Define: Underwriting Agreement

An underwriting agreement is a legally binding contract between a company issuing securities and an underwriter, who agrees to purchase and resell those securities to investors.

The purpose of an underwriting agreement is to establish the terms and conditions under which the underwriter will purchase and sell the securities, including the price, quantity, and timing of the transactions.

Key provisions in an underwriting agreement may include the underwriter’s obligations, the issuer’s representations and warranties, the conditions for closing the transaction, the allocation of risk between the parties, and any termination or indemnification provisions.

Yes, an underwriting agreement can be terminated before the closing of the transaction if certain conditions specified in the agreement are not met, such as the failure to obtain necessary regulatory approvals or the occurrence of a material adverse change in the issuer’s financial condition.

If the underwriter fails to sell all the securities to investors, they may be required to purchase the unsold securities themselves, as specified in the underwriting agreement. This is known as the underwriter’s “firm commitment.”

Yes, an underwriting agreement can be modified or amended after it is signed, but any changes must be agreed upon by both parties and documented in writing.

Yes, underwriting agreements are subject to various legal requirements and regulations, including securities laws and regulations enforced by the Securities and Exchange Commission (SEC) in the United States.

In some cases, an underwriting agreement may allow for assignment to another party with the consent of all parties involved. However, this typically requires the new party to meet certain qualifications and obligations.

If the issuer breaches its representations and warranties in the underwriting agreement, the underwriter may have the right to terminate the agreement, seek damages, or take other legal actions to protect its interests.

Yes, an underwriting agreement can be used for various types of securities offerings, including initial public offerings (IPOs), secondary offerings, debt offerings, and private placements. The specific terms and conditions may vary depending on the nature of the offering.