i. underwriting agreements

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I. UNDERWRITING AGREEMENTS Introduction, Purchase and Sale, Delivery and Payment • Introduction – sets forth the parties to the transaction, a description of the securities being sold and the number of shares being sold • May include a description of related transactions, such as an acquisition being funded by the proceeds • Purchase and Sale – sets forth the price at which the underwriters agree to buy the securities from the issuer/selling shareholders, reflecting a commission to the underwriters in the form of a discount to the public offering price • Sets forth the overallotment or “greenshoe” option • Underwriters may sell more shares than they have agreed to purchase from the issuer and/or selling shareholders in the base offering • To cover the syndicate short position in a rising market, underwriters have an option to purchase additional shares from the issuer and/or selling shareholders at the same price as shares bought in the base offering • Option is typically exercisable for 30 days after pricing by the lead bookrunners • Amount of shares in the option are limited by FINRA rules to 15% of the base offering • Delivery and Payment – sets forth settlement mechanics, typically occurring on T+3 4
I. UNDERWRITING AGREEMENTS Representations and Warranties • Issuer makes representations and warranties concerning: • No material misstatement or omission in the registration statement and prospectus • Accuracy of financial statements and independence of auditors • Corporate authorizations and other representations that address the validity of the transaction and securities being offered • Various aspects of the issuer’s business, including compliance with various laws • Areas specific to the issuer’s industry or jurisdiction (if outside the United States) • Selling shareholders make representations and warranties, but the scope will depend on their relationship to the issuer • “Clean hands” representation • Often heavily negotiated among external lawyers • Negotiation of representations and warranties serves as a helpful diligence exercise and can help all parties to focus on areas of particular concern 5
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