An underwriting agreement is a formal document created between a syndicate of investment bankers, who are part of an underwriting group, and a corporation which is responsible for issuing new securities. The agreement is signed by the lead underwriter and the document contains important information regarding the public offering price, the settlement date, the underwriting spread and the amount of net proceeds to the issuer. All crucial details of the transaction are mentioned in the agreement including the underwriting group’s assurance to buy the new securities issue.
Other details mentioned in the agreement include the price which the underwriting syndicate must pay to the issuing corporation and the first resale price. Thus the underwriting agreement can be seen as an agreement between a corporation undertaking a new securities issue and an underwriting group which will buy and resell the issue for a profit. The agreement clearly lays down the terms and responsibilities of both parties to avoid any conflict in the future.
[ Also Read: Securities Purchase Agreement]
Sample Underwriting Agreement
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