<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1999
Registration No. 333-80289
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
PRE-EFFECTIVE
AMENDMENT NO. 3
to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
1-800 CONTACTS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 5960 87-0571643
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or organization) Classification Code Number) No.)
</TABLE>
66 E. Wadsworth Park Drive
Draper, Utah 84020
Telephone: (801) 924-9800
(Address, including zip code, and telephone number, including area code, of
Registrant's executive offices)
Jonathan C. Coon, President and Chief Executive Officer
1-800 CONTACTS, INC.
66 E. Wadsworth Park Drive
Draper, Utah 84020
Telephone: (801) 924-9800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
Dennis M. Myers, Esq. Gregory C. Smith, Esq.
Kirkland & Ellis Skadden, Arps, Slate, Meagher & Flom LLP
200 East Randolph Drive 525 University Avenue, Suite 220
Chicago, Illinois 60601 Palo Alto, California 94301
(312) 861-2000 (650) 470-4500
</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, other than securities offered only in connection with dividend or
interest reinvestment plans, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following is a statement of estimated expenses, to be paid solely by
1-800 CONTACTS, of the issuance and distribution of the securities being
registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $14,694
NASD filing fee.................................................. 5,786
Nasdaq Stock Market listing fee.................................. 17,500
Blue Sky fees and expenses (including attorneys' fees and
expenses)....................................................... 10,000
Accounting fees and expenses..................................... 150,000
Printing expenses................................................ 300,000
Transfer agent's fees and expenses............................... 5,000
Legal fees and expenses.......................................... 200,000
Miscellaneous expenses........................................... 47,020
--------
Total........................................................ $750,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers.
1-800 CONTACTS is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any persons who are,
or are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
1-800 CONTACTS's Certificate of Incorporation and By-laws provide for the
indemnification of directors and officers of 1-800 CONTACTS to the fullest
extent permitted by Section 145.
In that regard, the By-laws provide that 1-800 CONTACTS shall indemnify
any person whom it has the power to indemnify by Section 145 from or against
any and all of the expenses, liabilities or other
II-1
<PAGE>
matters referred to or covered in Section 145, and such indemnification is not
exclusive of other rights to which such person shall be entitled under any By-
law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in such person's official capacity for or in behalf of 1-800
CONTACTS and/or any subsidiary of 1-800 CONTACTS and as to action in another
capacity while holding such office and shall continue as to such person who has
ceased to be a director, officer, employee, or agent of 1-800 CONTACTS and/or
subsidiary of 1-800 CONTACTS and shall inure to the benefit of the heirs,
executors, and administrators of such person.
1-800 CONTACTS has entered into indemnification agreements with each of
its executive officers and directors.
Item 15. Recent Sales of Unregistered Securities.
Within the past three years, 1-800 CONTACTS has not issued any securities
without registration under the Securities Act of 1933, as amended, except in
February 1996, 1-800 CONTACTS repurchased 2,250 shares of its outstanding
common stock and immediately subsequently resold these shares to Donald and
Stephen Yacktman for $300,000 in cash. The above-described transaction was
exempt from registration under the Securities Act pursuant to Section 4(2) of
the Securities Act as a transaction not involving any public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1(i) Restated Certificate of Incorporation of 1-800 CONTACTS. (1)
3.1(ii) Restated By-Laws of 1-800 CONTACTS. (1)
4.1 Form of certificate representing shares of Common Stock, $0.01 par
value per share. (2)
*5.1 Opinion of Kirkland & Ellis.
10.1 Employment Agreement between 1-800 CONTACTS and Jonathan C. Coon.
(2)
10.2 Employment Agreement between 1-800 CONTACTS and John F. Nichols. (2)
10.3 Employment Agreement between 1-800 CONTACTS and Scott S. Tanner. (2)
10.4 Employment Agreement between 1-800 CONTACTS and Robert G. Hunter.
(2)
10.5 1-800 CONTACTS, Inc. 1998 Incentive Stock Option Plan. (2)
10.6 Lease between 1-800 CONTACTS and Draper Land Partnership II, dated
September 4, 1996, with respect to 1-800 CONTACTS's former call
center. (2)
10.7 Lease between 1-800 CONTACTS and Draper Land Partnership II, dated
November 3, 1997, with respect to 1-800 CONTACTS's call center. (2)
10.8 Lease between 1-800 CONTACTS and Bird and Saunders, dated January
23, 1998, with respect to 1-800 CONTACTS's warehouse. (2)
10.9 Revolving Credit Agreement between 1-800 CONTACTS and Zions First
National Bank. (2)
10.10 Indemnification Agreement between 1-800 CONTACTS and its officers
and directors. (2)
10.11 Agreement for Distribution of Retained Earnings and Tax
Indemnification between 1-800 CONTACTS and the Existing
Stockholders. (2)
10.12 Lease between 1-800 CONTACTS and Larry T. Short, dated June 27,
1995, with respect to the 1-800 CONTACTS telephone number. (2)
10.13 Stock Option Agreement. (2)
10.14 First Amendment to Lease between 1-800 CONTACTS and Draper Land
Partnership II, dated May 25, 1998, with respect to 1-800 CONTACTS's
call center. (3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.15 Second Amendment to Lease between 1-800 CONTACTS and Draper Land
Partnership II, dated August 6, 1998, with respect to 1-800
CONTACTS's call center. (3)
10.16 Lease between 1-800 CONTACTS and ProLogis Development Services
Incorporated, dated October 13, 1998, with respect to 1-800
CONTACTS's distribution center. (3)
10.17 Revolving Credit Agreement between 1-800 CONTACTS and Zions First
National Bank, dated October 29, 1998. (3)
**23.1 Consent of Independent Public Accountants.
*23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
**24.1 Power of Attorney (included in signature page).
**27.1 Financial Data Schedule.
</TABLE>
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* Filed herewith.
** Previously filed.
(1) Incorporated by reference to 1-800 CONTACTS's Quarterly Report on Form 10-Q
for the quarterly period ended April 4, 1998 (Commission File No. 0-23633).
(2) Incorporated by reference to the same numbered exhibit to 1-800 CONTACTS's
Registration Statement on Form S-1 (Registration No. 333-41055).
(3) Incorporated by reference to the same numbered exhibit to 1-800 CONTACT's
Annual Report on Form 10-K for the year ended January 2, 1999 (Commission
File No. 0-23633).
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Pre-Effective Amendment No. 3 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Draper, State of Utah, on August 9, 1999.
1-800 Contacts, Inc.
/s/ Jonathan C. Coon
By: _________________________________
Jonathan C. Coon
President and Chief Executive
Officer
* * * *
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 3 to Registration Statement have been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Jonathan C. Coon President, Chief Executive August 9, 1999
____________________________________ Officer and Director
Jonathan C. Coon (principal executive
officer)
* Chief Financial Officer and August 9, 1999
____________________________________ Director (principal
Scott S. Tanner financial officer)
* Corporate Controller August 9, 1999
____________________________________ (principal accounting
Robert G. Hunter officer)
* Vice President, Operations August 9, 1999
____________________________________ and Director
John F. Nichols
* Director August 9, 1999
____________________________________
Stephen A. Yacktman
* Director August 9, 1999
____________________________________
E. Dean Butler
</TABLE>
* The undersigned, by signing his name hereto, does hereby sign and execute
this Pre-Effective Amendment No. 3 to Registration Statement on Form S-1 on
behalf of the above named officers and directors of 1-800 CONTACTS, INC.
pursuant to the Power of Attorney executed by such officer and/or director
and filed with the Commission.
<TABLE>
<S> <C> <C>
/s/ Jonathan C. Coon
By: __________________________________
Jonathan C. Coon
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1(i) Restated Certificate of Incorporation of 1-800 CONTACTS. (1)
3.1(ii) Restated By-Laws of 1-800 CONTACTS. (1)
4.1 Form of certificate representing shares of Common Stock, $0.01 par
value per share. (2)
*5.1 Opinion of Kirkland & Ellis.
10.1 Employment Agreement between 1-800 CONTACTS and Jonathan C.
Coon. (2)
10.2 Employment Agreement between 1-800 CONTACTS and John F.
Nichols. (2)
10.3 Employment Agreement between 1-800 CONTACTS and Scott S.
Tanner. (2)
10.4 Employment Agreement between 1-800 CONTACTS and Robert G.
Hunter. (2)
10.5 1-800 CONTACTS, Inc. 1998 Incentive Stock Option Plan. (2)
10.6 Lease between 1-800 CONTACTS and Draper Land Partnership II, dated
September 4, 1996, with respect to 1-800 CONTACTS's former call
center. (2)
10.7 Lease between 1-800 CONTACTS and Draper Land Partnership II, dated
November 3, 1997, with respect to 1-800 CONTACTS's call center. (2)
10.8 Lease between 1-800 CONTACTS and Bird and Saunders, dated January
23, 1998, with respect to 1-800 CONTACTS's warehouse. (2)
10.9 Revolving Credit Agreement between 1-800 CONTACTS and Zions First
National Bank. (2)
10.10 Indemnification Agreement between 1-800 CONTACTS and its officers
and directors. (2)
10.11 Agreement for Distribution of Retained Earnings and Tax
Indemnification between 1-800 CONTACTS and the Existing
Stockholders. (2)
10.12 Lease between 1-800 CONTACTS and Larry T. Short, dated June 27,
1995, with respect to the 1-800 CONTACTS telephone number. (2)
10.13 Stock Option Agreement. (2)
10.14 First Amendment to Lease between 1-800 CONTACTS and Draper Land
Partnership II, dated May 25, 1998, with respect to 1-800
CONTACTS's call center. (3)
10.15 Second Amendment to Lease between 1-800 CONTACTS and Draper Land
Partnership II, dated August 6, 1998, with respect to 1-800
CONTACTS's call center. (3)
10.16 Lease between 1-800 CONTACTS and ProLogis Development Services
Incorporated, dated October 13, 1998, with respect to 1-800
CONTACTS's distribution center. (3)
10.17 Revolving Credit Agreement between 1-800 CONTACTS and Zions First
National Bank, dated October 29, 1998. (3)
**23.1 Consent of Independent Public Accountants.
*23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
**24.1 Power of Attorney (included in signature page).
**27.1 Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to 1-800 CONTACTS's Quarterly Report on Form 10-Q
for the quarterly period ended April 4, 1998 (Commission File No. 0-23633).
(2) Incorporated by reference to the same numbered exhibit to 1-800 CONTACTS's
Registration Statement on Form S-1 (Registration No. 333-41055).
(3) Incorporated by reference to the same numbered exhibit to 1-800 CONTACT's
Annual Report on Form 10-K for the year ended January 2, 1999 (Commission
File No. 0-23633).
<PAGE>
Exhibit 1.1
1-800 CONTACTS, INC.
2,040,000 Shares/1/
Common Stock
UNDERWRITING AGREEMENT
----------------------
August __, 1999
HAMBRECHT & QUIST LLC
MCDONALD INVESTMENTS INC.
As Representatives of the several Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
1-800 CONTACTS, INC., a Delaware corporation (herein called the Company),
proposes to issue and sell 1,410,000 shares of its authorized but unissued
Common Stock, $0.01 par value (herein called the Common Stock), and the
stockholders of the Company named in Schedule II hereto (herein collectively
called the Selling Security holders) and Jonathan C. Coon and John C. Nichols
(herein collectively called the Principal Selling Security holders) propose to
sell an aggregate of 630,000 shares of Common Stock of the Company (said
2,040,000 shares of Common Stock being herein called the Underwritten Stock).
The Company and the Selling Security holders propose to grant to the
Underwriters (as hereinafter defined) an option to purchase up to 306,000
additional shares of Common Stock (herein called the Option Stock and with the
Underwritten Stock herein collectively called the Stock). The Common Stock is
more fully described in the Registration Statement and the Prospectus
hereinafter mentioned.
- ------------------------------------
/1/ Plus an option to purchase from the Company and the Selling Security holders
up to 306,000 additional shares to cover over-allotments.
1
<PAGE>
The Company and the Selling Security holders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1(No. 333-80289), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act) of the Stock. Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of Rule 430A of the rules and regulations of the Commission)
heretofore filed by the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amend ment)
such registration statement as so amended (including any Rule 462(b)
registration statement). The term Prospectus as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from and
after the filing with the Commission of such supplement or the effectiveness of
such amendment) such prospectus as so supplemented or amended. The term
Preliminary Prospectus as used in this Agreement shall mean each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each
2
<PAGE>
Preliminary Prospectus and has consented to the use of such copies for the
purposes permitted by the Securities Act.
2. Representations and Warranties of the Company and the Principal
Selling Security holders.
(a) Each of the Company and the Principal Selling Security holders hereby
represents and warrants as follows:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the character of
the property owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be so qualified would
not reasonably be expected to have a material adverse effect on the business,
properties, financial condition or results of operations of the Company).
(ii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
materially adverse change in the business, properties, financial condition or
results of operations of the Company, whether or not arising from transactions
in the ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, the Company has not entered into any material transaction
not referred to in the Registration Statement and the Prospectus.
(iii) The Registration Statement and the Prospectus comply, and on
the Closing Date (as hereinafter defined) and any later date on which Option
Stock is to be purchased, the Registration Statement and the Prospectus will
comply, in all material respects, with the provisions of the Securities Act and
the rules and regulations of the Commission thereunder; on the Effective Date,
the Registration Statement did not contain any untrue statement of a material
fact and did not omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and, on the
Effective Date the Prospectus did not and, on the Closing Date and any later
date on which Option Stock is to be purchased, will not contain any untrue
statement
3
<PAGE>
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties in this subparagraph (iii) shall apply to statements in, or omissions
from, the Registration Statement or the Prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to the
Company by or on behalf of the Underwriters for use in the Registration
Statement or the Prospectus.
(iv) The authorized capital stock of the Company consists of
1,000,000 shares of Preferred Stock, none of which are outstanding, and
20,000,000 shares of Common Stock, $0.01 par value, of which there are
outstanding 7,840,568 shares (including the Underwritten Stock plus the number
of shares of Option Stock, if any, issued on the date hereof); proper corporate
proceedings have been taken validly to authorize such authorized capital stock;
all of the shares of such capital stock outstanding prior to the issuance of the
Stock have been duly and validly issued and are fully paid and nonassessable;
all outstanding shares of capital stock and options and other rights to acquire
capital stock have been issued in compliance with the registration and
qualification provisions of all applicable securities laws and were not issued
in violation of any preemptive rights, rights of first refusal or other similar
rights; and no preemptive rights of, or rights of refusal in favor of,
stockholders exist with respect to the Stock, or the issue and sale thereof,
pursuant to the Restated Certificate of Incorporation or Bylaws of the Company,
and there are no contractual or statutory preemptive rights that have not been
waived, rights of first refusal or rights of co-sale which exist with respect to
the issue and sale of the Stock; except as described in the Prospectus, there
are no outstanding options, warrants or other rights to purchase, agreements to
issue or other rights to convert any obligations into shares of capital stock of
the Company.
(v) The Company owns or possesses valid licenses or other rights to
use all patents, patent rights, inventions, trade secrets, copyrights,
trademarks, service marks, trade names, technology and know-how (herein called
Intellectual Property) currently employed or proposed to be employed by them in
connection with their business as described in the Prospectus, except where the
failure to own or possess such rights would not reasonably be expected to have a
material adverse effect on the Company. Except as disclosed in the Prospectus,
the Company has not received any notice of infringement or conflict with (and
the Company does not know of any infringement or conflict with) asserted rights
of
4
<PAGE>
others with respect to any Intellectual Property that is reasonably likely to
have a material adverse effect on the Company. The discoveries, inventions,
products or processes of the Company referred to in the Prospectus do not, to
the Company's knowledge, infringe or conflict with any right or patent of any
third party, or any discovery, invention, product or process that is the subject
of a patent application filed by any third party, that could reasonably be
expected to have a material adverse effect on the Company.
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated herein, except such as have been obtained under the Securities Act
and such as may be required under state securities or blue sky laws in
connection with the purchase and distribution of the Stock by the Underwriters.
(vii) The Company owns no capital stock or other equity or
ownership or proprietary interest in any corporation, partnership, association,
trust or other entity.
(viii) All outstanding shares of Common Stock held by officers,
directors, Selling Security holders and, to the Company's knowledge, stockhold
ers holding greater than 5% of the Company's outstanding Common Stock (5%
Stockholders) and all securities convertible into or exercisable or exchangeable
for Common Stock held by officers, directors, Selling Security holders and 5%
Stockholders, are subject to valid, binding and enforceable agreements (herein
called the Lock-up Agreements) that restrict the holders thereof from selling,
making any short sale of, granting any option for the purchase of, or otherwise
transferring or disposing of, any of such shares of Common Stock, or any such
securities convertible into or exercisable or exchangeable for Common Stock, for
a period of 180 days after the date of the Prospectus without the prior written
consent of Hambrecht & Quist LLC.
(ix) Except as to defaults which individually or in the aggregate
would not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company, the Company is not in
violation of any provision of its Restated Certificate of Incorporation or
Bylaws or other organizational documents, or in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a
5
<PAGE>
party or by which it or any of its properties are bound; and; to the Company's
knowledge, there does not exist any state of facts which constitutes an event of
default on the part of the Company as defined in such documents or which, with
notice or lapse of time or both, would constitute such an event of default.
(x) There are no franchises, contracts, leases, documents or legal
proceedings, pending or, to the Company's knowledge, threatened, which are of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement, which are
not described and filed as required; the franchises, contracts, leases and
documents so described in the Prospectus (assuming due authorization, execution
and delivery by the parties thereto other than the Company) are in full force
and effect on the date hereof; and neither the Company nor, to the Company's
knowledge, any other party is in breach of or default under any of such
franchises, contracts, leases and documents.
(xi) Except as disclosed in the Registration Statement and the
Prospectus, the Company is conducting business in compliance in all material
respects with all applicable laws, rules and regulations of the jurisdictions in
which it is conducting business, including, without limitation, all applicable
local, state and federal laws, rules and regulations relating to the purchase
and sale of contact lenses, except where failure to be so in compliance would
not have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company.
(xii) The execution and delivery by the Company and the Selling
Security holders of, and the performance by the Company and the Selling Security
holders of their obligations pursuant to, the Underwriting Agreement, and the
issue and sale by the Company and the Selling Security holders of the shares of
Stock pursuant to the Underwriting Agreement will not conflict with, or result
in a violation of, the Restated Certificate of Incorporation or Bylaws of the
Company or result in any breach of, or constitute an event of default under, any
agreement or instrument to which the Company is a party or violate any
applicable law, regulation, order, writ, injunction or decree of any
jurisdiction, court or governmental instrumentality.
(xiii) The Stock to be sold by the Selling Security holders is
listed and duly admitted to trading on the Nasdaq National Market, and prior to
the Closing Date, the Stock to be issued and sold by the Company will be
authorized
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for listing by the Nasdaq National Market upon official notice of issuance.
(xiv) The Stock is duly and validly authorized, is (or, in the
case of shares of the Stock to be sold by the Company, will be, when issued and
sold to the Underwriters as provided herein) duly and validly issued, fully paid
and nonassessable and conforms to the description thereof in the Prospectus. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to be sold
by the Selling Security holders or the issuance and sale of the Stock as
contemplated herein.
(xv) The financial statements included in the Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the dates indicated and the results of their operations for the
periods specified; except as otherwise stated in the Registration Statement,
said financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the supporting
schedules in the Registration Statement present fairly the information required
to be stated therein. Except as otherwise expressly specified in the
Registration Statement, such financial statements are in accordance with the
books and records of the Company in all material respects. No other financial
statements are required by Form S-1 or otherwise to be included in the
Registration Statement or Prospectus,
(xvi) No labor dispute with the employees of the Company or, to the
knowledge of the Company, is imminent; and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its principal
suppliers or distributors which might reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company.
(xvii) The Company's corporate predecessor was qualified as an
"S corporation" since its incorporation and through February __, 1998. All
United States federal income tax returns of the Company required by law to be
filed have been filed and all taxes shown by the said returns or otherwise
assessed which are due and payable have been paid, except assessments against
which appeals have been or will be promptly taken. The United States federal
income tax returns of the Company through the fiscal year ended December 31,
1998 have been filed and, to the best of the Company's knowledge, no
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assessment in connection therewith has been made against the Company. The
Company has filed all other tax returns which are required to have been filed by
it pursuant to applicable state, local or other law except (i) with respect to
such taxes as are being contested in good faith and (ii) insofar as the failure
to file such returns individually and in the aggregate would not reasonably be
expected to have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company, and have paid all taxes due
pursuant to said returns or pursuant to any assessment received by the Company,
if any, as are being contested in good faith and as to which adequate reserves
have been provided. The charges, accruals and reserves on the books of the
Company in respect of any income and corporation tax liability for any years not
finally determined are adequate to meet any assessments or re-assessments for
additional income tax for any years not finally determined, except to the extent
of any inadequacy which would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company.
(xviii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization, and (D) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xix) The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(xx) The Company maintains reasonably adequate insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or similar businesses and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations. The officers and directors of the Company are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amount as are prudent and customary for officers and directors liability
insurance of a public company and as would cover claims which could be made in
connection with the issuance of the Securities; and the Company has no
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reason to believe that it will not be able to renew its existing directors and
officers liability insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to cover its
officers and directors.
(xxi) The Company has the legal right, corporate 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.
(xxii) The Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities (Permits) as are
necessary to own, lease and operate its properties and to conduct its business
in the manner described in the Prospectus, subject to such qualifications as may
be set forth in the Prospectus, and except where the failure to have such
Permits would not reasonably be expected to have a material adverse effect on
the business, prospects, financial condition or results or operations of the
Company; the Company has fulfilled and performed all of its material obligations
with respect to such Permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such Permits contain no
restrictions that would result in any material adverse effect on the business,
prospects, financial condition or results of operations of the Company.
(xxiv) There are no material 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 Prospectus.
(b) Each of the Selling Security holders hereby represents and warrants as
follows:
(i) Such Selling Security holder has good and marketable title to
all the shares of Stock to be sold by such Selling Security holder hereunder,
free and clear of all liens, encumbrances, equities, security interests and
claims whatsoever, with full right and authority to deliver the same hereunder,
and that
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upon the delivery of and payment for such shares of the Stock hereunder, the
several Underwriters will receive good and marketable title thereto, free and
clear of all liens, encumbrances, equities, security interests and claims
whatsoever.
(ii) Such Selling Security holder has reviewed the Registration
Statement and Prospectus and, although such Selling Security holder has not
independently verified the accuracy or completeness of all the information
contained therein, nothing has come to the attention of such Selling Security
holder that would lead such Selling Security holder to believe that on the
Effective Date, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading; or
that the the Prospectus, as of its date, or on the Closing Date and any later
date on which Option Stock is to be purchased, will contain any untrue statement
of a material fact or omitted or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(iii) The Selling Security holders have not taken and will not take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the shares of the Common Stock.
(iv) The Selling Security holders have full right, power and
authority to enter into this Agreement; the execution, delivery and performance
of this Agreement and by the Selling Security holders and the consummation by
the Selling Security holders of the transactions contemplated hereby and thereby
will not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Selling
Security holders is a party or by which the Selling Security holders is bound or
to which any of the property or assets of the Selling Security holders is
subject, nor will such actions result in any violation of the provisions of the
organiza tional documents or documents creating a partnership or a trust of the
Selling Security holders or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Selling
Security holders or the property or assets of the Selling Security holders; and,
except for
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the registration of the Stock under the 1933 Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and applicable
state securities laws in connection with the purchase and distribution of the
Common Stock by the Underwriters, no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this Agreement
or the Pricing Agreement by the Selling Security holders and the consummation by
the Selling Security holders of the transactions contemplated hereby and
thereby.
3. Purchase of the Stock by the Underwriters.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
1,410,000 shares of the Underwritten Stock to the several Underwriters, each
Selling Security holder agrees to sell to the several Underwriters the number of
shares of the Underwrit ten Stock set forth in Schedule II opposite the name of
such Selling Security holder, and each of the Underwriters agrees to purchase
from the Company and the Selling Security holders the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and the Selling Security holders and purchased by the several
Underwriters shall be $___ per share. The obligation of each Underwriter to the
Company and each of the Selling Security holders shall be to purchase from the
Company and the Selling Security holders that number of shares of the
Underwritten Stock which represents the same proportion of the total number of
shares of the Underwritten Stock to be sold by each of the Company and the
Selling Security holders pursuant to this Agreement as the number of shares of
the Underwritten Stock set forth opposite the name of such Underwriter in
Schedule I hereto represents of the total number of shares of the Underwritten
Stock to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under
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the provisions of Section 8 or 9 hereof) to purchase and pay for the number of
shares of the Stock agreed to be purchased by such Underwriter or Underwriters,
the Company or the Selling Security holders shall immediately give notice
thereof to you, and the non-defaulting Underwriters shall have the right within
24 hours after the receipt by you of such notice to purchase, or procure one or
more other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company and the Selling Security holders jointly shall have the right, within 24
hours next succeeding the 24-hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to you for purchase of such
shares and portion on the terms herein set forth. In any such case, either you
or the Company and the Selling Security holders shall have the right to postpone
the Closing Date determined as provided in Section 5 hereof for not more than
seven business days after the date originally fixed as the Closing Date pursuant
to said Section 5 in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made. If
neither the non-defaulting Underwriters nor the Company and the Selling Security
holders shall make arrangements within the 24-hour periods stated above for the
purchase of all the shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the Company
or the Selling Security holders to any non-defaulting Underwriter and without
any liability on the part of any non-defaulting Underwriter to the Company or
the Selling Security holders. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
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contained, and subject to the terms and conditions herein set forth, the Company
and the Selling Security holders grant an option to the several Underwriters to
purchase, severally and not jointly, up to 306,000 shares in the aggregate of
the Option Stock from the Company and the Selling Security holders at the same
price per share as the Underwriters shall pay for the Underwritten Stock. Said
option may be exercised only to cover over-allotments in the sale of the
Underwritten Stock by the Underwriters and may be exercised in whole or in part
at any time (but not more than once) on or before the thirtieth day after the
date of this Agreement upon written or telegraphic notice by you to the Company
setting forth the aggregate number of shares of the Option Stock as to which the
several Underwriters are exercising the option. In the event of exercise of
such option, in whole or in part, approximately 69% of the shares of the Option
Stock to be purchased by the several Underwriters shall be sold to them by the
Company and 31% of the shares of Option Stock shall be sold to them by the
Selling Security holders. Delivery of certificates for the shares of Option
Stock, and payment therefor, shall be made as provided in Section 5 hereof. The
number of shares of the Option Stock to be purchased by each Underwriter shall
be the same percentage of the total number of shares of the Option Stock to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Stock, as adjusted by you in such manner as you deem advisable to
avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the offering by the Underwriters of the Stock to be
purchased by them shall be as set forth in the Prospectus. The Underwriters may
from time to time change the public offering price after the closing of the
offering and increase or decrease the concessions and discounts to dealers as
they may determine.
(b) The information set forth in the first, third and tenth paragraphs
under "Underwriting" in the Registration Statement, any Preliminary Prospectus
and the Prospectus relating to the Stock filed by the Company (insofar as such
information relates to the Underwriters) constitutes the only information
furnished by the Underwriters to the Company for inclusion in the Registration
Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of
the respective Underwriters represent and warrant to the Company that the
statements made therein are correct.
5. Delivery of and Payment for the Stock.
(a) Delivery of certificates for the shares of the Underwritten Stock and
the
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Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 a.m., California time, on the date two business
days preceding the Closing Date), and payment therefor, shall be made at the
office of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Suite
220, Palo Alto CA 94301, at 7:00 a.m., California time, on the fourth business
day after the date of this Agreement, or at such time on such other day, not
later than seven full business days after such fourth business day, as shall be
agreed upon in writing by the Company, the Selling Security holders and you.
The date and hour of such delivery and payment (which may be postponed as
provided in Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., California time, on the date two business days preceding the Closing
Date, delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made at the office of Skadden, Arps, Slate, Meagher & Flom
LLP, 525 University Avenue, Suite 220, Palo Alto CA 94301, at 7:00 a.m., Palo
Alto time, on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to the
Company or its order, and payment for the Stock purchased from the Selling
Security holders shall be made to the Custodian, for the account of the Selling
Security holders, in each case by one or more certified or official bank check,
checks in same day funds or wire transfer. Such payment shall be made upon
delivery of certificates for the Stock to you for the respective accounts of the
several Underwriters against receipt therefor signed by you. Certificates for
the Stock to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices of Lewco Securities Corporation, 2
Broadway, New York, New York 10004 on the business day prior to the Closing Date
or, in the case of the Option Stock, by 3:00 p.m., New York time, on the
business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Security holders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter.
Any such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
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6. Further Agreements of the Company and the Selling Security holders.
Each of the Company and the Selling Security holders respectively covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) a Prospectus containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A and such
other changes, if any, as permitted under Rule 424(b) (ii) not file any
amendment to the Registration Statement or supplement to the Prospectus of which
you shall not previously have been advised and furnished with a copy or to which
you shall have reasonably objected in writing or which is not in compliance with
the Securities Act or the rules and regulations of the Commis sion.
(b) The Company will promptly notify each of the Representatives in the
event of (i) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information,
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, (iii) the institution or notice of
intended institution of any action or proceeding for that purpose, (iv) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Stock for sale in any jurisdiction, or (v) the receipt by
it of notice of the initiation or threatening of any proceeding for such
purpose. The Company and the Selling Security holders will make every
reasonable effort to prevent the issuance of such a stop order and, if such an
order shall at any time be issued, to obtain the withdrawal thereof at the
earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you a
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in
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which a prospectus is required by law to be delivered by an Underwriter or
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so supple
mented or amended will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the offering of the
Stock by the Underwriters and during such period, the Underwriters shall propose
to vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, you will advise the Company in writing of the proposed
variation, and, if in the opinion either of counsel for the Company or of
counsel for the Underwriters such proposed variation requires that the
Prospectus be supple mented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended prospectus
setting forth such variation. The Company authorizes the Underwriters and all
dealers to whom any of the Stock may be sold by the several Underwriters to use
the Prospectus, as from time to time amended or supplemented, in connection with
the sale of the Stock in accordance with the applicable provisions of the
Securities Act and the applicable rules and regulations thereunder for such
period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amend ment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in
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the qualification of the Stock for offer and sale under the securities or blue
sky laws of such jurisdictions as you may designate and, during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, in keeping such qualifications in good standing under said securities or
blue sky laws; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in effect
for so long a period as you may reasonably request for distribution of the
Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD") of
the Registration Statement, any Preliminary Prospectus and the Prospectus, (ii)
the furnishing to the Underwriters of copies of any Preliminary Prospectus and
of the several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents delivered
to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees. The Selling Security holders will pay any transfer taxes incident to the
transfer to the Underwriters of the shares the Stock being sold by the Selling
Security holders.
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(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including reasonable
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and in the review
of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are intended
to relieve the Underwriters from the payment of the expenses and costs which the
Company hereby agrees to pay and shall not affect any agreement which the
Company and the Selling Security holders may make, or may have made, for the
sharing of any such expenses and costs.
(l) The Company and each of the Selling Security holders hereby agrees
that, without the prior written consent of Hambrecht & Quist LLC on behalf of
the Underwriters, the Company or such Selling Security holder, as the case may
be, will not, for a period of 180 days following the effective date of the
Registration Statement, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares
of Common Stock issued by the Company upon the exercise of options granted under
the stock option plans of the Company (the "Option Plans") or upon the exercise
of warrants outstanding as of the date hereof, all as described in the
Prospectus, and (C) options to purchase Common Stock granted under the Option
Plans.
(m) The Company agrees to use its reasonable best efforts to cause all
directors, officers, and beneficial holders of more than 5% of the outstanding
Common Stock stockholders (who are not Selling Security holders) to agree that,
without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, such person or entity will not, for a period of 180 days following
the effective date of the Registration Statement, directly or indirectly,
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(i) sell, offer, contract to sell, make any short sale, pledge, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights to purchase or acquire Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.
(n) The Company agrees: (i) to enforce the terms of each Lock-up
Agreement and (ii) issue stop-transfer instructions to the transfer agent for
the Common Stock with respect to any transaction or contemplated transaction
that would constitute a breach of or default under the applicable Lock-up
Agreement. In addition, except with the prior written consent of Hambrecht &
Quist LLC, the Company agrees (i) not to amend or terminate, or waive any right
under, any Lock-up Agreement, or take any other action that would directly or
indirectly have the same effect as an amendment or termination, or waiver of any
right under, any Lock-up Agreement, that would permit any holder of shares of
Common Stock, or securities convertible into or exercisable or exchangeable for
Common Stock, to sell, make any short sale of, grant any option for the purchase
of, or otherwise transfer or dispose of, any of such shares of Common Stock or
other securities prior to the expiration of 180 days after the effective date of
the Registration Statement, and (ii) not to consent to any sale, short sale,
grant of an option for the purchase of, or other disposition or transfer of
shares of Common Stock, or securities convertible into or exercisable or
exchangeable for Common Stock, subject to a Lock-up Agreement.
(o) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. Indemnification and Contribution.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Selling Security holders jointly and severally agree to
indemnify and hold
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harmless each Underwriter and each person (including each partner or officer
thereof) who controls any Underwriter within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (herein called the Exchange Act), or the common law, local,
state or federal laws, rule or regulation, or otherwise, and the Company and the
Selling Security holders jointly and severally, agree to reimburse each such
Underwriter and controlling person for any legal or other expenses (including,
except as otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemni fied parties, in each case arising
out of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any post-
effective amendment thereto (including any Rule 462(b) registration statement),
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,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus or the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
(iii) the violation or non-compliance with any law, rule or regulation by the
Company or its affiliates in conducting its business as conducted or as
described in or contemplated by the Prospectus; provided, however, that (1) the
indemnity agreements of the Selling Security holders contained in this paragraph
(a)(iii) shall apply to the Principal Selling Security holders and not the other
Selling Security holder, (2) the indemnity agreements of the Company and the
Selling Security holders contained in this paragraph (a)(i) and (ii) shall not
apply to any such losses, claims, damages, liabilities or expenses if such
statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, and (2) the indemnity agreement contained in this paragraph
(a)(ii) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Stock which is the
subject thereof (or to the benefit of any person controlling such Underwriter)
if at or prior to the written confirmation of
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the sale of such Stock a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue statement
or omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented) and
it shall have been determined by a final judgement of a court of competent
jurisdiction that any Underwriter or any person controlling such Underwriter
would not have incurred such loss, claim, damage, liability or expense had the
Prospectus (as amended or supple mented) been delivered or sent, unless the
failure is the result of noncompliance by the Company with paragraph (c) of
Section 6 hereof. The indemnity agreements of the Company and the Selling
Security holders contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Security holders contained in Section
2 hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Security holders from and against any
and all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemni fied parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) 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 (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or
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omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement or
the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified
22
<PAGE>
party or parties and (ii) in any event, the indemnified party or parties shall
be entitled to have counsel chosen by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time after
receipt of the Notice, an indemnifying party gives a Notice of Defense and the
counsel chosen by the indemnify ing party or parties is reasonably satisfactory
to the indemnified party or parties, the indemnifying party or parties will not
be liable under paragraphs (a) through (c) of this Section 7 for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the defense
as referred to in clause (i) of the proviso to the preceding sentence and (B)
the indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If, within a
reasonable time after receipt of the Notice, no Notice of Defense has been
given, the indemnifying party or parties shall be responsible for any reasonable
legal or other expenses incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable
or insufficient to hold harmless an indemnified party under paragraph (a) or (b)
of this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Stock or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Security holders on the one hand and the Underwriters on the other shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Stock received by the Company and the Selling Security
holders and the total underwriting discount received by the Underwriters, as set
forth in the table on the cover page of the Prospectus, bear to the aggregate
public offering price of the Stock. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by each indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue
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statement or omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investiga
tion, preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Security holders will, without the
prior written consent of each Underwriter (which will not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent (i)
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of the Underwriter.
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<PAGE>
(f) The liability of each Selling Security holder under such Selling
Security holder's representations and warranties contained in paragraph (a) of
Section 2 hereof and under the indemnity and reimbursement agreements contained
in the provisions of this Section 7 and Section 11 hereof shall be limited to an
amount equal to the offering price of the stock sold by such Selling Security
holder to the Underwriters less underwriting discounts and commissions. The
Company and the Selling Security holders 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 Underwriters shall seek indemnification, to which they are
entitled under paragraph (A) of this Section 7 first from the Company. If the
Company does not respond to the Underwriters within 30 days, then the
Underwriters may seek such indemnification from the Selling Security holders. In
the event that the Underwriters are unable (or believe that they will be unable
to) obtain such indemnification from the Company, the Underwriters may then seek
indemnification from the Selling Security holders.
8. Termination. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Security holders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iii) suspension of trading in securities generally or a material
adverse decline in value of securities generally on the New York Stock Exchange,
the American Stock Exchange, or The Nasdaq Stock Market, or limitations on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such exchange or system, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially and adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in
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<PAGE>
respect of its monetary or fiscal affairs which in the Underwriters' reasonable
opinion has a material adverse effect on the securities markets in the United
States. If this Agreement shall be terminated pursuant to this Section 8, there
shall be no liability of the Company or the Selling Security holders to the
Underwriters and no liability of the Underwriters to the Company or the Selling
Security holders; provided, however, that in the event of any such termination
the Company agrees to indemnify and hold harmless the Underwriters from all
costs or expenses incident to the performance of the obligations of the Company
and the Selling Security holders under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
9. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Security holders of all their
respective obligations to be performed hereunder in all material respects at or
prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder and
the validity and form of the certificates representing the Stock, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters.
(c) You shall have received from Hyman, Phelps & McNamara, P.C., special
regulatory counsel to you, an opinion, in form acceptable to you, addressed to
the Underwriters and dated the Closing Date, covering such matters as you should
request hereto, and if Option Stock is purchased at any date after the Closing
Date, an additional opinion from such counsel, addressed to the Underwriters and
dated such later date, confirming that the statements expressed as of the
Closing Date in such opinion remain valid as of such later date.
(d) You shall have received from Kirkland & Ellis, counsel for the Company
and the Selling Security holders, an opinion, addressed to the
26
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Underwriters and dated the Closing Date, covering the matters set forth in Annex
A hereto, and if Option Stock is purchased at any date after the Closing Date,
additional opinions from such counsel, addressed to the Underwriters and dated
such later date, confirming that the statements expressed as of the Closing Date
in such opinions remain valid as of such later date.
(e) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company does not have any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus as of the date
hereof, (v) there are not any pending or known threatened legal proceedings to
which the Company is a party or of which property of the Company is the subject
which are material and which are not disclosed in the Registration Statement and
the Prospectus, (vi) there are not any franchises, contracts, leases or other
documents which are required to be filed as exhibits to the Registration
Statement which have not been filed as required, (vii) the representations and
warranties of the Company herein are true and correct in all material respects
as of the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and (viii) there has not been any material change
in the market for securities in general or in political, financial or economic
conditions from those reasonably foreseeable as to render it impracticable in
your reasonable judgment to make a public offering of the Stock, or a material
adverse change in market levels for securities in general (or those of companies
in particular) or financial or economic conditions which render it inadvisable
to proceed.
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(f) You shall have received on the Closing Date and on any later date on
which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (e) of this Section 9 are true and
correct.
(g) You shall have received from Arthur Anderson LLP, a letter or letters,
addressed to the Underwriters and dated the Closing Date and any later date on
which Option Stock is purchased, confirming that they are independent public
accountants with respect to the Company within the meaning of the Securities Act
and the applicable published rules and regulations thereunder and based upon the
procedures described in their 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 three business days prior to the Closing Date or such
later date on which Option Stock is purchased (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, 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 the Original Letter or
to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in your sole judgment, makes it impractical or inadvisable to
proceed with the public offering of the Stock or the purchase of the Option
Stock as contemplated by the Prospectus.
(h) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualification referred to in paragraph (f)
of Section 6 hereof.
(i) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
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(j) On or prior to the Closing Date, you shall have received from all
directors, officers, and, to the Company's knowledge, beneficial holders of more
than 5% of the outstanding Common Stock (who are not otherwise Selling Security
holders) stockholders agreements, in form reasonably satisfactory to Hambrecht &
Quist LLC, stating that without the prior written consent of Hambrecht & Quist
LLC on behalf of the Underwriters, such person or entity will not, for a period
of 180 days following the effective date of the Registration Statement, directly
or indirectly, (i) sell, offer, contract to sell, make any short sale, pledge,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire Common
Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences or ownership of Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
the Underwrit ers, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Security holders. Any such termination shall be
without liability of the Company or the Selling Security holders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Security holders; provided, however, that (i) in the event of such
termination, the Company and the Selling Security holders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Security holders
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Security holders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.
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10. Conditions of the Obligation of the Company and the Selling Security
holders. The obligation of the Company and the Selling Security holders to
deliver the Stock shall be subject to the conditions that (a) the Registration
Statement shall have become effective and (b) no stop order suspending the
effectiveness thereof shall be in effect and no proceedings therefor shall be
pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Security holders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Security holders to the Underwriters
and without liability of the Underwriters to the Company or the Selling Security
holders; provided, however, that in the event of any such termination the
Company and the Selling Security holders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling Security
holders under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof.
11. Reimbursement of Certain Expenses. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Security holder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Security holders hereby jointly and severally agree to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company, the Selling Security holders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Security holders and
the several Underwriters) indemnified under the provisions of said Section 7,
and their respective personal representatives,
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successors and assigns. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Stock from any of the
several Underwriters.
13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104, with a copy to Skadden, Arps, Slate, Meagher &
Flom, LLP Attention: Gregory C. Smith; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office,1-800 CONTACTS, INC., 66 E.
Wadsworth Park Drive, Draper, Utah 84020 Attention: Jonathan C. Coon, with a
copy to Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601
Attention: Dennis M. Myers; and if to the Selling Security holders, shall be
mailed, telegraphed or delivered to the Selling Security holders in care of
Jonathan C. Coon at 1-800 CONTACTS, INC., 66 E. Wadsworth Park Drive, Draper,
Utah 84020. All notices given by telegraph shall be promptly confirmed by
letter.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Security holders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
- -----------------
Date, the provisions of paragraphs (l), (m) and (n) of Section 6 hereof shall be
of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
Please sign and return to the Company and to the Selling Security holders
in care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling Security
holders and the several
31
<PAGE>
Underwriters in accordance with its terms.
Very truly yours,
1-800 CONTACTS, INC.
By: __________________________
Jonathan C. Coon
President, Chief Executive Officer
SELLING SECURITY HOLDERS:
By __________________________
Jonathan C. Coon
By __________________________
John C. Nichols
By __________________________
Stephen A. Yacktman
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
MCDONALD INVESTMENTS INC.
By Hambrecht & Quist LLC
By __________________________
Managing Director
32
<PAGE>
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
33
<PAGE>
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Numberof
Shares
to be
Underwriters Purchased
- ------------ ---------
<S> <C>
Hambrecht & Quist LLC ........................................
McDonald Investments Inc. ....................................
- -------------------------------------------------------------------------
Total
</TABLE>
34
<PAGE>
SCHEDULE II
SELLING SECURITY HOLDERS
<TABLE>
<CAPTION>
Number of
Shares
Names of to be
Securityholders Sold
- --------------------- ---------
<S> <C>
Johnathan C. Coon ................................................... 420,000
John F. Nichols ..................................................... 180,000
Stephen A. Yacktman ................................................. 30,000
- --------------------------------------------------------------------------------
Total 630,000
</TABLE>
35
<PAGE>
ANNEX A
Matters to be Covered in the Opinion of Kirkland & Ellis
Counsel for the Company
and the Selling Security holders
36
<PAGE>
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000 Facsimile:
(312) 861-2200
EXHIBIT 5.1
August 9, 1999
1-800 CONTACTS, INC.
66 E. Wadsworth Park Drive
Draper, Utah 84020
Re: 1-800 CONTACTS, INC.
Registration Statement on Form S-1
Registration No. 333-80289
--------------------------
Ladies and Gentlemen:
We are acting as special counsel to 1-800 CONTACTS, INC., a Delaware
corporation (the "Company"), in connection with the proposed registration by the
-------
Company of 1,410,000 shares (the "Initial Primary Shares") of its Common Stock,
----------------------
par value $.01 per share (the "Common Stock"), to be issued and sold by the
------------
Company and 630,000 shares of the Common Stock to be sold by certain selling
stockholders named therein (the "Initial Secondary Shares") pursuant to a
------------------------
Registration Statement on Form S-1 (Registration No. 333-80289), filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
----------
of 1933, as amended (the "Act") (such Registration Statement, as amended or
---
supplemented, is hereinafter referred to as the "Registration Statement"). The
----------------------
Registration Statement also covers up to an additional 211,140 shares of Common
Stock issuable by the Company (the "Over-Allotment Primary Shares" and, together
-----------------------------
with the Initial Primary Shares, the "Primary Shares") and 94,860 shares of
--------------
Common Stock from the selling stockholders (the "Over-Allotment Secondary
------------------------
Shares" and, together with the Initial Secondary Shares, the "Secondary Shares")
----------------
to cover over-allotments, if any. All of such shares are to be sold pursuant to
an underwriting agreement (the "Underwriting Agreement") among the Company, the
----------------------
selling stockholders and Hambrecht & Quist LLC and McDonald Investments Inc.,
as representatives of the several Underwriters.
We have examined such corporate proceedings, documents, records and
matters of law as we have deemed necessary to enable us to render this opinion.
For purposes of this opinion, we have assumed the authenticity of all documents
submitted to us as originals, the conformity
<PAGE>
1-800 CONTACTS, INC
August 9, 1999
Page 2
to the originals of all documents submitted to us as copies and the authenticity
of the originals of all documents submitted to us as copies. We have also
assumed the legal capacity of all natural persons, the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the due authorization, execution and
delivery of all documents by the parties thereto other than the Company. As to
any facts material to the opinions expressed herein, we have relied upon the
statements and representations of officers and other representations of the
Company and others.
As of the date of this opinion, the Board of Directors of the Company
has taken action to approve the issuance and sale of the Primary Shares and has
delegated to the Pricing Committee of the Board of Directors (the "Pricing
-------
Committee") authority to determine and approve certain matters regarding the
- ---------
issuance and sale of the Primary Shares, including the determination of the
number of Primary Shares to be sold, the price at which the Primary Shares are
to be sold and the underwriting discounts and commissions with respect thereto
(such authorization is referred to herein as the "Pricing Action").
--------------
Based upon and subject to the foregoing qualifications, assumptions
and limitations and the further limitations set forth below, we hereby advise
you that, in our opinion:
(1) The Primary Shares have been duly authorized for issuance; and, when
the Registration Statement becomes effective under the Act, the Pricing
Committee has duly taken the Pricing Action, the Primary Shares have
been issued in accordance with the terms of the Underwriting Agreement
upon receipt of the consideration contemplated thereby, and
certificates representing the Primary Shares have been duly executed
and delivered on behalf of the Company and duly registered by the
Company's Transfer Agent/Registrar, the Primary Shares will be validly
issued, fully paid and nonassessable.
(2) The Secondary Shares are validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission. This opinion and consent may be incorporated by
reference in a subsequent registration statement on Form S-1 filed pursuant to
Rule 462(b) under the Act with respect to the registration of additional
securities for sale in the offering contemplated by the Registration Statement.
<PAGE>
1-800 CONTACTS, INC
August 9, 1999
Page 3
We express no opinion as to any laws other than the General
Corporation Law of the State of Delaware and the Delaware case law decided
thereunder and the federal law of the United States of America. We do not find
it necessary for the purposes of this opinion, and accordingly we do not purport
to cover herein, the application of the securities or "Blue Sky" laws of the
various states to the issuance and sale of the Primary Shares or the Secondary
Shares.
This opinion is limited to the specific issues addressed herein, and
no opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the applicable
law be changed by legislative action, judicial decision or otherwise after the
date on which the Registration Statement is declared effective by the
Commission.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
