delaware corporation, and its
successors.
"DISINTERESTED" means a disinterested director or an "outside director"
within the meaning of any mandatory legal or regulatory requirements,
including Section 162(m) of the Code.
"ELIGIBLE EMPLOYEE" means an officer (whether or not a director) or
employee of the Company.
"ELIGIBLE PERSON" means an Eligible Employee, or any Other Eligible Person,
as determined by the Committee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
26
<PAGE>
"FAIR MARKET VALUE" on any date means (a) if the stock is listed or admitted
to trade on a national securities exchange, the closing price of the stock on
the Composite Tape, as published in the Western Edition of The Wall Street
Journal, of the principal national securities exchange on which the stock is
so listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (b) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished
by the National Association of Securities Dealers, Inc. ("NASD") through the
NASDAQ National Market Reporting System or a similar organization if the NASD
is no longer reporting such information; (c) if the stock is not listed or
admitted to trade on a national securities exchange and is not reported on
the National Market Reporting System, the mean between the bid and asked
price for the stock on such date, as furnished by the NASD or a similar
organization; or (d) if the stock is not listed or admitted to trade on a
national securities exchange, is not reported on the National Market
Reporting System and if bid and asked prices for the stock are not furnished
by the NASD or a similar organization, the value as established by the
Committee at such time for purposes of this Plan.
"INCENTIVE STOCK OPTION" means an Option that is designated and intended as
an incentive stock option within the meaning of Section 422 of the Code, the
award of that contains such provisions (including but not limited to the
receipt of stockholder approval of this Plan, if the award is made prior to
such approval) and is made under such circumstances and to such persons as
may be necessary to comply with that section.
"NONQUALIFIED STOCK OPTION" means an Option that is designated as a
Nonqualified Stock Option and will include any Option intended as an
Incentive Stock Option that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not designated as an incentive
stock option will be deemed to be designated a nonqualified stock option
under this Plan and not an incentive stock option under the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board of Directors of the
Corporation who is not an officer or employee of the Company. For purposes
of this Plan, the Chairman of the Board will be deemed an officer of the
Company.
"NON-EMPLOYEE DIRECTOR PARTICIPANT" means a Non-Employee Director who holds
an outstanding Award under the provisions of Section 8.
27
<PAGE>
"OPTION" means an option to purchase Common Stock granted under this Plan.
The Committee will designate any Option granted to an Eligible Person as a
Nonqualified Stock Option or an Incentive Stock Option.
"OTHER ELIGIBLE PERSON" means any Non-Employee Director or any individual
consultant or advisor who or (to the extent provided in the next sentence)
agent who renders or has rendered BONA FIDE services (other than services in
connection with the offering or sale of securities of the Company in a
capital raising transaction) to the Company, and who is selected to
participate in this Plan by the Committee. If the Corporation's officers and
directors are or become subject to Section 16 of the Exchange Act, a
Non-Employee Director will not thereafter be selected as an Other Eligible
Person. A non-employee providing BONA FIDE services to the Company (other
than as an eligible advisor or consultant) may also be selected as an Other
Eligible Person if such agent's participation in this Plan would not
adversely affect (a) the Corporation's eligibility to use Form S-8 to
register under the Securities Act of 1933, as amended, the offering of shares
issuable under this Plan by the Company or (b) the Corporation's compliance
with any other applicable laws.
"PARTICIPANT" means an Eligible Person who has been granted an Award under
this Plan and a Non-Employee Director who has been received an Award under
Section 8 of this Plan.
"PERFORMANCE SHARE AWARD" means an Award of a right to receive shares of
Common Stock under Section 5.1, or to receive shares of Common Stock or other
compensation (including cash) under Section 5.2, the issuance or payment of
that is contingent upon, among other conditions, the attainment of
performance objectives specified by the Committee.
"PERSONAL REPRESENTATIVE" means the person or persons who, upon the
disability or incompetence of a Participant, has acquired on behalf of the
Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan by virtue of having become the
legal representative of the Participant.
"PLAN" means this 1997 Performance Award Plan, as amended from time to time.
"QDRO" means a qualified domestic relations order.
"RESTRICTED SHARES" or "RESTRICTED STOCK" means shares of Common Stock
awarded to a Participant under this Plan, subject to payment of such
consideration, if any, and such conditions on vesting (which may include,
among others, the passage of time, specified performance objectives or other
factors) and
28
<PAGE>
such transfer and other restrictions as are established in or pursuant to
this Plan and the related Award Agreement, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
"RETIREMENT" means retirement with the consent of the Company or, from active
service as an employee or officer of the Company on or after attaining age 55
with ten or more years of service or age 65.
"RULE 16b-3" means Rule 16b-3 as promulgated by the Commission pursuant to
the Exchange Act, as amended from time to time, but subject to any applicable
transition rules.
"SECTION 16 PERSON" means a person subject to Section 16(a) of the Exchange
Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"STOCK APPRECIATION RIGHT" OR "SAR" means a right authorized under this Plan
to receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock.
"STOCK BONUS" means an Award of shares of Common Stock granted under this
Plan for no consideration other than past services and without restriction
other than such transfer or other restrictions as the Committee may deem
advisable to assure compliance with law.
"SUBSIDIARY" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
"TOTAL DISABILITY" means a disability where Participant is unable to
effectively engage in the material activities required for Participant's
position with the Company by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has lasted
or can be expected to last for a period of 90 consecutive days or for shorter
periods aggregating 180 days in any consecutive 12 month period.
29
<PAGE>
8. NON-EMPLOYEE DIRECTOR OPTIONS
8.1 PARTICIPATION. Awards under this Section 8 will be made only to
Non-Employee Directors and will be evidenced by Award Agreements
substantially in the form of EXHIBIT A.
8.2 ANNUAL OPTION GRANTS.
8.2.1 TIME OF INITIAL AWARD. After approval of this Plan by the
stockholders of the Corporation, if any person who is not then an
officer or employee of the Company will become a director of the
Corporation, such person will automatically be granted (without any
action by the Board or Committee) a Non-qualified Stock Option (the
Award Date of which will be the date such person takes office) to
purchase 10,000 shares of Common Stock.
8.2.2 SUBSEQUENT ANNUAL AWARDS. Subject to Section 8.2.3, at the close of
trading on the day of the annual stockholders meeting in each year
during the term of the Plan commencing 1998, there will be granted
automatically (without any action by the Committee or the Board) a
Nonqualified Stock Option (the Award Date of which will be such
date) to each Non-Employee Director then continuing in office to
purchase 5,000 shares of Common Stock.
8.2.3 MAXIMUM NUMBER OF OPTIONS/SHARES. Annual grants that would
otherwise exceed the maximum number of shares under Section 1.4.1
will be prorated within such limitation. A Non-Employee Director
will not receive more than one Nonqualified Stock Option under this
Section 8.2 in any calendar year.
8.3 OPTION PRICE. The purchase price per share of the Common Stock covered
by each Option granted pursuant to Section 8.2 will be 100% of the Fair
Market Value of the Common Stock on the Award Date. The exercise price
of any Option granted under this Section will be paid in full at the time
of each purchase in cash or by check or in shares of Common Stock valued
at their Fair Market Value on the date of exercise of the Option, or
partly in such shares and partly in cash, but any such shares used in
payment must be owned by the Participant at least six months prior to the
date of exercise.
8.4 OPTION PERIOD AND EXERCISABILITY. Each Option granted under this Section
8 and all rights or obligations thereunder will expire on the day before
the tenth anniversary of the Award Date and will be subject to earlier
termination as provided below. Each Option granted under Section 8.2
will become exercisable at the rate
30
<PAGE>
of 20% per annum commencing on the first anniversary of the Award Date and
each of the next four anniversaries thereof.
8.5 TERMINATION OF DIRECTORSHIP. If a Non-Employee Director's services as a
member of the Board of Directors terminate by reason of death, Disability
or Retirement, an Option granted pursuant to this Section 8 held by such
Participant will immediately become and will remain exercisable for two
years after the date of such termination or until the expiration of the
stated term of such Option, whichever first occurs. If a Non-Employee
Director's services as a member of the Board of Directors terminate for
any other reason, any portion of an Option granted pursuant to this
Section that is not then exercisable will terminate and any portion of
such Option that is then exercisable may be exercised for six months
after the date of such termination or until the expiration of the stated
term whichever first occurs.
8.6 ADJUSTMENTS; ACCELERATIONS; TERMINATIONS. Options granted under this
Section 8 will be subject to adjustments, accelerations and terminations
as provided in Section 6.2, but only to the extent that in the case of a
Change in Control Event such effect and any Board or Committee action in
respect thereof is effected pursuant to the terms of a reorganization
agreement approved by stockholders of the Corporation, or is otherwise
consistent with the effect on Options held by persons other than
executive officers or directors of the Corporation (or, if there are
none, consistent in respect of the underlying shares with the effect on
stockholders generally).
31
<PAGE>
8.7 ACCELERATION UPON A CHANGE IN CONTROL EVENT. Upon the occurrence of a
Change in Control Event and acceleration under Section 6.2.2, each Option
granted under Section 8.2 hereof will become immediately exercisable in
full. To the extent that any Option granted under this Section 8 is not
exercised prior to (a) a dissolution of the Corporation or (b) a merger
or other corporate event that the Corporation does not survive, and no
provision is (or consistent with the provisions of this Plan can be) made
for the assumption, conversion, substitution or exchange of the Option,
the Option will terminate upon the occurrence of such event.
32
<PAGE>
EXHIBIT A
BIG DOG HOLDINGS, INC.
ELIGIBLE DIRECTOR
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of _____________, ____, is between BIG DOG
HOLDINGS, INC. , a Delaware corporation (the "CORPORATION"), and
________________ (the "DIRECTOR"). The Corporation and the Director agree to
the terms and conditions set forth herein as required by the terms of the
Plan.
BACKGROUND
A. The Corporation has adopted and the stockholders of the
Corporation have approved the 1997 Performance Award Plan (the "PLAN").
B. Pursuant to the Plan, the Corporation has granted an option (the
"OPTION") to the Director upon the terms and conditions evidenced hereby, as
required by the Plan, which Option is not intended as and will not be deemed
to be an incentive stock option within the meaning of Section 422 of the Code.
1. OPTION GRANT. This Agreement evidences the grant to the Director, as of
___________, ____ (the "OPTION DATE"), of an Option to purchase an aggregate
of _____ shares of Common Stock, par value $____ per share, under Section 8
of the Plan, subject to the terms and conditions and to adjustment as set
forth herein or in pursuant to the Plan.
2. EXERCISE PRICE. The Option entitles the Director to purchase (subject
to the terms of Sections 3 through 5 below) all or any part of the Option
shares at a price per share of $_______, which represents the Fair Market
Value of the shares on the Option Date.
Exhibit A-1
<PAGE>
3. OPTION EXERCISABILITY AND TERM. Subject to adjustment pursuant to the
Plan, the Option will first become and remain exercisable as to ___________
(20%) of the shares on the first anniversary of the date of grant and as to an
additional _________ shares (20%) on each of the next four anniversaries of
that date, in each case subject to adjustments and acceleration under
Section 8.6 of the Plan. The Option will terminate on ____________, ____,*
unless earlier terminated in accordance with the terms of the Plan.
4. SERVICE AND EFFECT OF TERMINATION OF SERVICE. The Director
agrees to serve as a director in accordance with the provisions of the
Corporation's Certificate of Incorporation, bylaws and applicable law. If
the Director's services as a member of the Board terminate, this Option will
terminate at the times and to the extent set forth in the Plan.
5. GENERAL TERMS. The Option and this Agreement are subject to,
and the Corporation and the Director agree to be bound by, the provisions of
the Plan that apply to the Option. Such provisions are incorporated herein
by this reference. The Director has received a copy of the Plan and has read
its applicable provisions. Capitalized terms not otherwise defined herein
have the meaning set forth in the Plan.
_______________
* Insert day before tenth anniversary of date of grant
Exhibit A-2
<PAGE>
The parties have signed this Agreement as of the date on page 1.
BIG DOG HOLDINGS, INC.
(a Delaware corporation)
By __________________________
Title ______________________
Optionee Director
_____________________________
(Signature)
_____________________________
(Print Name)
_____________________________
(Address)
_____________________________
(City, State, Zip Code)
_____________________________
[social security number]
In consideration of the execution of the foregoing Stock Option
Agreement by Big Dog Holdings, Inc., I, ____________________________, the
spouse of the Director named therein, agree to be bound by all of the terms
and provisions thereof and of the Plan.
DATED: ______________, ____.
___________________________
Signature of Spouse
Exhibit A-3
<PAGE>
ADDENDUM TO
BIG DOG HOLDINGS, INC.
1997 PERFORMANCE AWARD PLAN
The following Addendum amends the Big Dog Holdings, Inc. 1997 Performance Award
Plan (the "Plan"). All terms used herein shall have the meaning provided in the
Plan. Until the date (the "Sunset Date") on which the offer and grant of
Options and the issuance of Common Stock subject to Options under the plan is
exempt from California qualification requirements under Federal law or Section
25100(o) of the California Corporate Securities Law and the Rules of the
California Commissioner of Corporations thereunder, the following amendments
shall continue to apply, to the extent required under California law, in respect
of all Options granted under the plan prior to the Sunset Date (the "Initial
Options").
1. EFFECTIVE TIME OF AMENDMENT. This addendum amendment shall be effective
from August 1, 1997 until the Sunset Date.
2. TERM. Section 1.6 is deleted and Section 2.3.2 is amended to provide:
OPTION PERIOD. Each Option and all rights thereunder will expire no
later than 120 months after the Award Date.
3. TRANSFERABILITY. Section 1.9.2 and clauses (a), (c) and (d) of Section
1.9.3 are deleted.
4. PRICING LIMITS. Section 2.2.1 is amended by changing the phrase "not less
than the par value thereof" to "not less than 85% of the fair value (as
determined consistent with the requirements of Section 25102(o) of the
California Corporate Securities Law of 1968, as amended (the "California
Exemption")) as of the Award Date, except that the purchase price shall be 110%
of the fair value in the case of any person who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company.
5. EFFECT OF TERMINATION OF EMPLOYMENT. Section 2.6 is amended to eliminate
the discretion of the Committee (other than under 2.6.6) and the Board in
respect of Options granted to persons other than persons ("Associated
Persons") who are officers, directors or consultants of the Corporation or
any of its affiliates.
6. EXERCISE. Section 2.8 is added to provide:
RIGHT TO EXERCISE. Subject to Section 2.6, Options shall become
exercisable at the rate of at least 20% per year over five years from
the Award Date, subject to reasonable conditions such as continued
employment. However, in the case of an Option granted to an
Associated Person, the Option may become fully exercisable, subject to
reasonable
<PAGE>
conditions such as continued employment, at any time or during any
period established by the Committee.
7. INFORMATION. Section 2.9 is added to provide:
INFORMATION TO PARTICIPANTS. To the extent required by the California
Exemption, Participants will receive financial statements of the
Company at least annually.
8. ELIGIBLE PERSONS. Eligible Persons shall be limited to persons eligible
under the California Exemption and SEC Rule 701.
9. REPURCHASE RIGHTS. Any provision in the Option Agreement for the repurchase
of the option or the underlying Common Stock from a person who is not an
Associated Person shall comply with the provisions of Section 260.140.41 of the
Rules of the California Commissioner of Corporations.
