Sebi's Model Underwriting Agreement - Legal Draft

To,The

Board of Directors..................Ltd..................................................................................................Dear

sir,Re:

Forthcoming public issue of shares/debentures of Rs..... each for cash as

part/premium aggregating to Rs...... (Public issue)1. We hereby record that

we (hereinafter referred to as the underwriter) have agreed to

underwrite/procure subscription to shares/debentures of Rs...... each for cash

at par/premium aggregating to Rs..... (Rupees.... only) (hereinafter referred

to as the underwriting obligation) for the captioned public issue by.... Ltd.

(hereinafter referred to as "the Company" on the following terms and

conditions.2. Opening of the

subscription list: The subscription list for the public issue shall open not

later than three months from the date of this agreement or such extended

period(s) as the underwriter may agree to in writing. The subscription list

shall, unless the issue is fully subscribed, be kept open by the company for a

maximum period of 10 calendar days failing which the underwriter shall not be

bound to discharge the underwriting obligations under this agreement.3. To make available

final copy of the prospectus: The company shall before delivering to the

Registrar of Companies (hereinafter referred to as "ROC") make

available to the underwriter a copy of the prospectus, which shall be as

modified in the light of the observations made by SEBI while issuing the

acknowledgment card. The underwriter shall before executing this agreement

satisfy himself with the terms of the issue and other information and

disclosures contained therein.4. Delivery of

prospectus to the Registrar of Companies: The prospectus in respect of the

public issue shall be delivered by the company to the ROC for registration in

accordance with the provisions of the Companies Act, 1956 not later that 30

days from the date of this Agreement or such extended period(s) as the under

writer may approve in writing, the time being the essence of this Agreement.5. Material disclosures

after filing of prospectus: The company agrees that, if after filing of the

prospectus with the ROC any additional disclosures are required to be made in

the interest of the investors in regard to any matter relevant to the issue,

the company shall with such requirements as may be stipulated by SEBI or the

lead manager and compliance of such requirements shall be binding on the

underwriter; provided that such disclosures shall not give a right to the

underwriter to avoid underwriting obligations unless such subsequent

disclosures are certified by SEBI as being material in nature and essential for

the contract of underwriting; the question whether or not such subsequent

disclosures are material in nature, the decision of SEBI shall be final and

binding on both the parties.6. Making available

copies of prospectus and application form, etc. The company shall make

available to the underwriter a minimum of...... (No. of application forms

forming part of abridged prospectus) and....... (number of copies of the

prospectus) for every lakh of ruppes of underwriting accepted by the

underwriter. If the underwriter desires to have more application forms and

prospectus than specified he must state his requirements which would then be considered

as condition for acceptance of this underwriting Agreement. Thereafter, it is

responsibility of the company to deliver to the underwriter the accepted

quantity of application forms and prospectus as soon as the prospectus is filed

with the ROC but in any case not later than 21 days prior to the date of

opening of the public issue, proof of which, should be retained by the company.7. Warranty as to

statutory and other approvals. The company warrants that all consents,

sanctions, clearances, approvals, permissions, licences, etc., in connection

with the public issue as detailed in the prospectus or required for completing

the prospectus have been obtained or will be obtained and the same shall remain

effective and in force until the allotment of all the shares/debentures are

completed.8. Sub-underwriting

arrangements: The underwriter shall be entitled to arrange for sub-underwriting

of its underwriting obligation on his own account with any person or persons on

terms to be agreed upon between them. Notwithstanding such arrangement, the

underwriter shall be primarily responsible for sub-underwriting and any failure

or default on the part of the sub-underwriters to discharge their respective

sub-underwriting obligations, shall not exempt or discharge the underwriter of

his underwriting obligation under this agreement.9. Treatment of

applications made with underwriters/sub-underwriters stamp for the purpose of

allotment. The application bearing the stamp of the underwriter or as the case

may be the sub-underwriter whether made on their own behalf or otherwise shall

be treated in the same manner as the applications received directly from the

members of the public and, in the event of the issue being oversubscribed, such

applications shall be treated on par with those received from the public and

under no circumstances, the applications bearing the stamp of the underwriter

or the sub-underwriter shall be given any preference or priority in the matter

of allotment of shares/debentures.10. Computation of

underwriter's obligation:1. If the issue is

undersubscribed, the underwriting obligation, shall be determined in the manner

set out hereunder; provided that under no circumstances, the underwriter's

obligation to subscribe/procure subscription to shares/ debentures shall exceed

the amount mentioned in clause 1 above.2. The following

applications for shares/debentures shall be treated pro tanto in or towards

satisfaction of the underwriter's obligations under this Agreement, namely -a. applications which

have been accepted excluding those withdrawn before allotment; andb. applications received

from the underwriter or any of his sub-underwriters including those

applications which bear the stamp of the underwriter or any of the

sub-underwriters,1.2.3. After making

adjustments as provided in sub-clause (2) above the underwriting obligation of

the underwriter and other underwriters shall be, subject to following further

adjustments.a. The application

received from the public independently i.e. those applications not covered

under sub-clause (2) above shall be apportioned amongst all the underwriters.

Where underwriting obligations have not. been fully satisfied after adjustments

under sub-clause (2) above in proportion to their respective underwriting

obligations and to that extent their respective underwriting obligation shall

stand reduced.b. If, after the

adjustments made under sub-clauses (2) and (3)(a) above, it is found that the

shares/debentures available for adjustment are in excess of the

shares/debentures required to be subscribed in fulfillment of the underwriting

obligations of one or more individual underwriters, then such excess amount

required to meet the underwriting obligations of any underwriter shall be

further apportioned amongst such other underwriters, whose underwriting obligations

have not been fully discharged, in proportion to their respective underwriting

obligations.11. Procedure for

effecting/discharge of underwriting obligations: The underwriting obligations

as determined under clause 10 shall be discharged in the manner mentioned

below:a. the company shall

within 30 days after the date of closure of subscription list communicate in

writing to the underwriter, the total number of shares/debentures remaining

unsubscribed, the number of shares/debentures required to be taken up by the

underwriter or subscription to be procured therefor by the underwriter.b. (b)the company shall

make available to the underwriter, the manner of computation of underwriting

obligation and also furnish a certificate in support of such computation from the

company's auditors.c. the underwriter on

being satisfied about the extent of devolvement of the underwriting obligation,

shall immediately and in any case not later than 30 days after receipt of the

communication under sub-clause (a) above, make or procure the applications to

subscribe to the shares/debentures and submit the same together with the

application moneys to the company.d. in the event of

failure of the underwriter to make the application to subscribe to the shares

as required under clause (c) above, the company shall be free to make

arrangements(s) with one or more persons to subscribe to such shares without

prejudice to the rights of the company to take such measures and proceedings as

may be available to it against the underwriter including the right to claim

damages for any loss suffered by the company by reason of failure on the part

of the underwriter to subscribe to the shares as aforesaid.Note

- The Company is free to quantify the damages being a multiple of the value of

the shares/debentures not subscribed by the underwriter.12. Right to receive

underwriting commission/brokerage. Subject to the underwriter fulfilling his

underrating obligations, he shall be entitled to receive commission in respect

of the underwriting obligation undertaken by him and brokerage in respect of

the shares/debentures procured by him at the rates set out in clause 13

hereunder. The underwriting commission shall be payable only if his

underwriting commitment is fully subscribed.13. Underwriting

commission: (1) In consideration of the underwriter agreeing to underwrite the

shares/debentures as mentioned in clause 1 above, the company shall pay to the

underwriter a commission at the following rates;Note:1. The rates as mutually

negotiated between the company and the underwriter may be inserted. Needless to

say that the rates so agreed upon shall be subject to the provisions of section

76 of the Companies Act, 1956.2. (2) The underwriting

commission shall be payable by the company within 15 days from the date of

finalisation of allotment and proof of such payment within the specified time

should be available with the company. The obligation to pay underwriting

commission shall arise only upon the underwriter fulfilling his underwriting

obligation and duly subscribing to the shares/debentures, if any devolved on

him.14. Obligations of the

company1. The company shall

immediately after the closure of the subscription list, take expeditious steps

for processing the applications and complete the allotment within the time

limit prescribed under the Companies Act, 1956 and also comply with other

listing requirements.2. If the company fails

to receive 90% of the issue amount including the amount received from the

underwriters towards devolvement, within 60 days from the date of closure of

subscription list, the company shall refund the amount paid by the underwriter

in fulfilment of his underwriting obligations. The obligation to refund the

moneys shall be without prejudice to the disputes if any in regard to the

underwriting obligation to the underwriter.15. Time is the essence

of the agreement: All obligations of the company and the underwriter, are

subject to the condition that time wherever stipulated, shall be of the essence

of the agreement. Consequently any failure on the part of the company or the

underwriter to adhere to the time limits shall unless otherwise agreed to

between the company and the underwriter, discharge the underwriter or company

of his/their obligations under the underwriting agreement.16. Right of termination

under special circumstances. Notwithstanding anything contained herein, the

underwriter shall have the option to be exercised by him at any time prior to

the opening of the issue as notified in the prospectus of terminating this

agreement under any or all of the following circumstances -i.

if

any representations/statements made by the company to the underwriter and/or in

the application forms, negotiations, correspondence, the prospectus or in this

letter are or are found to be incorrect;ii.

a

complete breakdown or dislocation of business in the major financial markets,

affecting the cities of Calcutta, Bombay, Madras or New Delhi;iii.

declaration

of war or occurrence of insurrection, civil commotion or any other serious or

sustained financial, political or industrial emergency or disturbance affecting

the major financial markets of Calcutta, Bombay, Madras or New Delhi.17. Notice of termination

to the company: Notwithstanding anything contained in clause 16 above, in the

event of the company failing to perform all or any of the covenants within time

limits specified wherever applicable under this letter of underwriting, the

underwriter shall inform the company with adequate documentary evidence of the

breach/non-performance by Registered post/Speed post and acknowledgment

obtained therefore, whereupon the underwriter shall be released from all or any

of the obligations required to be performed by him.18. Net worth of the

underwriter. The underwriter, hereby declares that he satisfies the net

worth/capital adequacy requirements specified under the SEBI (Underwrites)

Rules and Regulations, 1993 or the bye-laws of the stock exchange of which the

underwriter is a member and that he is competent to undertake the underwriting

obligations mentioned in clause 1 hereinabove.19. Registration with the

SEBI: The underwriter hereby declares that SEBI has granted to him a

certificate of registration to act as an underwriter in accordance with the

SEBI (Underwriters) Rules and Regulations, 1993 or, he has applied for

registration to SEBI within the time stipulated under sub-section (1) of

section 12 of the Securities and Exchange Board of India Act, 1992 and is

entitled to carry on the business as an underwriter under the SEBI Act.20. Reference to

arbitration - Any dispute arising out of this agreement between the underwriter

and the company shall be referred to the Arbitration Committee constituted by

the Regional Stock Exchange in which the shares/debentures are to be listed and

the decision of the Arbitration Committee shall be final and binding on both

the parties.Yours

faithfully.for..........(Signature

of the underwriter)We,

the company.................. Ltd. the above named do hereby accept your offer

for undewriting on the above mentioned terms and conditions.Authorised

Signatory...............For...............

Ltd.Designation..............Authorised

by a resolution passed at the meeting of the Board of Directors held on

the....... day of.............. 19.....