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6,325,000 Shares
NETWORK ENGINES, INC.
Common Stock
UNDERWRITING AGREEMENT
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July ___, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
Dain Rauscher Incorporated
FleetBoston Robertson Stephens Inc.
DLJdirect Inc.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs and Madames:
Network Engines, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell 5,500,000 shares of its Common Stock, par value $0.01 per share,
(the "Firm Shares") to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 825,000 shares of its Common Stock, par
value $0.01 per share, (the "Additional Shares") if requested by the
Underwriters as provided in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter referred to collectively as the "Shares". The
shares of common stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock".
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Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "Registration Statement";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "Prospectus". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
Section 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "Purchase Price") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to 825,000 Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within thirty (30) days after the date of this Agreement. You shall
give any such notice on behalf of the Underwriters and such notice shall specify
the aggregate number of Additional Shares to be purchased pursuant to such
exercise and the date for payment and delivery thereof, which date shall be a
business day (i) no earlier than two (2) business days after such notice has
been given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten (10) business days after such notice has
been given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
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The Company hereby (i) agrees not to (x) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(y) enter into any swap, derivative transaction, or other arrangement that
transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (x) or (y) is to be settled by the delivery of Common Stock,
or such other securities, in cash or otherwise), without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation except to the
Underwriters pursuant to this Agreement, for a period of 180 days after the date
of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period (1) the Company may grant
stock options or awards pursuant to the Company's existing stock option or
purchase plans and (2) the Company may issue shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof. The Company also agrees not to file any registration statement
with respect to any shares of Common Stock or any 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 Donaldson, Lufkin &
Jenrette Securities Corporation; provided, however, that during such period the
Company may file one or more registration statements on Form S-8 registering
shares of Common Stock acquired or to be acquired pursuant to the Company's 1999
Stock Incentive Plan, 2000 Employee Stock Purchase Plan and 2000 Director Stock
Option Plan.
The Company shall, prior to or concurrently with the execution of this
Agreement, deliver an agreement, a form of which is attached hereto as Exhibit A
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(a "Lock-Up Agreement"), executed by (i) each of the directors and officers of
the Company and (ii) each security holder listed on Annex I hereto.
Section 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
Section 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two (2) business days prior to the Closing Date or
the applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid, to
Donaldson, Lufkin & Jenrette Securities Corporation through the facilities of
The Depository Trust Company ("DTC"), for the respective accounts of the several
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Underwriters, against payment to the Company of the Purchase Price therefore by
wire transfer of Federal or other funds immediately available in New York City.
The certificates representing the Shares shall be made available for inspection
not later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be, at the
office of DTC or its designated custodian (the "Designated Office"). The time
and date of delivery and payment for the Firm Shares shall be 9:00 A.M., New
York City time, on July __, 2000 or such other time on the same or such other
date as Donaldson, Lufkin & Jenrette Securities Corporation and the Company
shall agree in writing. The time and date of delivery for the Firm Shares are
hereinafter referred to as the "Closing Date". The time and date of delivery
and payment for any Additional Shares to be purchased by the Underwriters shall
be 9:00 A.M., New York City time, on the date specified in the applicable
exercise notice given by you pursuant to Section 2 or such other time on the
same or such other date as Donaldson, Lufkin & Jenrette Securities Corporation
and the Company shall agree in writing. The time and date of delivery for any
Additional Shares are hereinafter referred to as an "Option Closing Date".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Hale and Dorr, LLP, 60 State Street,
Boston, Massachusetts 02109 and the Shares shall be delivered at the Designated
Office, all on the Closing Date or such Option Closing Date, as the case may be.
Section 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective, and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will use its best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time.
(b) To furnish to you four (4) signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it,
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including all exhibits, and to furnish to you and each Underwriter designated by
you such number of conformed copies of the Registration Statement as so filed
and of each amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification;
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provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which it is
not now so qualified or to take any action that would subject it to general
consent to service of process or taxation other than as to matters and
transactions relating to the Prospectus, the Registration Statement, any
preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering a period of at least twelve months
beginning after the effective date of the Registration Statement that shall
satisfy the provisions of Section 11(a) of the Act, and to advise you in writing
when such statement has been so made available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to the listing of the Shares on the Nasdaq National
Market, (vii) the cost of printing certificates representing the
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Shares, (viii) the costs and charges of any transfer agent, registrar and/or
depositary, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(j) To use its reasonable best efforts to list for quotation the Shares on
the Nasdaq National Market and to maintain the listing of the Shares on the
Nasdaq National Market for a period of three (3) years after the date of this
Agreement.
(k) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Shares, to file a Rule 462(b) Registration
Statement with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
Section 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material
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fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (B) will comply in all
material respects with the Act, and (iv) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter to you expressly for use
therein.
(d) The Company has no subsidiaries, has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the State
of Delaware and has the corporate power and authority to carry on its business
as described in the Prospectus and to own, lease and operate its properties, and
is duly qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company relating to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of the Company, except as otherwise
disclosed in the Registration Statement.
(f) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights; and the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
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(g) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(h) The Company is not in violation of its charter or by-laws or in
default in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company, to which the Company is a party
or by which the Company or its property is bound.
(i) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states, the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or in connection with the NASD's review
of the underwriting arrangements for the offering and sale of the Shares), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company, to which the Company is a party or by which the Company or its
property is bound, (iii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, or its property, or (iv)
result in the suspension, termination or revocation of any Authorization (as
defined below) of the Company or any other impairment of the rights of the
holder of any such Authorization.
(j) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company is or could be a party or
to which any of its property is or could be subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described; nor are there any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
(k) The Company has not violated any foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended, or any provisions of the Foreign
Corrupt Practices Act, or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company.
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(l) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "Authorization") of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its properties and to
conduct its business, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company. Each such Authorization is valid and in
full force and effect and the Company is in compliance in all material respects
with all the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other material impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company.
(m) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company.
(n) This Agreement has been duly authorized, executed and delivered by the
Company.
(o) PricewaterhouseCoopers LLP are independent public accountants with
respect to the Company as required by the Act.
(p) The financial statements included in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), together with related
schedules and notes, present fairly the financial position, results of
operations and changes in financial position of the Company on the basis stated
therein at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the supporting
schedules, if any, included in
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the Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(q) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(r) All persons with whom the Company has any contract, agreement or
understanding which grants the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement have, with respect to the
offering contemplated hereby, waived such rights or such rights were properly
waived on such persons behalf.
(s) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company, (ii) there
has not been any material adverse change or any development involving a
prospective material adverse change in the capital stock or in the long-term
debt of the Company, and (iii) the Company has not incurred any material
liability or obligation, direct or contingent, which would reasonably have been
required to be disclosed pursuant to the Act in the Prospectus had such
liability or obligation been incurred prior to the date of the Prospectus.
(t) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
Section 7. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter, its directors, its officers and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a
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material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter who failed to deliver a Prospectus, as then
amended or supplemented (so long as the Prospectus and any amendments or
supplements thereto were provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis to permit proper delivery on or
prior to the Closing Date) to the person asserting any losses, claims, damages,
liabilities or judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in such preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such
12
<PAGE>
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party, or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of parties indemnified pursuant
to Section 7(a), and by the Company, in the case of parties indemnified pursuant
to Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent, or (ii) effected without its written consent if the
settlement is entered into more than twenty (20) business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action, 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 indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, 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 such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters
13
<PAGE>
on the other hand from the offering of the Shares, or (ii) if the allocation
provided by clause 7(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 7(d)(i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other hand shall be deemed to be in the same proportion as the total net
proceeds from the offering (after deducting underwriting discounts and
commissions, but before deducting expenses) received by the Company, and the
total underwriting discounts and commissions received by the Underwriters, bear
to the total price to the public of the Shares, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company on
the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
14
<PAGE>
Section 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Lawrence A. Genovesi and Douglas G. Bryant, in their
respective capacities as the President and Chief Executive Officer and Chief
Financial Officer of the Company, confirming the matters set forth in Sections
6(s), 8(a) and 8(b) and that the Company has complied with all of the agreements
and satisfied all of the conditions herein contained and required to be complied
with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company, (ii) there shall not have
been any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company, and (iii) the Company shall not
have incurred any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in
your judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
(e) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Hale and
Dorr LLP, counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its
business as described in the Prospectus and to own, lease and operate its
15
<PAGE>
properties; to such counsel's knowledge, the Company has no subsidiaries;
(ii) the Company is duly qualified to do business as a foreign
corporation and is in good standing in the Commonwealths of Massachusetts
and Virginia, and the States of California and New York.
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-
assessable and not subject to any statutory preemptive or similar statutory
rights or, to such counsel's knowledge, any preemptive or similar right
pursuant to any agreement to which the Company is a party which right has
not been waived or complied with;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any statutory preemptive or
similar statutory rights or, to such counsel's knowledge, any preemptive
or similar right pursuant to any agreement to which the Company is a party
which right has not been waived or complied with;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) the authorized capital stock of the Company conforms as to
legal matters in all material respects to the description thereof contained
in the Prospectus;
(vii) the Registration Statement has been declared effective under
the Act and, to such counsel's knowledge, (i) no stop order suspending its
effectiveness has been issued, and (ii) no proceedings for that purpose are
pending before or contemplated by the Commission;
(viii) the statements under the captions "Management-Benefit
Plans", "Related Party Transactions", "Shares Eligible for Future Sale",
"Description of Capital Stock" and "Underwriting" in the Prospectus and
Items 14 and 15 of Part II of the Registration Statement, insofar as such
statements constitute a summary of legal matters or a summary of documents
or proceedings referred to therein, fairly present the information called
for with respect to such legal matters, documents and proceedings;
(ix) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions hereof
and the consummation by the Company of the transactions contemplated hereby
(other than the performance by the Company of its obligations under the
indemnification and contribution sections of the
16
<PAGE>
Underwriting Agreement as to which no opinion is expressed) will not (A)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states, the Exchange Act or in connection with the NASD's review of the
underwriting arrangements for the offering and sale of the Shares), (B)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or, with respect
to the Company, any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is listed as an exhibit to the Registration
Statement, or (C) violate or conflict with any applicable United States
federal law, Massachusetts state law, the Delaware General Corporation Law
or any rule or regulation that, in such counsel's experience, is normally
applicable in transactions of the type contemplated by this Agreement, or
to counsel's knowledge any judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company, or its
property;
(x) such counsel does not know of any legal or governmental
proceedings pending or threatened against the Company or as to which its
property is subject that are required by the Act or the rules and
regulations thereunder to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required by the Act or the rules and
regulations thereunder to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required;
(xi) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(xii) to such counsel's knowledge except as set forth in this
Registration Statement and Prospectus, there are no contracts, agreements
or understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under the
Act with respect to any securities of the Company or to require the Company
to include such securities with the Shares registered pursuant to the
Registration Statement, and all persons having such rights known to us with
respect to registration of Company securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated hereby, waived such rights or such rights were properly waived
on such person's behalf; and
(xiii) the Registration Statement and the Prospectus and any
17
<PAGE>
supplement or amendment thereto (except for the financial statements,
including the notes and schedules thereto, and other financial or
accounting data included therein as to which no opinion need be expressed)
comply as to form with the Act and the applicable rules and regulations
thereunder.
In addition, such counsel shall state that, in connection with preparation
of the Registration Statement and the Prospectus, such counsel has
participated in conferences with officers and representatives of the
Company, the Underwriters, counsel for the Underwriters and the independent
accountants of the Company, at which conferences such counsel made
inquiries of such persons and others and discussed the contents of the
Registration Statement and the Prospectus; and that while the limitations
inherent in the independent verification of factual matters and the
character of determinations involved in the registration process are such
that such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, subject to the
foregoing and based on such participation, inquiries and discussions, no
facts have come to the attention of such counsel which have caused such
counsel to believe that the Registration Statement, at the time it became
effective (but after giving effect to changes incorporated pursuant to Rule
430A under the Act), contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading (except
that such counsel need express no such view with respect to the financial
statements, including the notes and schedules thereto, or any other
financial or accounting data included therein), or that the Prospectus, as
of the date of such Prospectus and as of the Closing Date, contained or
contains 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 light of the circumstances under which they were made, not misleading
(except that such counsel need express no such view with respect to the
financial statements, including the notes and schedules thereto, or any
other financial or accounting data included therein).
The opinion of Hale and Dorr, LLP described in Section 8(e) above shall be
rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters,
as to the matters referred to in Sections 8(e)(iv), 8(e)(v), 8(e)(viii) (but
only with respect to the statements under the caption "Description of Capital
Stock" and "Underwriting") and 8(e)(xiii).
In giving such opinions with respect to the matters covered by Section
8(e)(xiii), Hale and Dorr LLP and Testa, Hurwitz & Thibeault, LLP may state that
18
<PAGE>
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from PricewaterhouseCoopers LLP,
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
Section 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options
19
<PAGE>
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company, (v) the
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 respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within forty-eight
(48) hours after such default, this Agreement will terminate without liability
on the part of any non-defaulting Underwriter and the Company. In any such
case which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven (7) days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. If, on an Option Closing Date, any Underwriter or Underwriters
shall fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such
20
<PAGE>
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased on such date, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase such
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase on
such date in the absence of such default. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of any such Underwriter under this Agreement.
Section 10. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Network
Engines, Inc., 25 Dan Road, Canton, Massachusetts 02021 and (ii) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder, and (iii) termination
of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse
the several Underwriters, their directors and officers and any persons
controlling any of the Underwriters for any and all fees and expenses
(including, without limitation, the reasonable fees and disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not
21
<PAGE>
include a purchaser of any of the Shares from any of the several Underwriters
merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
22
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
NETWORK ENGINES, INC.
By: ___________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DAIN RAUSCHER INCORPORATED
FLEETBOSTON ROBERTSON STEPHENS, INC.
DLJdirect, INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By _______________________________
Name:
Title:
23
<PAGE>
SCHEDULE I
----------
Underwriters Number of Firm Shares
to be Purchased
Donaldson, Lufkin & Jenrette Securities Corporation
Dain Rauscher Incorporated
FleetBoston Robertson Stephens, Inc.
DLJdirect, Inc.
Total
<PAGE>
Exhibit A
Lock-Up Agreement
2
<PAGE>
LOCK-UP AGREEMENT
March __, 2000
Network Engines, Inc.
61 Pleasant Street
Randolph, Massachusetts 02368
Donaldson, Lufkin & Jenrette Securities Corporation
Dain Rauscher Incorporated
FleetBoston Robertson Stephens, Inc.
DLJdirect, Inc.
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs and Madames:
The undersigned understands that Donaldson, Lufkin & Jenrette Securities
Corporation, Dain Rauscher Incorporated, FleetBoston Robertson Stephens, Inc.
and DLJdirect, Inc., as Representatives of the several underwriters (the
"Underwriters"), propose to enter into an Underwriting Agreement with Network
Engines, Inc. (the "Company"), providing for the initial public offering (the
"Initial Public Offering") of common stock, par value $.01 per share (the
"Common Stock"), of the Company.
To induce the Underwriters that may participate in the Initial Public
Offering to continue their efforts in connection with the Initial Public
Offering, the undersigned, from the date hereof and through the end of the 180-
day period after the date of the final prospectus relating to the Initial Public
Offering (the "Final Prospectus"):
(i) agrees not to (x) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (including, without
limitation, shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock which may be
deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange
Commission) (collectively, "Company Securities"); (y) enter into
any swap, derivative transaction or other arrangement that
transfers all or a portion of the economic consequences
associated with the ownership of any Company
<PAGE>
Securities (regardless of whether any of the transactions described
in clause (x) or (y) is to be settled by the delivery of Company
Securities, in cash or otherwise), without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation; provided,
--------
however, that the undersigned may transfer the undersigned's Company
-------
Securities to a transferee (a "Transferee") as follows, provided the
Transferee executes a lock-up agreement identical hereto and delivers
such letter to Donaldson, Lufkin & Jenrette Securities Corporation:
(a) as a bona fide gift or gifts, (b) by will or intestacy, (c) to
any trust for the direct or indirect benefit of the undersigned or
the immediate family of the undersigned, provided that any such
transfer shall not involve a disposition for value, (d) to any of the
undersigned's affiliates, as such term is defined in Rule 405 under
the Securities Act of 1933, as amended, or (e) with the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation on
behalf of the Underwriters. For purposes of this Lock-Up Agreement,
"immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin. In addition,
notwithstanding the foregoing, the undersigned may transfer any
Company Securities to any wholly-owned subsidiary if the undersigned
is a corporation or any make a distribution to limited partners,
members or stockholders of the undersigned, as the case may be;
provided, however, that in any such case, it shall be a condition to
-------- -------
the transfer that the transferee execute a lock-up agreement
identical hereto and deliver such agreement to Donaldson, Lufkin &
Jenrette Securities Corporation, and provided further that any
transfer shall not involve a disposition for value. Furthermore,
notwithstanding the foregoing, this Lock-Up Agreement does not
prohibit the sale of shares of the Company Securities by the
undersigned to the Underwriters in the Initial Public Offering or the
sale of directed shares of Common Stock acquired by the undersigned
in the Initial Public Offering, provided the undersigned is not, and
has not been since the date of the Final Prospectus, either an
executive officer of the Company subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act of
1934, as amended (an "Executive Officer") or a director of the
Company. The undersigned now has, and, except as contemplated by this
Lock-Up Agreement, for the duration of this Lock-Up Agreement will
have, good and marketable title to the undersigned's Company
Securities, free and clear of all liens, encumbrances, and claims
whatsoever.
(ii) agrees not to make any demand for, or exercise any right with respect
to, the registration of any Company Securities, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities
Corporation; and
(iii) authorizes the Company to cause the transfer agent, subject to the
proviso contained in clause (i) above, to decline to transfer and/or
to note stop transfer restrictions on the transfer books and records
of the Company with respect to any Company Securities for which the
undersigned is the record
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<PAGE>
holder and, in the case of any such shares or securities for which
the undersigned is the beneficial but not the record holder, agrees
to cause the record holder to cause the transfer agent to decline to
transfer and/or to note stop transfer restrictions on such books and
records with respect to such shares or securities;
provided further, that the restrictions in clause (i) above shall cease to apply
to (A) 25% of the Company Securities beneficially owned by the undersigned on
the date of the Final Prospectus, upon the later to occur of (I) the end of the
90-day period after the date of the Final Prospectus or (II) the second trading
day following the first public release of the Company's quarterly results after
the date of the Final Prospectus, and (B) an additional 25% of the Company
Securities beneficially owned by the undersigned on the date of the Final
Prospectus, upon the end of the 135-day period after the date of the Final
Prospectus if, in the case of each of clauses (A) and (B), (X) the reported last
sale price of the Common Stock on the Nasdaq National Market is at least twice
the price per share in the Initial Public Offering for 20 of the 30 trading days
ending on (a) in the case of clause (A) above, the later of (1) the last trading
day of the 90-day period after the date of the Final Prospectus or (2) the
second trading day following the first public release of the Company's quarterly
results after the date of the Final Prospectus, as the case may be, and (b) in
the case of clause (B) above, the last trading day of the 135-day period after
the date of the Final Prospectus and (Y) the undersigned is not, and has not
been since the date of the Final Prospectus, an Executive Officer or director of
the Company ; provided further, that the undersigned agrees to give Donaldson,
Lufkin & Jenrette Securities Corporation and the Company written notice three
(3) business days prior to taking any of the actions set forth in clause (i)
above pursuant to the preceding proviso and to execute any such action only
through Donaldson, Lufkin & Jenrette Securities Corporation or any of its
affiliates acting as broker, unless otherwise agreed in writing by Donaldson,
Lufkin & Jenrette Securities Corporation. The failure of the Common Stock to
meet the threshholds set fourth in clause (X)(a) above shall not preclude any
release pursuant to clause (B) above if the threshhold set fourth in clause
(X)(b) above is satisfied. If any Company Securities subject hereto on the date
of the Final Prospectus are thereafter transferred to any Transferee pursuant to
clause (i) then, for purposes of all lock-up agreements delivered at any time to
Donaldson, Lufkin & Jenrette Securities Corporation in connection with the
Initial Public Offering, each such Transferee (and solely such Transferee) shall
be deemed to have beneficially owned as of the date of the Final Prospectus the
Company Securities so transferred.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into the agreements set forth herein, and
that, upon request, the undersigned will execute any additional documents
necessary or desirable in connection with the enforcement hereof. All authority
herein conferred or agreed to be conferred shall survive the death or incapacity
of the undersigned and any obligations of the undersigned shall be binding upon
the heirs, personal representatives, successors, and assigns of the undersigned.
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<PAGE>
This Lock-Up Agreement shall automatically terminate on the earlier of (i)
August 1, 2000, in the event that, in connection with the Initial Public
Offering, an underwriting agreement (the "Underwriting Agreement) is not
executed by the Company on or prior to that date and (ii) the date the
Underwriting Agreement is terminated, in the event that the Underwriters do not
purchase the Company Securities described in the Final Prospectus and the
Underwriting Agreement is terminated pursuant to its terms.
Very truly yours,
__________________________________
Name: (Please Print or Type)
Address:__________________________
__________________________________
__________________________________
Social Security or Taxpayer Identification No.:_________________________
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<PAGE>
Annex I
[names of security holders of the Company
who will be required to sign the lock-up agreement]
3
