Form Of Underwriting Agreement

EXHIBIT 1.1


[ ] Shares of Common Stock


ASD Systems, Inc.


UNDERWRITING AGREEMENT
----------------------


[ ], 1999


BEAR, STEARNS & CO. INC. PRUDENTIAL SECURITIES INCORPORATED FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
as Representatives of the
several Underwriters named in
Schedule I attached hereto c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, New York 10167


Ladies and Gentlemen:


ASD Systems, Inc., a corporation organized and existing under the laws of Texas (the "Company") proposes, subject to the terms and conditions stated herein, that the Company issue and sell to the underwriters named in Schedule I hereto (the "Underwriters"), acting severally and not jointly, an aggregate of [ ] shares (the "Firm Shares") of its common stock, par value $0.0001 per share (the "Common Stock"), and, for the sole purpose of covering over-allotments in connection with the sale of the Firm Shares, at the option of the Underwriters, up to an additional [ ] shares (the "Additional Shares") of the Common Stock. The Firm Shares and any Additional Shares purchased by the Underwriters are referred to herein as the "Shares." The Shares are more fully described in the Registration Statement referred to below.


1. Representations and Warranties of the Company. The Company hereby
--------------------------------------------- represents and warrants to, and agrees with, the Underwriters that:


(a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, and may have filed an amendment or amendments thereto, on Form S-1 (No. 333-85983), for the registration of the Shares under the Securities Act of 1933, as amended (the "Act"). Such registration statement, including the prospectus, financial statements and schedules, exhibits and all other documents filed as a part thereof, as amended at the time of effectiveness of the registration statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of


the Rules and Regulations of the Commission under the Act (the "Regulations"), is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the Regulations is herein called the "462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing is required, is herein called the "Prospectus." The term "preliminary prospectus" as used herein means a preliminary prospectus as described in Rule 430 of the Regulations. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment, supplement or term sheet with respect to any of the foregoing shall be deemed to include the copy of such documents filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). Neither the Commission nor the Blue Sky or securities authority of any state or other jurisdiction has issued a stop order suspending the effectiveness of the Registration Statement, preventing or suspending the use of any preliminary prospectus, the Prospectus, the Registration Statement or any amendment or supplement or term sheet thereto, refusing to permit the effectiveness of the Registration Statement or suspending the registration or qualification of the Shares, nor has any of such authorities instituted or threatened to institute any proceedings with respect to a stop order.


(b) At the respective time of the effectiveness of the Registration Statement or any 462(b) Registration Statement or the effectiveness of any post- effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or amendment of the Prospectus is filed with the Commission and at the Closing Date and the Additional Closing Date, if any (as hereinafter respectively defined), the Registration Statement and the Prospectus and any amendments and supplements thereto complied or will comply in all material respects with the applicable provisions of the Act and the Regulations and do not or will not contain an untrue statement of a material fact and do not or will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein (i) in the case of the Registration Statement, not misleading and (ii) in the case of the Prospectus, in light of the circumstances under which they were made, not misleading. When any related preliminary prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment or supplement thereto was first filed with the Commission, such preliminary prospectus and any amendments and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. In addition, each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or omitted from the Registration Statement or the Prospectus or any related preliminary prospectus or any amendment or supplement thereto in reliance upon and in conformity with information


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furnished in writing to the Company by or on behalf of any Underwriter through you as herein stated expressly for use in connection with the preparation thereof. If Rule 434 is used, the Company will comply with the requirements of Rule 434 and the Prospectus shall not be "materially different," as such term is used in Rule 434, from the Prospectus included in the Registration Statement at the time it became effective.


(c) Ernst & Young LLP, who have certified the financial statements and supporting schedules included in the Registration Statement, are independent public accountants as required by the Act and the Regulations.


(d) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement and the Prospectus, (i) there has been no material adverse effect or any development involving a prospective material adverse effect on the business, prospects, properties, operations, condition (financial or other) or results of operations of the Company, including but not limited to relationships with customers and suppliers of the Company (collectively, a "Material Adverse Effect"); (ii) there have been no transactions entered into by the Company, other than those in the ordinary course of business, which are material with respect to the Company; (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock; and (iv) since the date of the latest balance sheet presented in the Registration Statement and the Prospectus, the Company has not incurred or undertaken any liabilities or obligations, direct or contingent, which are material to the Company, except for liabilities or obligations which are reflected in the Registration Statement and the Prospectus.


(e) This Agreement and the transactions contemplated herein have been duly and validly authorized by all necessary corporate action on the part of the Company, and this Agreement has been duly and validly executed and delivered by the Company. Assuming due authorization, execution and delivery by the Representatives, this Agreement constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms.


(f) The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any debenture, note, contract, indenture, mortgage, deed of trust, lease, joint venture or other agreement, instrument, franchise, license or permit to which the Company is a party or by which any of its properties or assets may be bound, (ii) violate or conflict with any provision of the Articles of Incorporation or By-Laws of the Company, or (iii) violate or conflict with any judgment, writ, decree, order, law, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its respective properties, assets or operations other than any violation or conflict that would not have a Material Adverse Effect on the Company. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its respective properties or assets is necessary or required for the execution, delivery and


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performance of this Agreement or the consummation of the transactions contemplated hereby, including the issuance, sale and delivery of the Shares to be issued, sold and delivered by the Company hereunder, except (i) the registration under the Act of the offer and sale of the Shares, (ii) the registration of the shares of Common Stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (iii) such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters.


(g) All of the outstanding shares of capital stock of the Company are duly and validly authorized and issued, fully paid and nonassessable, and none of such shares was issued in violation of or is now subject to any preemptive rights, co-sale rights, registration rights, rights of first refusal or similar rights which have not otherwise been waived in writing. All of the outstanding shares of capital stock and all other outstanding securities of the Company have been issued in compliance in all material respects with applicable Federal and state laws. The Shares have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued, delivered and sold in accordance with this Agreement, will be duly and validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances or claims, will not have been issued in violation of or be subject to any preemptive rights, co-sale rights, registration rights, rights of first refusal or similar rights and no holder of Shares will be subject to personal liability by reason of being such a holder. The authorized, issued and outstanding capital stock of the Company as of the date set forth in the Prospectus under the caption "Capitalization" is as set forth in the Prospectus under such caption, and, after giving effect to the offering will be as set forth under such caption and as referred to on an "as adjusted basis." Since that date, the Company has not issued any securities other than (i) Common Stock of the Company pursuant to the exercise of previously outstanding and privately granted options pursuant to the ASD Systems, Inc. 1999 Long-Term Incentive Plan (the "Plan"), (ii) options granted in the ordinary course of business pursuant to the Plan, (iii) Series A Convertible Preferred Stock issued in connection with the Company's private placement closed August 23, 1999 (the "Preferred Financing"); (iv) Series B Redeemable Preferred Stock issued in connection with the Preferred Financing, and (v) Common Stock Purchase Warrants issued in connection with the Preferred Financing. The authorized capital stock of the Company, including the Common Stock, the Firm Shares and the Additional Shares, conforms in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus and such descriptions conform in all material respects to the rights set forth in the instruments defining the same. Except as disclosed in the Registration Statement and the Prospectus, there are no outstanding shares of capital stock, options, warrants or other securities or other rights calling for the issuance of, and no commitments, obligations, plans or arrangements to issue, any securities of the Company. The outstanding stock options relating to the Common Stock have been duly authorized and validly issued and each of the Plan and stock options granted by the Company conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus.


(h) The Company has no subsidiaries. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. The Company is duly qualified and in good standing as a foreign corporation in


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each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which would not have a Material Adverse Effect on the Company, either individually or in the aggregate. Except as described in the Prospectus, the Company has no agreements, commitments, or understandings with respect to acquiring or selling the business, stock or material assets, except those assets acquired in the ordinary course of business, of the Company or any other person or entity. Except for shares held in the Company's 401(k) plan, the Company does not own any capital stock or any other interest in any other corporation or entity.


(i) The Company has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits (collectively, "Governmental Licenses") of and from all appropriate federal, state, local or foreign public, regulatory or governmental agencies and bodies, to own, lease and operate its properties and conduct its business as now being conducted, or as proposed to be conducted, and as described in the Registration Statement and the Prospectus, except where the failure to possess such Governmental Licenses would not have a Material Adverse Effect on the Company. Each material Governmental License is valid and in full force and effect, the Company is in compliance with the terms and conditions of all such Governmental Licenses, and no such Governmental License contains a materially burdensome restriction not disclosed in the Prospectus, and the Company has not received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses.


(j) The Company is not in violation of any provision of its Articles of Incorporation or Bylaws, as the case may be, and the Company is not in breach of any of the terms or provisions of or in default (or would be in default with notice or lapse of time, or both) under any debenture, note, contract, indenture, mortgage, deed of trust, lease, joint venture or other agreement, instrument, franchise, license or permit to which the Company is a party or by which any of its properties, assets or operations may be bound, which such breach or default would have, individually or in the aggregate, a Material Adverse Effect on the Company, or in violation of any judgment, writ, decree, order, law, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its respective properties, assets or operations, the violation of which would have, individually or in the aggregate, a Material Adverse Effect on the Company.


(k) Except as described in the Prospectus, there is no litigation, action, suit, proceeding, inquiry or governmental proceeding or investigation to which the Company is a party or to which any property of the Company is subject or which is pending or threatened, or, to the knowledge of the Company, contemplated against the Company that would be required to be disclosed in the Prospectus.


(l) The Company has not taken nor will it take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock in violation of Regulation M under the Exchange Act.


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(m) The financial statements, including the notes thereto, and supporting schedules, if any, included in the Registration Statement and the Prospectus present fairly the financial position of the Company as of the dates indicated and the results of their operations, shareholders' equity and cash flows for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis through the periods involved, except as otherwise stated therein; the supporting schedules included in the Registration Statement, if any, present fairly the information required to be stated therein; and the selected financial data, the summary financial information, and the capitalization information included in the Registration Statement and the Prospectus (including the pro forma information contained therein) present fairly in accordance with GAAP and the Regulations the information shown therein and have been compiled on a basis consistent with that of the financial statements included in the Registration Statement and the Prospectus. No financial statements are required to be included in the Registration Statement that have not been so included.


(n) All material federal, state and local tax returns required to be filed by the Company have been filed and all such returns are true, complete, and correct in all material respects. All material taxes that are due or claimed to be due from the Company have been paid other than those (i) currently payable without penalty or interest or (ii) being contested in good faith and by appropriate proceedings and, to the extent required by GAAP, for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the Registration Statement and the Prospectus, there is no material tax deficiency that has been, or may reasonably be expected to be, asserted against the Company.


(o) The Company maintains insurance with insurers of recognized financial responsibility of the types and in the amounts generally deemed adequate for its business, including, without limitation, insurance coverage for real and personal property owned or leased by them against theft, damage, destruction, acts of vandalism, and all other material risks customarily insured against, all of which insurance is in full force and effect. The Company has no reason to believe that it will not be able to renew existing insurance coverage as and when such coverage expires or to obtain similar coverage from insurers of recognized financial responsibility as may be necessary to continue its business. The officers and directors of the Company are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary for officers and directors liability insurance of a public company and as would cover claims which could be made in connection with the issuance of the Shares; and the Company has no reason to believe that it will not be able to renew its existing directors and officers liability insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to cover its officers and directors.


(p) The Company has good and marketable title to all personal property and assets owned by it, free and clear of all mortgages, pledges, security interests, claims, restrictions, liens, encumbrances and defects except as do not, individually or in the aggregate, interfere with the use made or proposed to be made of such property by the Company. Any real property and buildings held under lease by the Company are held under valid, existing and enforceable leases in full force and effect with such exceptions as are not material and do not inter-


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fere with the use made or proposed to be made of such property and buildings by the Company, and the Company has no notice of any claims of any sort that has been asserted by anyone adverse to the rights of the Company under any such leases.


(q) The Company owns or possesses legal and valid rights to use all patents, inventions, copyrights, software, databases, know-how, Internet domain names, trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, trademarks, service marks, trade names, rights of publicity pertaining to the name, likeness, voice, signatures, and/or biographical information of real persons and other intellectual property necessary to carry on its business as currently conducted, and as proposed to be conducted and described in the Prospectus (collectively, "Intellectual Property"), free and clear of all liens, claims and encumbrances. The Company has not received any notice or is otherwise aware of (i) any claim, action or demand of any person in the United States or elsewhere or any proceeding in the United States or elsewhere, pending or threatened, that (A) challenges the ownership of the Company in or its right to use any Intellectual Property or (B) alleges that any product or service of the Company infringes or misappropriates the Intellectual Property rights of others or constitutes unfair competition or (ii) any facts or circumstances that would render any Intellectual Property owned or used by the Company or any Intellectual Property license agreement to which the Company is a party, invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein or thereunder. The Company has taken reasonable steps to protect, maintain and safeguard its rights in all Intellectual Property owned or used by the Company and to maintain the secrecy of all such Intellectual Property as to which improper or unauthorized disclosure would impair its value or validity, including the execution of appropriate nondisclosure and confidentiality agreements.


(r) No relationship, direct or indirect, exists between or among the Company or any of its affiliates, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required by the Act to be described in the Registration Statement and the Prospectus that is not so described. Except as disclosed in the Registration Statement and the Prospectus, there are no outstanding loans, advances or guarantees of indebtedness by the Company to or for the benefit of any of the executive officers or directors of the Company or any of the members of the families of any of them.


(s) The Shares have been duly authorized for listing on the Nasdaq National Market, subject to official notice of issuance.


(t) Except as described in the Prospectus, no holder of securities of the Company has any rights (other than rights which have been waived in writing or satisfied) to the registration of securities of the Company because of the filing of the Registration Statement or otherwise in connection with the sale of the Shares contemplated hereby.


(u) The Company is not, and upon consummation of the transactions contemplated hereby and the application of the net proceeds of the offering of the Shares as described in the Prospectus will not be, subject to registration as an "investment company" or an entity "controlled" by an "investment company" under the Investment Company Act of 1940, as amended.


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(v) No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers, customers or contractors that are likely, individually or in the aggregate, to have a Material Adverse Effect on the Company.


(w) The Company is in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), except where such noncompliance would not in the aggregate have a material adverse effect on the Company.


(x) There are no contracts or documents which are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits thereto which have not been so described and filed as required. The descriptions of contracts in the Registration Statement and the Prospectus are accurate and complete in all material respects; all contracts described in the Registration Statement and the Prospectus are valid, binding and enforceable and are in full force and effect, and neither the Company nor, to the Company's knowledge, any other party is in breach of or default under any provisions of such contracts.


(y) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Securities Act of 1974, as amended ("ERISA"), that is maintained, administered or contributed to by the Company for employees or former employees of the Company has been maintained in compliance with its respective terms and the requirements of any applicable statutes, order, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). No prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any such plan, excluding transactions effected pursuant to a statutory or administrative exemption. For each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency", as defined in Section 412 of the Code, has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeded the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions. The description of the Company's Plan and the options or other rights granted and exercised thereunder set forth in the Registration Statement and the Prospectus accurately and fairly describe, in all material respects, the information required to be shown with respect to such Plan, options and rights.


(z) The Company maintains a system of internal accounting controls that are sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the


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existing assets at reasonable intervals and appropriate action is taken with respe ...