1,000,000 Shares
LEVEL 8 SYSTEMS, INC.
UNDERWRITING AGREEMENT
_________, 1996
Hampshire Securities Corporation
As Representative of the several
Underwriters named in Schedule I
attached hereto
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
The undersigned, ▇▇▇▇▇ ▇ Systems, Inc., a New York corporation (the
"Company"), and the undersigned shareholders of the Company named in Schedule II
hereto (excluding Liraz Export (1990) Ltd. ("LEL"), the "Individual Selling
Shareholders," and, together with LEL, the "Selling Shareholders") hereby
confirm their agreement with Hampshire Securities Corporation (individually,
"Hampshire," and, as representative of the several underwriters named in
Schedule I hereto, the "Representative") and the underwriters named in Schedule
I hereto (the "Underwriters") as follows:
1. Introduction.
(a) The Company proposes to issue and sell to the Underwriters an
aggregate of 600,000 shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"). Such shares of Common Stock are hereinafter
referred to as the "Company Firm Stock".
(b) Certain Selling Shareholders (the "Firm Selling Shareholders")
propose to sell to the Underwriters an aggregate of 400,000 shares of Common
Stock. Such shares of Common Stock are hereinafter referred to as the "Selling
Shareholder Firm Stock". The Company Firm Stock and the Selling Shareholder
Firm Stock are hereinafter referred to as the "Firm Stock".
(c) Solely for the purpose of covering over-allotments, if any,
certain Individual Selling Shareholders (the "Individual Additional Selling
Shareholders") propose to grant to Hampshire, individually and not as
Representative, an option (the "Individual Selling Shareholder Over-allotment
Option") to purchase from them, in the aggregate, up to an additional 70,000
shares of Common Stock. Such shares of Common Stock are hereinafter referred
to as the "Individual Selling Shareholder Additional Stock." Solely for the
purpose of covering over-allotments, if any, LEL proposes to grant to Hampshire,
individually and not as Representative, an option (the "LEL Over-allotment
Option," and, together with the Individual Selling Shareholder Over-allotment
Option, the "Selling Shareholder Over-allotment Options") to purchase from them,
in the aggregate, up to an additional 50,000 shares of Common Stock. Such
shares of Common Stock are hereinafter referred to as the "LEL Additional
Stock," and, together with the Individual Selling Shareholder Additional Stock,
the "Selling Shareholder Additional Stock".
(d) Solely for the purpose of covering over-allotments, if any, the
Company proposes to grant to Hampshire, individually and not as Representative,
an option (the "Company Over-allotment Option," and, together with the Selling
Shareholder Over-allotment Options, the "Over-allotment Options") to purchase
from it up to an additional 30,000 shares of Common Stock. Such shares of
Common Stock are hereinafter referred to as the "Company Additional Stock," and,
together with the Selling Shareholder Additional Stock, are hereinafter referred
to as the "Additional Stock." The Firm Stock and the Additional Stock are
hereinafter referred to as the "Stock." The Company Over-allotment Option and
the LEL Over-allotment Option may be exercised by Hampshire only after the
exercise in full of the Individual Selling Shareholder Over-allotment Option;
thereafter, the Company Over-allotment Option and the LEL Over-allotment Option
shall be exercisable ratably.
(d) The Company proposes to sell to Hampshire, individually and not
as Representative, warrants (the "Representative's Warrants") to purchase up to
an aggregate of 100,000 shares of Common Stock (the "Warrant Shares") for an
aggregate purchase price of $________. The Representative's Warrants shall be
substantially in the form filed as an exhibit to the Registration Statement (as
hereinafter defined). The Representative's Warrants and the Warrant Shares are
hereinafter referred to collectively as the "Representative's Securities." The
Stock and the Representative's Securities are hereinafter referred to
collectively as the "Securities."
2. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed one
or more amendments thereto, on Form S-1 (Registration No. 333-___________),
including in such
registration statement and each such amendment a related preliminary
prospectus, for the registration of the Securities under the Securities Act
of 1933, as amended (the "Securities Act"). As used in this Agreement, the
term "Registration Statement" shall refer to such registration statement
referred to in the first sentence of this Section 2(a)(1), as amended, on
file with the Commission at the time such registration statement is declared
by the Commission to be effective under the Securities Act (including the
prospectus, financial statements, and exhibits filed as a part thereof,
provided, however, that such registration statement, at the time it is
declared by the Commission to be effective under the Securities Act, may omit
such information as is permitted to be omitted from such registration
statement when it becomes effective under the Securities Act pursuant to Rule
430A of the General Rules and Regulations of the Commission under the
Securities Act (the "Regulations"), which information (the "Rule 430A
Information") shall be deemed to be included in such registration statement
when a final prospectus is filed with the Commission in accordance with Rules
430A and 424(b)(1) or (4) of the Regulations); the term "Preliminary
Prospectus" shall refer to each prospectus included in the Registration
Statement, or any amendments thereto, before the Registration Statement is
declared by the Commission to be effective under the Securities Act, the form
of prospectus omitting Rule 430A Information included in the Registration
Statement when the Registration Statement becomes effective under the
Securities Act, if applicable (the "Rule 430A Prospectus"), and any
prospectus filed by the Company with the consent of the Representative
pursuant to Rule 424(a) of the Regulations; and the term "Prospectus" shall
refer to the final prospectus forming a part of the Registration Statement in
the form first filed with the Commission pursuant to Rule 424(b)(1) or (4) of
the Regulations or, if no such filing is required, the form of final
prospectus forming a part of the Registration Statement.
(2) When the Registration Statement becomes effective under the
Securities Act, and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 3(a)) and each Additional Closing Date (as
defined in Section 3(b)), and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriters or a
dealer, and during such longer period until any post-effective amendment thereto
shall become effective under the Securities Act, the Registration Statement (and
any post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement to the Registration Statement or the Prospectus) will contain all
statements which are required to be stated therein in accordance with the
Securities Act and the Regulations, will comply in all material respects with
the Securities Act and the Regulations, and will not contain any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made in the case of
the Prospectus) not misleading and no event will have occurred which should have
been set forth in an amendment or supplement to the Registration Statement or
the Prospectus which has not then been set forth in such amendment or
supplement; if a Rule 430A Prospectus is included in the Registration Statement
at the time it is declared by the Commission to be effective under the
Securities Act, the Prospectus filed pursuant to Rules 430A and 424(b)(1) or (4)
of the Regulations will contain all Rule 430A Information and all statements
which are required to be stated therein in accordance with the Securities Act or
the Regulations, will comply with the Securities Act and the Regulations, and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made in the case of
the Prospectus) not misleading; and no event will have occurred which should
have been set forth in an amendment or supplement to the Registration Statement
or the Prospectus which has not then been set forth in such amendment or
supplement; and each Preliminary Prospectus, as of the date filed with the
Commission, contained all statements required to be stated therein in accordance
with the Securities Act and the Regulations, complied with the Securities Act
and the Regulations, and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; except that no representation or
warranty is made in this Section 2(a)(2) with respect to statements or omissions
made in reliance upon, and in conformity with, written information furnished to
the Company as stated in Section 8(b) with respect to any Underwriter by, or on
behalf of, such Underwriter through the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or with respect to statements or omissions
made in reliance upon, and in conformity with, written information furnished to
the Company as stated in Section 8(c) with respect to any Selling Shareholder
expressly for inclusion in the Registration Statement, any Preliminary
Prospectus, or the Prospectus, or any amendment or supplement thereto.
(3) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order (a "Stop Order") preventing or
suspending the use of, the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, refusing to permit the
effectiveness of the Registration Statement, or suspending the registration or
qualification of the Securities nor has any of such authorities instituted or
threatened to institute any proceedings with respect to a Stop Order.
(4) Any contract, agreement, instrument, lease, or license required
to be described in the Registration Statement or the Prospectus has been
properly described therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to the Registration
Statement.
(5) The following corporations are the only subsidiaries (as defined
in the Regulations) of the Company: ProfitKey International, Inc., a Delaware
corporation ("ProfitKey"), Level 8 Systems, Inc., a New York corporation ("Level
8"), and 3077934 Canada, Inc., a Canada corporation ("3077934," and, together
with ProfitKey, Level 8, and 3077934, the "Subsidiaries"). The Company and each
of the Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of its respective jurisdiction of incorporation,
with full power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and other governmental
authorities and all courts and other tribunals, to own, lease, license, and use
its properties and assets and to conduct its business in the manner described in
the Prospectus. The Company and each of the Subsidiaries is duly qualified to
do business as a foreign corporation and is in good standing as such in every
jurisdiction in which its ownership, leasing, licensing, or use of property and
assets or the conduct of its business makes such qualification necessary, except
where the failure to so qualify will not have a material adverse effect on the
business, properties, or financial condition of the Company and the Subsidiaries
taken as a whole.
(6) (i) The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 6,236,297shares are outstanding, and
1,000,000 shares of preferred stock, par value $.01 per share, of which none are
outstanding. Each outstanding share of Common Stock and each outstanding share
of capital stock of each of the Subsidiaries is validly authorized and issued,
fully paid, and nonassessable, without any personal liability attaching to the
ownership thereof, has not been issued and is not owned or held in violation of
any preemptive or similar rights of stockholders and, in each case, is owned
free and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements and voting trusts. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right calling
for the issuance of, any share of capital stock of the Company or any Subsidiary
or any security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company or any Subsidiary,
except as may be properly described in the Prospectus. There is outstanding no
security or other instrument issued by the Company or any Subsidiary which by
its terms is convertible into, or exercisable or exchangeable for, capital stock
of the Company or any Subsidiary, except as may be properly described in the
Prospectus. The certificates evidencing the Common Stock are in due and proper
form.
(ii) The authorized capital stock of the ProfitKey consists of
25,000,000 shares of common stock, par value $.01 per share, of which 14,086,774
shares are outstanding, and 3,473,149 shares of preferred stock, par value $.01
per share, none of which are outstanding. The Company is the record and
beneficial owner of 14,086,774 shares of common stock, par value $ .01 per
share, of ProfitKey.
(iii) The authorized capital stock of the Level 8 consists of
200 shares of common stock, without par value, of which 100 shares are
outstanding. The Company is the record and beneficial owner of 100 shares of
common stock, without par value of Level 8.
(iv) The Company is the record and beneficial owner of all of
the outstanding shares of capital stock of 3077934.
(7) The consolidated financial statements of the Company, and the
financial statments of each of ProfitKey and ▇▇▇▇▇ ▇, each included in the
Registration Statement and the Prospectus fairly present, with respect to the
Company and such Subsidiary, respectively, the financial position, the results
of operations, the cash flows, and the other information purported to be shown
therein at the respective dates and for the respective periods to which they
apply, on a consolidated basis with respect to the Company. Such financial
statements have been prepared in accordance with generally accepted accounting
principles (except to the extent that certain footnote disclosures regarding any
stub period may have been omitted in accordance with the applicable rules of the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) consistently applied throughout the periods involved, are correct and
complete in all material respects, and are in accordance with the books and
records of the Company. Lurie, Besikof, ▇▇▇▇▇▇▇ & Co., P.L.L.P., the
accountants whose report on the audited financial statements is filed with the
Commission as a part of the Registration Statement, are, and during the periods
covered by their reports included in the Registration Statement and the
Prospectus were, independent certified public accountants with respect to the
Company and the Subsidiaries within the meaning of the Securities Act and the
Regulations. No other financial statements are required by Form S-1 or
otherwise to be included in the Registration Statement or the Prospectus. There
has at no time been a material adverse change in the financial condition,
results of operations, business, properties, assets, liabilities, or future
prospects of the Company and the Subsidiaries, taken as a whole, from the latest
information set forth in the Registration Statement or the Prospectus, except as
may be properly described in the Prospectus.
(8) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or, to
the best knowledge of the Company, in prospect (or any basis therefor) with
respect to the Company or any Subsidiary or any of their respective operations,
businesses, properties, or assets, except as may be described in all material
respects in the Prospectus or such as individually or in the aggregate do not
now have, and will not in the future have, a material adverse effect upon the
operations, business, properties, or assets of the Company and the Subsidiaries
taken as a whole. To the best knowledge of the
Company, neither the Company nor any Subsidiary is in violation of, or in
default with respect to, any law, rule, regulation, order, judgment, or decree
to which it is subject, except as may be properly described in the Prospectus or
such as in the aggregate do not now have, and will not in the future have, a
material adverse effect upon the operations, business, properties, or assets of
the Company and the Subsidiaries taken as a whole; nor is the Company or any
Subsidiary currently required to take any action in order to avoid any such
violation or default.
(9) The Company and each Subsidiary has good and marketable title to
all properties and assets which the Prospectus indicates are owned by it, free
and clear of all liens, security interests, pledges, charges, encumbrances, and
mortgages, except as may be properly described in the Prospectus or as are not
material to the Company and the Subsidiaries taken as a whole.
(10) Neither the Company or any Subsidiary nor, to the knowledge of
the Company, any other party, is now, or is expected by the Company to be, in
violation or breach of, or in default with respect to, any provision of any
contract, agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company and the Subsidiaries taken as a whole, and each
such contract, agreement, instrument, lease, license, arrangement, and
understanding is in full force and effect and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in accordance
with its respective terms. The Company and each of the Subsidiaries enjoys
peaceful and undisturbed possession under all leases and licenses under which it
is operating. Except as described in the Prospectus, neither the Company nor
any of the Subsidiaries is a party to, or bound by, any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to any
charter or other restriction, which has had, or may in the future have, a
material adverse effect on the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company
and the Subsidiaries taken as a whole. Neither the Company nor any Subsidiary
is in violation or breach of, or in default with respect to, any term of its
respective certificate of incorporation (or other charter document) or by-laws.
(11) The Company and each of the Subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, and copyrights described or referred to
in the Prospectus as owned or used by it or which are necessary for the conduct
of its respective business as currently conducted as described in the Prospectus
and, to the best knowledge of the Company, its respective business as
contemplated as described in the Prospectus. To the best knowledge of the
Company, all such patents, patent rights, licenses, trademarks, service marks,
and copyrights are (i) valid and enforceable, (ii) not being
infringed by any third parties which infringement could, singly or in the
aggregate, materially and adversely affect the business, properties, operations,
condition (financial or otherwise), results of operations, income, or business
prospects of the Company and the Subsidiaries taken as a whole, as presently
being conducted or as proposed to be conducted as described in the Prospectus,
and (iii) are uncontested by any third party. The Company has no knowledge of,
nor has it received any notice of, infringement of, or conflict with, asserted
rights of others with respect to any patents, patent rights, inventions, trade
secrets, licenses, know-how, proprietary techniques, including processes and
substances, trademarks, service marks, trade names, or copyrights which in the
aggregate, if the subject of an unfavorable decision, ruling, or finding could
materially and adversely affect the business, properties, operations, condition
(financial or otherwise), results of operations, income, or business prospects
of the Company and the Subsidiaries, as presently being conducted or as proposed
to be conducted as described in the Prospectus, taken as a whole.
(12) Neither the Company or any Subsidiary, nor, to the best knowledge
of the Company, any director, officer, agent, employee, or other person acting
on behalf of the Company or any Subsidiary, has, directly or indirectly: used
any corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company's internal accounting controls and procedures are sufficient to cause
the Company and each of the Subsidiaries to comply in all respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(13) The Company has all requisite power and authority to execute,
deliver, and perform each of this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company have been duly taken to
authorize the execution, delivery, and performance by the Company of this
Agreement and the Representative's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid, and
binding obligation of the Company, and is enforceable as to the Company in
accordance with its terms, except as rights to indemnity or contribution which
may be limited by federal or state securities law and except as such
enforceability may be limited by bankruptcy, insolvency, or other laws affecting
the rights of creditors generally and subject to general principles of equity.
The Representative's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, or other laws affecting the rights of creditors generally and
general principles of equity. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or other
tribunal is required by the Company or any Subsidiary for the execution,
delivery, or performance by the Company of this Agreement or the
Representative's Warrants, except filings under the Securities Act which have
been or will be made before the Closing Date, and consents consisting only of
consents under "blue sky" or securities laws which have been obtained at or
prior to the date of this Agreement. No consent which has not been obtained of
any party to any contract, agreement, instrument, lease, license, arrangement,
or understanding to which the Company or any Subsidiary is a party, or to which
any of its respective properties or assets are subject, is required for the
execution, delivery, or performance of this Agreement and the Representative's
Warrants; and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will not violate, result in a breach of, conflict
with, result in the creation or imposition of any lien, charge, or encumbrance
upon any properties or assets of the Company or any Subsidiary pursuant to the
terms of, or, with or without the giving of notice or the passage of time or
both, entitle any party to terminate or call a default under, any such contract,
agreement, instrument, lease, license, arrangement, or understanding, or
violate, result in a breach of, or conflict with any term of the certificate of
incorporation (or other charter document) or by-laws of the Company or any
Subsidiary, or violate, result in a breach of, or conflict with, any law, rule,
regulation, order, judgment, or decree binding on the Company or any Subsidiary
or to which any of their respective operations, businesses, properties, or
assets are subject.
(14) The Company Firm Stock and the Company Additional Stock are
validly authorized and, when issued and delivered in accordance with this
Agreement, will be validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, and will not be issued in
violation of any preemptive or similar rights of stockholders, and the
Underwriters will receive good title to the shares of Company Firm Stock and
Company Additional Stock purchased by them, respectively, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Selling Shareholder Firm Stock and the
Selling Shareholder Additional Stock are validly authorized and issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and were not issued in violation of any preemptive or similar
rights of stockholders. The Stock conforms to all statements relating thereto
contained in the Registration Statement and the Prospectus.
(15) The Warrant Stock is validly authorized and has been duly and
validly reserved for issuance and, when issued and delivered upon exercise of
the Representative's Warrants in accordance with the terms thereof, will be
validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders; and the holders of the Representative's Warrants will receive
good title to the securities purchased by them upon the exercise of the
Representative's Warrants, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting trusts.
The Representative's Securities conform to all statements relating thereto
contained in the Registration Statement and the Prospectus.
(16) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in the Prospectus, neither the Company nor any
Subsidiary has (i) issued any securities or incurred any material liability or
material obligation, primary or contingent, for borrowed money, (ii) entered
into any material transaction not in the ordinary course of business, (iii)
declared or paid any dividend on its capital stock, except for dividends from
any Subsidiary to the Company, or (iv) experienced any adverse changes or any
development which may materially adversely effect the condition (financial or
otherwise), net assets or stockholders' equity, results of operations, business,
key personnel, assets, or properties of the Company and the Subsidiaries taken
as a whole.
(17) Neither the Company or any of the Subsidiaries nor, to the
Company's knowledge, any of their respective officers, directors, or affiliates
(as defined in the Regulations), has taken or will take, directly or indirectly,
prior to the termination of the offering contemplated by this Agreement, any
action designed to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company, to facilitate the sale or resale of
any of the Stock.
(18) The Company has obtained from each of its directors and officers
owning Common Stock, other than the Firm Selling Shareholders with respect to
the Selling Shareholder Firm Stock and other than the Additional Selling
Shareholders with respect to the Selling Shareholder Additional Stock, and
shareholders of the Company together representing in the aggregate an excess of
_____________% of the outstanding Common Stock, and _______% of the outstanding
stock options issued pursuant to the the Company's 1995 Stock Incentive Plan,
immediately prior hereto, and has furnished to the Representative a written
agreement, in form and substance satisfactory to counsel for the Underwriters,
that, for a period of six months from the date on which the Registration
Statement is declared by the Commission to be effective under the Securities
Act, he, she, or it will not, without the prior written consent of the
Representative, publicly offer, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock or other
securities
of the Company, including, without limitation, any shares of Common Stock
issuable pursuant to the terms of any employee stock options; provided, however,
that such persons may offer, sell, contract to sell, grant an option for the
sale of, or otherwise dispose of all or any part of his, her, or its shares of
Common Stock or other such security or instrument of the Company during such
period if such transaction is private in nature and the transferee of such
shares of Common Stock or other securities or instruments agrees, prior to such
transaction, to be bound by all of the provisions of such agreement.
(19) The Company is not, and does not intend to conduct its business
in a manner in which it would be required to register as, an "investment
company" as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations promulgated
thereunder.
(20) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement, which right has not been
waived.
(21) Except as may be set forth in the Prospectus, neither the Company
nor any Subsidiary has incurred any liability for a fee, commission, or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(22) Neither the Company or any of the Subsidiaries, nor any of their
affiliates, is presently doing business with the government of Cuba or with any
person or affiliate located in Cuba. If, at any time after the date on which
the Registration Statement is declared by the Commission to be effective under
the Securities Act or with the Florida Department of Banking and Finance (the
"Florida Department"), whichever is later, and prior to the end of the period
referred to in the first clause of Section 2(a)(2) hereof, the Company or any of
the Subsidiaries or any of their respective affiliates commences engaging in
business with the government of Cuba or with any person or affiliate located in
Cuba, the Company will so inform the Florida Department within 90 days after
such commencement of business in Cuba, and, during the period referred to in
Section 2(a)(2) hereof, will inform the Florida Department within 90 days after
any change occurs with respect to previously reported information.
(23) To the best knowledge of the Company, no officer, director, or
shareholder of the Company has any affiliation or association with the National
Association of Securities Dealers, Inc. (the "NASD") or any member thereof.
(24) Except as disclosed in the Prospectus, the Company and each of
the Subsidiaries has filed all necessary federal, state, local, and foreign
income and franchise tax returns and other reports required to be filed and has
paid all taxes shown as due thereon; and there is no material tax deficiency
which has been, or, to the knowledge of the Company, may reasonably be expected
to be, asserted against the Company or any of the Subsidiaries (other than
claims for which adequate reserve has been made in the Company's financial
statements included in the Registration Statement, the Preliminary Prospectus,
and the Prospectus.
(25) To the best knowledge of the Company, none of the activities or
business of the Company or any Subsidiary is in violation of, or will cause the
Company or any Subsidiary to violate, any law, rule, regulation, or order of the
United States, any state, county, or locality, or of any agency or body of the
United States or of any state, county, or locality, the violation of which would
have a material adverse effect upon the condition (financial or otherwise),
business, property, prospective results of operations, or net worth of the
Company and the Subsidiaries taken as a whole.
(26) The Stock is quoted on the Nasdaq National Market.
(b) Each of the Selling Shareholders severally and not jointly represents
and warrants to, and agrees with, Hampshire that:
(1) Such Selling Shareholder has (i) caused a negotiated certificate
or negotiated certificates representing the number of shares of Selling
Shareholder Firm Stock and/or the Selling Shareholder Additional Stock, as
applicable, set forth opposite the name of such Selling Shareholder in Schedule
II hereto to be delivered to _______________________ (the "Custodian"), duly
endorsed in blank or together with blank stock powers duly executed, such
certificate or certificates to be held by the Custodian pursuant to a letter of
transmittal and custody agreement for delivery, pursuant to the provisions
hereof, on the Closing Date (as hereinafter defined) or one or more Additional
Closing Dates and (ii) granted an irrevocable power of attorney to ▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Attorneys") to purchase all requisite stock
transfer tax stamps, to execute this Agreement (including agreeing on the price
at which the Selling Shareholder Firm Stock and the Selling Shareholder
Additional Stock are s to be sold to Hampshire) and thereafter to modify and
amend this Agreement, to settle any dispute relating to the terms of this
Agreement, to waive any condition to the obligations of such Selling
Shareholder, and to execute all other instruments and documents and to perform
all other acts necessary or desirable to carry out the provisions of this
Agreement on behalf of such Selling Shareholder. Such letter of transmittal and
custody agreement, together with such irrevocable power of attorney, are
hereinafter referred to as the "Custodial Agreement".
(2) LEL has all requisite power and authority to execute, deliver,
and perform this Agreement and the Custodial Agreement. All necessary corporate
proceedings of LEL have been duly taken to authorize the execution, delivery,
and performance of this Agreement and the Custodial Agreement. This Agreement
and the Custodial Agreement have been duly executed and delivered by such
Selling Shareholder, are the legal, valid, and binding obligations of such
Selling Shareholder, and are enforceable as to such Selling Shareholder in
accordance with their respective terms, except as rights to indemnity or
contribution may be limited by federal or
state securities law and except as such enforceability may be limited by
bankruptcy, insolvency, or other laws affecting the rights of creditors
generally and general principles of equity. To such Selling Shareholder's best
knowledge, no consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is required by such
Selling Shareholder for the execution, delivery, or performance of this
Agreement or the Custodial Agreement, except filings under the Securities Act
which have been or will be made before the Closing Date and such consents
consisting only of consents under "blue sky" or securities laws which have been
obtained at or prior to the date of this Agreement by such Selling Shareholder.
No consent which has not been obtained of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which such Selling
Shareholder is a party, or to which any of such Selling Shareholder's properties
or assets are subject, is required for the execution, delivery, or performance
of this Agreement or the Custodial Agreement; and the execution, delivery, and
performance of this Agreement and the Custodial Agreement will not violate,
result in a breach of, conflict with, or result in the creation or imposition of
any lien, charge, or encumbrance upon any properties or assets of such Selling
Shareholder pursuant to the terms of, or, with or without the giving of notice
or the passage of time or both, entitle any party to terminate or call a default
under, any such contract, agreement, instrument, lease, license, arrangement, or
understanding, or, to such Selling Shareholder's best knowledge, violate, result
in a breach of, or conflict with, any law, rule, regulation, order, judgment, or
decree binding on such Selling Shareholder or to which any of such Selling
Shareholder's business, properties, or assets are subject.
(3) Such Selling Shareholder has good title to the shares of Selling
Shareholder Firm Stock and/or Selling Shareholder Additional Stock, as
applicable, to be sold by such Selling Shareholder pursuant to this Agreement,
free and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts (except those created by this
Agreement and the Custodial Agreement and those which have been terminated prior
to the execution hereof), and, when and if delivered in accordance with this
Agreement, the Underwriters will receive good title to the shares of Selling
Sharehlder Firm Stock, and Hampshire will receive good title to the shares of
Selling Shareholder Additional Stock, purchased by them from such Selling
Shareholder, free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. The ▇▇▇▇▇▇▇
Shareholder Firm Stock and the Selling Shareholder Additional Stock conforms to
all statements relating thereto contained in the Registration Statement or the
Prospectus.
(4) Neither such Selling Shareholder nor any of such Selling
Shareholder's affiliates (as defined in the Regulations) has taken or will take,
directly or indirectly, prior to the termination of the offering contemplated by
this Agreement, any action designed to stabilize or manipulate the price of any
security of the Company, or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company, to facilitate the sale
or resale of any of the Stock.
(5) Such Selling Shareholder has reviewed, and is familiar with, the
Registration Statement and all amendments and supplements thereto, if any, filed
with the Commission prior to the date hereof, and with each Preliminary
Prospectus and the Prospectus contained therein, as supplemented, if applicable,
to the date hereof, and all information relating to such Selling Shareholder,
such Selling Shareholder's shares of Common Stock, and any contractual or other
business relationship between such Selling Shareholder and the Company that is
set forth in the Registration Statement, any such amendment or supplement
thereto, each Preliminary Prospectus, and the Prospectus, or any such supplement
thereof, and all other written information furnished or to be furnished by, or
on behalf of, such Selling Shareholder for use in the Registration Statement,
any such amendment or supplement thereto, any Preliminary Prospectus, and the
Prospectus, or any such supplement thereto, is and, at the Closing Date and each
Additional Closing Date, will be, true, correct, and complete and does not and,
at the Closing Date and each Additional Closing Date, will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make such information (in light of the
circumstances under which they were made in the case of the Prospectus) not
misleading.
(6) Such Selling Shareholder has not incurred any liability for a
fee, commission, or other compensation on account of the employment of a broker
or finder in connection with the transactions contemplated by this Agreement.
3. Purchase, Sale, and Delivery of the Stock and the Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Underwriters, severally and not jointly, agree
to purchase from (i) the Company, and the Company agrees to issue and sell to
the several Underwriters, the numbers of shares of Company Firm Stock set forth
opposite the respective names of the Underwriters in Schedule I hereto, and (ii)
the Firm Selling Shareholders, and the Firm Selling Shareholders agree to issue
and sell to the several Underwriters, the numbers of shares of Selling
Shareholder Firm Stock set forth opposite the respective names of the Firm
Selling Shareholders in Schedule II hereto. The purchase price per share of
the Firm Stock to be paid by the several Underwriters shall be $___________.
The initial public offering price per share of the Firm Stock shall be
$________.
Payment for the Company Firm Stock by the Underwriters shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds, payable to the order of the
Company, and payment for the Selling Shareholder Firm Stock by the Underwriters
shall be made by certified or official bank check in New York Clearing House
(next day) funds or by electronic wire transfer of next day funds, payable to
the order of the Custodian, at the offices of Hampshire Securities Corporation,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place in the New
York City metropolitan area as the Representative shall determine and advise the
Company by at least one full days' notice in writing, upon delivery of the Firm
Stock to the Representative for the respective accounts of the Underwriters.
Such delivery and payment shall be made at 9:00 a.m., New York City local time,
on the third business day following the time of the initial public offering, as
defined in Section 11(a) hereof (unless such time and date is postponed in
accordance with the provisions of Section 9(c) hereof), or at such other time as
shall be agreed upon between the Representative and the Company. The time and
date of such delivery and payment are hereinafter referred to as the "Closing
Date."
Certificates representing the Firm Stock shall be registered in such name
or names and in such authorized denominations as the Representative may request
in writing at least two full business days prior to the Closing Date. The
Company shall permit the Representative to examine and package such certificates
for delivery at least one full business day prior to the Closing Date.
(b) Each Individual Individual Additional Selling Shareholder hereby,
severally and not jointly, grants to Hampshire the Individual Selling
Shareholder Over-allotment Option to purchase up to the number of shares of
Individual Selling Shareholder Additional Stock set forth opposite his, her, or
its respective name in Schedule II hereto, as may be necessary to cover
over-allotments, at the same purchase price per share to be paid by the several
Underwriters to the Company for the Firm Stock as provided for in this Section 3
hereof. LEL hereby grants to Hampshire the LEL Over-allotment Option to
purchase up 50,000 shares of LEL Additional Stock, as may be necessary to cover
over-allotments, at the same purchase price per share to be paid by the several
Underwriters to the Company for the Firm Stock as provided for in this Section 3
hereof. The Company hereby grants to Hampshire the Company Over-allotment
Option to purchase up to 30,000 shares of Company Additional Stock, as may be
necessary to cover over-allotments, at the same purchase price per share to be
paid by the several Underwriters to the Company for the Firm Stock as provided
for in this Section 3 hereof. The Over-allotment Options may be exercised only
to cover over-allotments in the sale of shares by Hampshire. The Company
Over-allotment Option and the LEL Over-allotment Option may be exercised only
after the exercise in full of the Selling Shareholder Over-allotment Option;
thereafter, the Company Over-allotment Option and the LEL Over-allotment Option
shall be exercisable ratably. The shares of Individual Selling Shareholder
Additional Stock purchased by Hampshire in such allocation as Hampshire and the
Company shall agree. The Over-allotment Options may be exercised by Hampshire
on the basis of the representations, warranties, covenants, and agreements of
the Company and the Selling Shareholders herein contained, but subject to the
terms and conditions herein set forth, at any time and from time to time on or
before the forty-fifth day following the date on which the Registration
Statement becomes effective under the Securities Act, by written notice by
Hampshire to the Company and Custodian. Such notice shall set forth the
aggregate number of shares of Additional Stock as to which the Over-allotment
Option is being exercised, the name or names in which the certificates
representing the Additional Stock are to be registered, the authorized
denominations in which the Additional Stock is to be registered, and the time
and date, as determined by Hampshire, when such shares of Additional Stock are
to be delivered (each such time and date are hereinafter referred to as an
"Additional Closing Date"); provided, however, that no Additional Closing Date
shall be earlier than the Closing Date nor earlier than the second business day
after the date on which the notice of the exercise of the Over-allotment Options
shall have been given nor later than the eighth business day after the date on
which such notice shall have been given.
In the event the Company declares or pays a dividend or a distribution on
the Common Stock, whether in the form of cash, shares of Common Stock, or other
consideration, prior to the Additional Closing Date, such dividend or
distribution shall also be paid on the Additional Stock on the later of the
Additional Closing Date and the date on which such dividend or distribution is
payable.
Payment for the shares of Additional Stock by Hampshire shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds payable to the order of Company in
the case of the Company Additional Stock, and the Custodian, in the case of the
Selling Shareholder Additional Stock, at the offices of Hampshire Securities
Corporation, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place
in the New York City metropolitan area as Hampshire shall determine and advise
the Company by at least one full day's notice in writing, upon delivery of the
shares of Additional Stock to Hampshire
for its account.
Certificates for the shares of Additional Stock shall be registered in such
name or names and in such authorized denominations as Hampshire may request in
writing at least two full business days prior to the Additional Closing Date
with respect thereto. The Company shall permit Hampshire to examine and package
such certificates for delivery at least one full business day prior to the
Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to Hampshire and/or
its designees on the Closing Date the Representative's Warrants to purchase the
Warrant Shares for an aggregate purchase price of $100.00.
Delivery and payment for the Representative's Warrants shall be made on
the Closing Date. The Company shall deliver to Hampshire, upon payment
therefor, certificates representing the Representative's Warrants in the name
or names and in such authorized denominations as Hampshire may request. The
Representative's Warrants shall be exercisable for a period of four years
commencing one year from the date on which the Registration Statement is
declared effective under the Securities Act at an initial exercise price per
Warrant Share equal to $________.
(d) It is understood that Hampshire may (but shall not be obligated
to) make any and all the payments required pursuant to this Section 3 on behalf
of any Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Firm Stock to be purchased by such
Underwriter or Underwriters. Any such payment by the Representative shall not
relieve any such Underwriter or Underwriters of any of its or their obligations
hereunder.
4. Offering. The Underwriters are to make a public offering of the Firm
Stock as soon, on or after the date on which the Registration Statement becomes
effective under the Securities Act, as the Representative deems it advisable so
to do. The Firm Stock is to be initially offered to the public at the initial
public offering price as provided for in Section 3(a) (such price being
hereinafter referred to as the "public offering price"). After the initial
public offering, the Representative may from time to time increase or decrease
the public offering price, in the sole discretion of the Representative, by
reason of changes in general market conditions or otherwise.
5. Covenants.
(a) The Company covenants that it will:
(1) Use its best efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as possible and notify the
Representative and counsel to the Underwriters immediately, and confirm such
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective under the Securities Act, (ii) of the receipt
of any comments from the Commission or the "blue sky" or securities authority of
any jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the
Prospectus, or any amendment or supplement thereto, (iii) of the filing with the
Commission of any supplement to the Prospectus, and (iv) of the receipt of any
notification with respect to a Stop Order or the initiation or threatening of
any proceeding with respect to a Stop Order. The Company will use its best
efforts to prevent the issuance of any Stop Order and, if any Stop Order is
issued, to obtain the lifting thereof as promptly as possible. If the
Registration Statement has become or becomes effective under the Securities Act
with a form of prospectus omitting Rule 430A Information, or filing of the
Prospectus with the Commission is otherwise required under Rule 424(b) of the
Regulations, the Company will file with the Commission the Prospectus, properly
completed, pursuant to Rule 424(b) of the Regulations within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(2) During the time when a prospectus relating to the Firm Stock
or the Additional Stock is required to be delivered hereunder or under the
Securities Act or the Regulations, comply with all requirements imposed upon it
by the Securities Act, as now existing and as hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Stock in accordance with the
provisions hereof and the Prospectus. If, at any time when a prospectus
relating to the Firm Stock or the Additional Stock is required to be delivered
hereunder or under the Securities Act or the Regulations, any event shall have
occurred as a result of which, in the reasonable opinion of counsel for the
Company or counsel for the Underwriters, the Registration Statement or the
Prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if, in the
reasonable opinion of either of such counsel, it is necessary during such period
to amend or supplement the Registration Statement or the Prospectus to comply
with the Securities Act or the Regulations, the Company will immediately notify
you and promptly prepare and file with the Commission an appropriate amendment
or supplement (in form and substance satisfactory to the Representative and
counsel to the Underwriters) which will correct such statement or omission or
which will effect such compliance and will use its best efforts to have any such
amendment declared effective under the Securities Act as soon as possible.
(3) Deliver without charge to each of the several Underwriters
such number of copies of each Preliminary Prospectus as may reasonably be
requested by the Underwriters and, as soon as the Registration Statement, or any
amendment thereto, becomes effective under the Securities Act or a supplement is
filed with the Commission, deliver without charge to the Representative two
signed copies of the Registration Statement, including exhibits, or such
amendment thereto, as the case may be, and two copies of any supplement thereto,
and deliver without charge to each of the several Underwriters such number of
copies of the Prospectus, the Registration Statement, and amendments and
supplements thereto, if any, without exhibits, as the Representative may request
for the purposes contemplated by the Securities Act.
(4) Endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective under the Securities Act, to qualify the Securities for offering and
sale under the "blue sky" or securities laws of such jurisdictions as may be
designated by the Representative; provided, however, that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then
subject. In each jurisdiction where such qualification shall be effected, the
Company will, unless the Representative agrees in writing that such action is
not at the time necessary or advisable, file and make such statements or
reports at such times as are or may be required by the laws of such
jurisdiction.
(5) Make generally available, within the meaning of Section
11(a) of the Securities Act and the Regulations, to its security holders as soon
as practicable, but not later than March 31, 1997, an earnings statement, which
need not be certified by independent certified public accountants unless
required by the Securities Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Securities Act and the Regulations, covering
a period of at least 12 months beginning after the date on which the
Registration Statement was declared effective under the Securities Act.
(6) For a period of five years after the date on which the
Registration Statement was declared effective under the Securities Act furnish
you, without charge, the following:
(i) within 90 days after the end of each fiscal year, one
copy of consolidated financial statements certified by independent certified
public accountants, including a balance sheet, statement of income, and
statement of changes in cash flows of the Company and its then existing
subsidiaries, if any, with supporting schedules, prepared in accordance with
generally accepted accounting principles in effect in the United States, as at
the end of such fiscal year and for the 12 months then ended, which may be on a
consolidated basis;
(ii) as soon as practicable after they have been sent to
shareholders of the Company or filed with, or furnished to, the Commission or
the NASD, one copy of each annual and interim financial and other report or
communication sent by the Company to its shareholders or filed with, or
furnished to, the Commission or the NASD;
(iii) as soon as practicable, one copy of every press
release and every material news item and article in respect of the Company or
its affairs which was released by the Company; and
(iv) such additional documents and information with respect
to the Company and its affairs, and the affairs of its subsidiaries, if any, as
the Representative may from time to time reasonably request; provided, however,
that such additional documents and information shall be received by you on a
confidential basis, unless otherwise disclosed to the
public, and shall not be used in violation of the federal securities laws and
the rules and regulations promulgated thereunder.
(7) Apply the net proceeds received by the Company from the
offering contemplated by this Agreement in the manner set forth under the
heading "Use of Proceeds" in the Prospectus.
(8) Furnish to the Representative as early as practicable prior
to the Closing Date and each Additional Closing Date, if any, as the case may
be, but not less than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have been
read by the Company's independent certified public accountants, as stated in
their letters to be furnished pursuant to Section 7(e) hereof.
(9) File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the date on which
the Registration Statement was declared effective under the Securities Act,
unless such filing shall comply with the Securities Act and the Regulations and
unless the Representative shall previously have been advised of such filing and
furnished with a copy thereof, and the Representative shall have approved such
filing in writing (which approval shall not be unreasonably withheld). Until
the completion by the Underwriters of the distribution of the Stock (but in no
event more than nine months after the date on which the Registration Statement
shall have been declared effective under the Securities Act), the Company will
prepare and file with the Commission, promptly upon the Representative's
request, any amendments or supplements to the Registration Statement or the
Prospectus which, in the reasonable opinion of the Representative, may be
necessary or advisable in connection with the distribution of the Stock.
(10) File timely with the Commission an appropriate form to amend
the registration with respect to the Common Stock pursuant to Section 12(g) of
the Exchange Act to include the Stock and comply with all registration, filing,
and reporting requirements of the Exchange Act, which may from time to time be
applicable to the Company.
(11) Comply with all provisions of all undertakings contained in
the Registration Statement.
(12) Prior to the Closing Date or any Additional Closing Date, as
the case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference with respect to the Company or any
Subsidiary, the financial condition, results of operations, business,
properties, assets, liabilities of any of the Company or any Subsidiary, or this
offering, without the prior written consent of the Representative.
(13) Make all filings required to maintain the inclusion of the
Common Stock on the Nasdaq National Market, the New York Stock Exchange, or the
American Stock Exchange, as the case may be, as long as required under the
Exchange Act.
(14) On the Closing Date, sell to Hampshire, individually and not
as Representative of the several Underwriters, at the price of $.001 per
Warrant, warrants to purchase the Warrant Stock, which Representative's Warrants
shall be substantially in the form set forth as an exhibit to the Registration
Statement.
(15) Until expiration of the Representative's Warrants, keep
reserved sufficient shares of Common Stock for issuance upon exercise of the
Representative's Warrants.
(16) Deliver to the Representative, without charge, within a
reasonable period after the earlier of the last Additional Closing Date or the
expiration of the period during which the Representative may exercise the
Over-allotment Options, four sets of bound volumes of the Registration Statement
and all related materials to the individuals designated by the Representative or
counsel to the Underwriters.
(17) For a period of three years after the date on which the
Registration Statement is declared effective under the Securities Act, provide,
at its sole expense, to the Representative copies of the Company's transfer
sheets on a mutually agreeable basis, if so requested by the Representative.
(18) Will maintain a key-person life insurance payable to the
Company on the life of each of __________________, the ________ of the Company,
and ____________, the _______________ of the Company, each in the amount of at
least $1,000,000, and shall maintain such life insurance in at least such amount
for the period of time equal to the longer of three years from the Closing Date
and the respective terms of the employment agreements between the Company and
such officers.
(19) For a period of three years from the date on which the
Registration Statement becomes effective under the Securities Act, the
Representative shall have the right to appoint a designee as an observer of the
Company's Board of Directors. Such observer will have the right to attend all
meetings of the Board of Directors, but will have no voting rights. Such
observer shall be entitled to receive reimbursement for all out-of-pocket
expenses incurred in attending such meetings, including, but not limited to,
food, lodging and transportation, as long as such costs do not exceed $500 per
meeting, and any fees paid to directors for attending meetings. The
Representative shall be given notice of such meetings at the same time and in
the same manner as directors of the Company are informed. The Representative
and such observer shall be indemnified to the same extent as the other
directors. The Company will use its best efforts to purchase directors' and
officers' insurance in an amount of not less than $2,000,000, provided,
however, that the Company shall not be required to pay more than $50,000 per
year in order to maintain such insurance, and if insurance in such amount is not
available at such cost, the Company shall purchase that amount of such insurance
which is available at a cost of $50,000 per year.
(b) Each Selling Shareholder covenants that it will not:
(1) Subject to the agreement referenced in Section 2(b)(18) of
this Agreement, for a period of 18 months from the date on which the
Registration is declared by the Commission to be effective under the Securities
Act, without the prior written consent of the
Representative, publicly offer, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock or other
securities of the Company, including, without limitation, any shares of Common
Stock issuable pursuant to the terms of any employee stock options.
(2) Take, directly or indirectly, prior to the termination of
the offering contemplated by this Agreement, any action designed to stabilize or
manipulate the price of any security of the Company, or which might in the
future reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company, to facilitate the sale
or resale of any of the Stock.
6. Payment of Expenses.
The Company hereby agrees to pay all expenses (other than fees of counsel
for the Underwriters, except as provided in Section 6(c)) in connection with (a)
the preparation, printing, filing, distribution, and mailing of the Registration
Statement and the Prospectus and the printing, filing, distribution, and mailing
of this Agreement and the Master Agreement Among Underwriters, any Master
Selected Dealer Agreement, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments or supplements thereto supplied to the Underwriters in quantities as
hereinabove stated, (b) the issuance, sale, transfer, and delivery (as
applicable) of the Securities, including any transfer or other taxes payable
thereon, (c) the qualification of the Securities under state or foreign "blue
sky" or securities laws, including the costs of printing and mailing the
preliminary and final "Blue Sky Survey" and the fees of counsel for the
Underwriters ($___________) and the disbursements in connection therewith, (d)
the filing fees payable to the Commission, the NASD, and the jurisdictions in
which such qualification is sought, (e) any fees relating to the listing of the
Common Stock on the Nasdaq National Market, (f) the cost of printing
certificates representing the shares of Common Stock, (g) the fees of the
transfer agent for the Common Stock, (h) the cost of publication of "tombstone"
advertisements with respect to offerings, not to exceed $15,000, and (i) a
non-accountable expense allowance equal to three percent of the gross proceeds
of the sale of the Company Firm Stock and the Company Additional Stock (less
amounts, if any, previously paid to the Representative in respect of such
non-accountable expense allowance) to the Representative on the Closing Date.
Notwithstanding the foregoing, if the offering contemplated hereby should be
terminated, the Company agrees to pay the Representative only the out-of-pocket
expenses incurred by the Underwriters in connection with this Agreement or the
proposed offer, sale, and delivery of the Stock.
The Individual Selling Shareholders hereby agree to pay a non-accountable
expense
allowance equal to three percent of the gross proceeds of the sale of any
Selling Shareholder Firm Stock and/or any Selling Shareholder Additional Stock
sold by them to the Representative on the Closing Date or any Additional Closing
Date. LEL hereby agrees to pay a non-accountable expense allowance equal to
three percent of the gross proceeds of the sale of any Selling Shareholder Firm
Stock and/or Selling Shareholder Additional Stock sold by it to the
Representative on the Closing Date or any Additional Closing Date.
7. Conditions of Underwriters' Obligations.
(a) The obligations of the several Underwriters to purchase and pay
for the Firm Stock, as provided herein, and the obligation of Hampshire to
purchase and pay for any Additional Stock and the Representative's Warrants,
each as provided herein, shall be subject, in the discretion of the
Representative or Hampshire, respectively, to the continuing accuracy of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
the Underwriters, or Hampshire, as applicable, as of the date hereof and as of
the Closing Date or any Additional Closing Date, as the case may be, to the
performance by the Company and each Selling Shareholder, as applicable, of its
respective obligations hereunder, and to the following conditions:
(b) The Registration Statement shall have become effective under the
Securities Act not later than 6:00 P.M., New York City local time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Representative; on or prior to the Closing Date, or any
Additional Closing Date, as the case may be, no Stop Order shall have been
issued and no proceeding shall have been initiated or threatened with respect to
a Stop Order; and any request by the Commission for additional information shall
have been complied with by the Company to the reasonable satisfaction of counsel
for the Underwriters. If required, the Prospectus shall have been filed with
the Commission in the manner and within the time period required by Rule 424(b)
under the Securities Act.
(c) (1) At the Closing Date and any Additional Closing Date, as the
case may be, you shall have received the opinion of Proskauer ▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇ LLP, counsel for the Company, dated the date of delivery, addressed
to the Underwriters, and in form reasonably satisfactory to counsel for the
Underwriters, with reproduced copies or signed counterparts thereof for each of
the Underwriters, to the effect that:
(i) to the knowledge of such counsel, the only subsidiaries (as
defined in the Regulations) of the Company are the Subsidiaries. Each of the
Company and each of the Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of its respective jurisdiction of
incorporation, with full power and authority to conduct its business in the
manner described in the Prospectus. The Company and each of the Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in the jurisdictions specified in Annex A to the opinion;
(ii) A. the authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 6,236,297 shares are outstanding,
and 1,000,000 shares of preferred stock, par value $.01 per share, of which none
are outstanding. Each outstanding share of Common Stock and each outstanding
share of capital stock of each of the Subsidiaries is validly authorized and
issued, fully paid, and, subject to section 630 of the New York Business
Corporation Law (the "BCL"), nonassessable and without any personal liability
attaching to the ownership thereof, and none of those shares have been issued
and none are owned or held in violation of any preemptive or similar rights of
stockholders. To the knowledge of such counsel, there is no commitment, plan,
or arrangement to issue, and no outstanding option, warrant, or other right
calling for the issuance of, any share of capital stock of the Company or any
Subsidiary or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, capital stock of the Company or any
Subsidiary, [except as may be properly described in the Prospectus and except
for an outstanding preemptive right to purchase 200 shares of Common Stock]. To
the knowledge of such counsel, there is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company or any Subsidiary, except as may
be properly described in the Prospectus. The certificates evidencing the Common
Stock are in due and proper form.
B. The authorized capital stock of the ProfitKey consists
of 25,000,000 shares of common stock, par value $.01 per share, of which, to the
knowledge of such counsel, 14,086,744 shares are outstanding, and 3,473,147
shares of preferred stock, par value $.01 per share, none of which, to our
knowledge, are outstanding. The Company is the record and to the knowledge of
such counsel, beneficial owner of 14,086,744 shares of common stock, par value
$.01 per share, of ProfitKey, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting trusts.
C. The authorized capital stock of the Level 8 consists
of 200 shares of common stock, no par value, of which, to the knowledge of such
counsel, 100 shares are outstanding. The Company is the record and, to the
knowledge of such counsel, beneficial owner of 100 shares of common stock, no
par value, of Level 8, in each case free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts.
D. The Company is the record and, to the knowledge of
such counsel, beneficial owner of all of the outstanding shares of capital stock
of 3077934, free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts.
(iii) to the knowledge of such counsel, there is no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending, threatened, or in prospect (or any basis
therefor) with respect to the Company or any Subsidiary or any of their
respective operations, businesses, properties, or assets required to be
described in the Registration Statement or Prospectus that is not so disclosed;
(iv) the Company has all requisite power and authority to
execute, deliver, and perform this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance by the Company of this Agreement and
the Representative's Warrants. This Agreement has been duly authorized,
executed, and delivered by the Company, is the legal, valid, and binding
obligation of the Company, and, except as rights to indemnity or contribution
may be limited by federal or state securities law, subject to applicable
bankruptcy, insolvency, and other laws affecting the enforceability of
creditors' rights generally and general principles of equity, is enforceable as
to the Company in accordance with its terms. The Representative's Warrants have
been duly authorized by the Company and, when executed and delivered by the
Company, will be the legal, valid, and binding obligations of the Company, each
enforceable as to the Company in accordance with its terms. No consent,
authorization, approval, order, lease or license, certificate, or permit of or
from, or declaration or filing with, any U.S. Federal, New York or Delaware
governmental authority is required by the Company or any Subsidiary for the
execution, delivery, or performance by the Company of this Agreement or the
Representative's Warrants, except filings under the Securities Act which have
been made prior to the Closing Date or Additional Closing Date, as the case may
be, and consents consisting only of consents under "blue sky" or securities
laws. No consent of any party to any contract, agreement, instrument, lease or
license, either filed as an exhibit to the Registration Statement or described
in the Prospectus to which the Company or any Subsidiary is a party, or to which
any of their respective properties or assets are subject, is required for the
execu- tion, delivery, or performance of this Agreement and the Representative's
Warrants; and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will
not violate, result in a breach of, conflict with, result in the creation or
imposition of any lien, charge, or encumbrance upon any properties or assets of
the Company pursuant to the terms of, or, with or without the giving of notice
or the passage of time or both, entitle any party to terminate or call a default
under, any such contract, agreement, instrument, lease or license, either filed
as an exhibit to the Registration Statement or described in the Prospectus to
which the Company is a party or by which it is bound, violate or result in a
breach of, or conflict with any term of the certificate of incorporation (or
other charter document) or by-laws of the Company, or violate, result in a
breach of, or conflict with any U.S. Federal, New York or Delaware law, rule or
regulation, or, to the knowledge of such counsel, any order, judgment, or
decree, binding on the Company or any Subsidiary or to which any of their
respective operations, businesses, properties, or assets are subject;
(v) each share of Company Firm Stock to be delivered on the
Closing Date, and each share of Company Additional Stock to be delivered on any
Additional Closing Date, is validly authorized and, when issued and delivered in
accordance with the terms hereof, will be validly issued, fully paid, and,
subject to section 630 of the BCL, nonassessable and without any personal
liability attaching to the ownership thereof, and will not be issued in
violation of any preemptive or similar rights of stockholders. The Underwriters
will receive good title to the shares of Company Firm Stock and Company
Additional Stock purchased by them, respectively, and to the best of such
counsel's knowledge, free and clear of all liens, security interests, pledges,
charges, encumberances, stockholders' agreements, and voting trusts. The Stock
conforms to all statements relating thereto contained in the Registration
Statement or the Prospectus;
(vi) the Warrant Stock is validly authorized and has been duly
and validly reserved for issuance pursuant to the terms of the Representative's
Warrants. The Representative's Warrants, when issued and delivered in
accordance with the terms hereof, will be validly issued and delivered. The
Warrant Stock, when issued and delivered in accordance with the Representative's
Warrants, will be validly issued, fully paid, and, subject to section 630 of the
BCL, nonassessable and without any personal liability attaching to the
ownership thereof, and will not have been issued in violation of any preemptive
rights of stockholders. To the best knowedge of such counsel, the
Representative, and any other holders of the Representative's Warrants, will
receive the securities purchased by them upon exercise of the Representative's
Warrants to the best knowledge of such counsel, free and clear of all all liens,
security interests, pledges, charges, encumberances, stockholders' agreements,
and voting trusts. The description of the Representative's Securities conform
to all statements relating thereto contained in the
Registration Statement or the Prospectus;
(vii) to the knowledge of such counsel, each contract,
agreement, instrument, lease, or license required to be described in the
Registration Statement or the Prospectus has been accurately described therein,
and to the knowledge of such counsel, each contract, agreement, instrument,
lease, or license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to the Registration
Statement;
(viii) insofar as statements in the Prospectus purport to
summarize the status of litigation or the provisions of laws, rules,
regulations, orders, judgments, decrees, contracts, agreements, instruments,
leases, or licenses, such statements have been prepared or reviewed by such
counsel and, to the knowledge of such counsel, accurately reflect the status of
such litigation and provisions purported to be summarized and are correct in all
respects;
(ix) the Company is not an "investment company" as defined
in the Investment Company Act and the rules and regulations thereunder;
(x) to the knowledge of such counsel, no person or entity has
the right to require registration of shares of Common Stock or other securities
of the Company because of the filing or effectiveness of the Registration
Statement; and
(xi) the Registration Statement has become effective under
the Securities Act, the Prospectus has been filed in accordance with Rule 424(b)
of the Regulations, including the applicable time periods set forth therein, or
such filing is not required. To the knowledge of such counsel, no Stop Order
has been issued and no proceeding for that purpose has been instituted or, to
the knowledge of such counsel, threatened. On the basis of the participation of
such counsel in conferences at which the contents of the Registration Statement
and the Prospectus and related matters were discussed, but without independent
verification by such counsel of the accuracy, completeness, or fairness of the
statements contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, such counsel has no knowledge that (other than
financial statements and other financial data and schedules which are or should
be contained therein, as to which such counsel need express no opinion): (A) the
Registration Statement, any Rule 430A Prospectus, and the Prospectus, and any
amendment or supplement thereto, does not appear on its face to comply as to
form in all material respects with the requirements of the Securities Act and
the Regulations; (B) any of the Registration Statement at the time it became
effective and on the Closing Date, or any Additional Closing Date, as the case
may be, and any Rule 430A Prospectus or the Prospectus, as of their dates and on
the Closing Date and any Additional Closing Date, as the case may be, or any
amendment or supplement thereto, contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (C) since the date
of effectiveness under the Securities Act of the Registration Statement, any
event has occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the
Prospectus which has not been set forth in such an amendment or supplement.
In rendering such opinion, counsel for the Company may rely (A) as to
matters involving the application of laws other than the laws of the United
States and the laws of the States of Delaware and New York, to the extent
counsel for the Company deems proper and to the extent specified in such
opinion, upon an opinion or opinions (in form and substance reasonably
satisfactory to counsel for the Underwriters) of other counsel, reasonably
acceptable to counsel for the Underwriters, familiar with the applicable laws,
in which case the opinion of counsel for the Company shall state that the
opinion or opinions of such other counsel are satisfactory in scope, form, and
substance to counsel for the Company and that reliance thereon by counsel for
the Company and the Underwriters is reasonable; (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company; and (C) to the extent they deem proper, upon written statements or
certificates of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the Company;
provided that copies of any such opinions, certificates, or statements shall be
annexed as exhibits to the opinion of counsel for the Company.
(2) At the Closing Date and any Additional Closing Date, you shall
have received the favorable opinion of Proskauer ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP,
counsel for the Selling Shareholders, dated the date of delivery, addressed to
the Underwriters, and in form and scope satisfactory to counsel for the
Underwriters, with reproduced copies or signed counterparts thereof for each of
the Underwriters, to the effect that:
(i) LEL has all requisite power and authority to execute,
deliver, and perform this Agreement and the Custodial Agreement. This Agreement
and the Custodial Agreement each have been duly executed and delivered by each
Selling Shareholder, are the legal, valid, and binding obligation of each
Selling Shareholder, and are each enforceable as to each Selling Shareholder in
accordance with its respective terms, except as rights to indemnity or
contribution may be limited by federal or state securities law and subject to
applicable bankruptcy, insolvency and other laws affecting the enforceability of
creditors' rights generally and general principles of equity.
(ii) To such counsel's knowledge, each Firm Selling Shareholder
and each Additional Selling Shareholder has good title to the shares of Selling
Shareholder Firm Stock or Selling Stockholder Additional Stock, respectively,
to be sold by such Selling Shareholder pursuant to this Agreement, and to the
best of such counsel's knowledge, free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders' agreements, and voting
trusts (except those created by this Agreement and the Custodial Agreement and
those which have been terminated prior to the execution hereof). When delivered
in accordance with the terms of this Agreement, to such counsel's knowledge,
Hampshire shall receive good title to the Selling Shareholder Firm Stock and/or
Selling Shareholder Additional Stock purchased by it from each Firm Selling
Shareholder or Additional Selling Shareholder, respectively, free and clear of
all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts.
In rendering such opinion, counsel for the Selling Shareholders may rely
(A) as to matters involving the application of laws other than the laws of the
United States and the laws of the States of Delaware and New York, to the extent
counsel for the Selling Shareholder deems proper and to the extent specified in
such opinion, upon an opinion or opinions (in form and substance reasonably
satisfactory to counsel for the Underwriters) of other counsel, reasonably
acceptable to counsel for the Underwriters, familiar with the applicable laws,
in which case the opinion of counsel for the Selling Shareholders shall state
that the opinion or opinions of such other counsel are satisfactory in scope,
form, and substance to counsel for the Selling Shareholders and that reliance
thereon by counsel for the Selling Shareholders and counsel for the Underwriters
is reasonable; and (B) as to matters of fact, to the extent proper, on
certificates of responsible officers of the Company; provided, that copies of
any such opinions, certificates, or statements shall be annexed as exhibits to
the opinion of counsel for the Selling Shareholders.
(c) On or prior to the Closing Date and any Additional Closing Date,
as the case may be, the Underwriters shall have been furnished such information,
documents, certificates, and opinions as they may reasonably require for the
purpose of enabling them to review the matters referred to in Section 7(b), and
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained, or as the Representative may reasonably request.
(d) At the Closing Date or any Additional Closing Date, as the case
may be, (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be stated
therein in accordance with the Securities Act and the Regulations, and in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) there shall have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, or condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt, or general affairs of the Company and its Subsidiaries taken as
a whole from that set forth in the Registration Statement and the Prospectus,
except changes which the Registration Statement and Prospectus indicate might
occur after the date on which the Registration Statement becomes effective under
the Securities Act, and neither the Company nor any Subsidiary shall have
incurred any material liabilities or entered into any agreements not in the
ordinary course of business other than as referred to in the Registration
Statement and Prospectus, (iii) except as set forth in the Prospectus, no
litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or investigation
shall be pending, threatened, or in prospect (or any basis therefor) with
respect to the Company or any Subsidiary or any of their respective operations,
businesses, properties, or assets which would be required to be set forth in the
Registration Statement, wherein an unfavorable decision, ruling, or finding
would materially adversely affect the business, property, condition (financial
or otherwise), results of operations, or general affairs of the Company or such
Subsidiary, and (iv) the Stock shall have been approved for quotation, and shall
continue to be quoted, upon the Nasdaq National Market.
(e) At the Closing Date and any Additional Closing Date, as the case
may be, you shall have received a certificate of the chief executive officer,
the chief financial officer, and the chief accounting officer of the Company,
dated the Closing Date or such Additional Closing Date, as the case may be, to
the effect, among other things, that (i) the conditions set forth in Sections
7(a) and 7(d) have been satisfied, (ii) as of the date of this Agreement and as
of the Closing Date or such Additional Closing Date, as the case may be, the
representations and warranties of the Company contained herein were and are
accurate and correct in all materials respects, and (iii) as of the Closing Date
or such Additional Closing Date, as the case may be, the obligations to be
performed by the Company hereunder on or prior to such time have been fully
performed. At Closing Date and any Additional Closing Date, as the case may be,
you shall have received a certificate of a duly appointed attorney-in-fact for
each of the Selling Shareholders, dated such Additional Closing Date, that, as
of the date of this Agreement and as of such Additional Closing Date, the
representations and warranties of each of the Selling Shareholders selling
shares of Common stock on such date contained herein were and are accurate and
correct in all material respects, and that as of the Closing Date or such
Additional Closing Date, as the case may be, the obligations to be performed by
such Selling Shareholders hereunder on or prior thereto have been fully
performed.
(f) At the time this Agreement is executed and at the Closing Date
and any Additional Closing Date, as the case may be, you shall have received a
letter, addressed to the Underwriters, and in form and substance satisfactory to
the Representative, with reproduced copies or signed counterparts thereof for
each of the Underwriters, from Lurie, Besikof, ▇▇▇▇▇▇▇ & Co., P.L.L.P.,
independent certified public accountants for the Company and the Subsidiaries,
dated the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company and each of
the Subsidiaries within the meaning of the Securities Act and the published
Regulations and stating that the answer to Item 10 of the Registration Statement
is correct insofar as it relates to them;
(ii) stating that, in their opinion, the consolidated financial
statements and schedules of the Company and the financial statement of each of
ProfitKey, Bizware, and Level
8 included in the Registration Statement examined by them comply in form in all
material respects with the applicable accounting requirements of the Securities
Act and the Regulations;
(iii) stating that, on the basis of procedures (but not an
examination made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim consolidated financial statements), a reading of the
latest available minutes of the stockholders and Boards of Directors of the
Company and the Subsidiaries and committees of such Board of Directors,
inquiries to certain officers and other employees of the Company and the
Subsidiaries responsible for financial and accounting matters, and other
specified procedures and inquiries, nothing has come to their attention that
caused them to believe that: (A) the unaudited consolidated financial statements
and schedules of the Company and the Subsidiaries included in the Registration
Statement and Prospectus do not comply in form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange Act
and the related published rules and regulations under the Securities Act or the
Exchange Act or are not fairly presented in conformity with generally accepted
accounting principles in effect on the date hereof in the United States (except
to the extent that certain footnote disclosures regarding any stub period may
have been omitted in accordance with the applicable rules of the Commission
under the Exchange Act) applied on a basis consistent with that of the audited
consolidated financial statements appearing therein; (B) there was any change in
the capital stock or consolidated long-term debt of the Company or any decrease
in the net current assets or stockholders' equity of the Company on a
consolidated basis as of the date of the latest available monthly consolidated
financial statements of the Company and the Subsidiaries as of a specified date
not more than five business days prior to the date of such letter, each as
compared with the amounts shown in the March 31, 1995 unaudited consolidated
balance sheet included in the Registration Statement and Prospectus, other than
as properly described in the Registration Statement and Prospectus or any change
or decrease (which shall be set forth therein) which, in the sole discretion of
the Representative, the Representative shall accept, or (C) there was any
decrease in consolidated net sales, consolidated net earnings, or consolidated
net earnings per share of Common Stock during the period from March 31, 1995 to
the date of the latest available monthly unaudited consolidated financial
statements of the Company or to a specified date not more than five business
days prior to the date of such letter, each as compared with the corresponding
period in 1994, other than as properly described in the Registration Statement
and Prospectus or any decrease (which shall be set forth therein) which, the
sole discretion of the Representative, the Representative shall accept;
and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the Registration
Statement, which have been specified by the Representative prior to the date of
this Agreement, to the extent that such data and information may be derived from
the general accounting records of the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate procedures
(which procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter, and found them to be in
agreement.
(g) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be satisfactory in form and
substance to the Representative and to counsel for the Underwriters, and the
Underwriters shall have received from such counsel for the Underwriters the
opinion, dated as of the Closing Date and the Additional Closing Date, as the
case may be, with respect to such of the matters set forth under Section 7(b),
and with respect to such other related matters, as the Representative may
reasonably request.
(h) The NASD, upon review of the terms of the public offering of the
Stock shall not have objected to the Underwriters' participation in such
offering.
(i) Prior to or on the Closing Date, the Company shall have entered
into the Representative's Warrants with the Representative.
(j) Prior to or on the Closing Date, the Company shall have provided
to you copies of the agreements referred to in Section 2(a)(18).
Any certificate or other document signed by any officer of the Company and
delivered to the Representative or to counsel for the Underwriters as required
under this Agreement shall be deemed a representation and warranty by the
Company hereunder to the Underwriters as to the statements made therein. Any
certificate or other document signed by, or on behalf of, any Selling
Shareholder and delivered to the Underwriters or to counsel for the Underwriters
as required under this Agreement shall be deemed a representation and warranty
by such Selling Shareholder hereunder to the Underwriters as to the statement
made therein. If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or any Additional Closing Date, as the
case may be, is not so fulfilled in all material respects, the Representative
may, on behalf of the several Underwriters, terminate this Agreement in writing
or, if the Representative so elects, in writing waive any such conditions which
have not been fulfilled or extend the time for their fulfillment.
(k) At the Closing Date and any Additional Closing Date, as the case
may be, you shall have received the opinion of Adessky ▇▇▇▇▇▇, Canadian counsel
for the Company, or such
other Canadian counsel as shall be reasonably satisfactory to counsel for the
Underwriters, dated the date of delivery, addressed to the Underwriters, and in
form and substance reasonably satisfactory to counsel for the Underwriters, with
reproduced copies or signed counterparts thereof for each of the Underwriters.
8. Indemnification and Contribution.
(d) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless each Underwriter, its officers, directors,
partners, employees, agents, and counsel, each Selling Shareholder, and each
person, if any, who controls any Underwriter or Selling Shareholder within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this Section 8, but not be limited to,
attorneys' fees and any and all reasonable expenses incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever and any and all amounts paid in settlement of any claim or
litigation) as and when incurred arising out of, based upon, or in connection
with, (i) any untrue statement or alleged untrue statement of a material fact
contained in (A) the Registration Statement, any Preliminary Prospectus, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto or (B) any application or other document or communication
(for purposes of this Section 8, collectively referred to as an "application")
executed by, or on behalf of, the Company or based upon written information
furnished by, or on behalf of, the Company filed in any jurisdiction in order to
qualify the Securities under the "blue sky" or securities laws thereof or filed
with the Commission or any securities exchange; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon, and in conformity with, written information furnished
to the Company as stated in Section 8(b) with respect to any Underwriter by, or
on behalf of, such Underwriter through the Representative or as stated in
Section 8(c) with respect to any Selling Shareholder by, or on behalf of, such
Selling Shareholder expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained in
this Agreement. The foregoing agreement to indemnify shall be in addition to
any liability the Company may otherwise have, including liabilities arising
under this Agreement.
If any action is brought against an Underwriter or any of its respective
officers, directors, partners, employees, agents, or counsel, any Selling
Shareholder, or any controlling persons of an Underwriter or Selling Shareholder
(an "indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have other than pursuant to this Section 8(a)) and the Company shall
promptly assume the defense of such action, including, without limitation, the
employment of counsel reasonably satisfactory to such indemnified party or
parties and payment of reasonable expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel satisfactory to
such indemnified party or parties to have charge of the defense of such action
or such indemnified party or parties shall have concluded that there may be one
or more legal defenses available to it or them or to other indemnified parties
which are different from, or in addition to, those available to the Company, in
any of which events such reasonable fees and expenses shall be borne by the
Company, and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this
paragraph to the contrary notwithstanding, the Company shall not be liable for
any settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. The Company shall not,
without the prior written consent of each indemnified party that is not released
as described in this sentence, settle or compromise any action, or permit a
default or consent to the entry of judgment or otherwise seek to terminate any
pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
The Company agrees promptly to notify the Underwriters and the Selling
Shareholders of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of the
Securities, the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto, or any application.
(e) Each Underwriter severally agrees to indemnify and hold
harmless the Company, the Selling Shareholders, each director of the Company,
each officer of the Company who shall have signed the Registration Statement,
and each other person, if any, who controls the Company or any Selling
Shareholder within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to the several Underwriters and the Selling Shareholders in Section
8(a), but only with respect to statements or omissions, if any, made in the
Registration Statement, any Preliminary Prospectus, or the Prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
or in any application, in reliance upon, and in conformity with, written
information furnished to the Company as stated in this Section 8(b) with respect
to any Underwriter by, or on behalf of, such Underwriter through the
Representative expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or on any application, as the case may be; provided, however, that the
obligation of each Underwriter to provide indemnity under the provisions of this
Section 8(b) shall be limited to the amount which represents the product of (i)
the number of shares of Stock underwritten by such Underwriter hereunder and the
(ii) the underwriting discount per share of Common Stock set forth on the cover
page of the Prospectus. For all purposes of this Agreement, the amounts of the
selling concession and reallowance and the name of each of the Underwriters, and
the number of shares of Firm Stock purchased by each of the Underwriters set
forth in the Prospectus constitute the only information furnished in writing by,
or on behalf of, such Underwriter expressly for inclusion in the Registration
Statement, any Preliminary Prospectus, or the Prospectus (as from time to time
amended or supplemented), or any amendment
or supplement thereto, any application, as the case may be. If any action shall
be brought against the Company, any Selling Shareholder, or any other person so
indemnified based on the Registration Statement, any Preliminary Prospectus, or
the Prospectus, or any amendment or supplement thereto, or any application, and
in respect of which indemnity may be sought against any Underwriter pursuant to
this Section 8(b), such Underwriter shall have the rights and duties given to
the Company, and the Company, the Selling Shareholders, and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of Section 8(a). The foregoing agreement to indemnify shall
be in addition to any liability the Underwriters may otherwise have, including
liabilities arising out of this Agreement.
(f) Each Selling Shareholder severally agrees to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed the Registration Statement, each Underwriter, each
officer, director, partner, employee, agent, and counsel of each Underwriter,
and each other person, if any, who controls the Company or any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the several Underwriters in Section 8(a), but only with respect to (i)
statements or omissions, if any, made in the Registration Statement, any
Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application in
reliance upon, and in conformity with, written information furnished to the
Company by, or on behalf of, such Selling Shareholder expressly for inclusion in
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or in any application, as the case may be,
or (ii) any breach of any representation, warranty, covenant, or
agreement of such Selling Shareholder contained in this Agreement. For all
purposes of this Agreement, information with respect to any Selling Shareholder
set forth under "Principal and Selling Shareholders" shall constitute the only
information furnished in writing with respect to such Selling Shareholder by, or
on behalf of, such Selling Shareholder expressly for inclusion in any the
Registration Statement, any Preliminary Prospectus, or the Prospectus (as from
time to time amended or supplemented), or any amendment or supplement thereto,
or in any application, as the case may be. In case any action shall be brought
against the Company, any Underwriter, or any other person so indemnified based
on the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or on any application, or with respect to
any such breach, and in respect of which indemnity may be sought against any
Selling Shareholder, such Selling Shareholder shall have the rights and duties
given to the Company, and the Company, the Underwriters, and each other person
so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(a). The foregoing agreement to
indemnify shall be in addition to any liability the Selling Shareholders may
otherwise have, including liabilities arising out of this Agreement.
(g) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 8(a),
8(b), or 8(c) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Securities Act, the Exchange Act, or otherwise,
then the Company (including for this purpose any contribution made by, or on
behalf of, any director of the Company, any officer of the Company who signed
the Registration Statement, and any controlling person of the Company), as one
entity, the Selling Shareholders, as a second entity, and the Underwriters
(including for this purpose any contribution by, or on behalf of, an indemnified
party) as a third entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, so that
the Underwriters, in the aggregate, are responsible for the proportion thereof
equal to the percentage which the underwriting discount and commission per share
of Common Stock set forth on the cover page of the Prospectus represents of the
initial public offering price per share of
Common Stock set forth on the cover page of the Prospectus and the Company and
the Selling Shareholders are responsible for the remaining portion; provided,
however, that if applicable law does not permit such allocation, then other
relevant equitable considerations such as the relative fault of the Company, the
Selling Shareholders, and the Underwriters in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by, among
other things, whether such statement, alleged statement, omission, or alleged
omission relates to information supplied by the Company, by the Selling
Shareholders, or by the Underwriters, and the parties' relative intent,
knowledge, access to in- formation, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company, the
Selling Shareholders, and the Underwriters agree that it would be unjust and
inequitable if the respective obligations of the Company, the Selling
Shareholders, and the Underwriters for contribution were determined by pro rata
or per capita allocation of the aggregate losses, liabilities, claims, damages,
and expenses (even if the Underwriters and the other indemnified parties were
treated as one entity for such purpose) or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
8(d). No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For purposes of
this Section 8(d), each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent, and counsel of any
Underwriter shall have the same rights to contribution as such Underwriter, each
person, if any, who controls any Selling Shareholder within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, shall
have the same rights to contribution as the Selling Shareholders, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the provisions of this Section 8(d). Anything in this Section 8(d)
to the contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 8(d) is intended to supersede any right to contribution
under the Securities Act, the Exchange Act, or otherwise.
9. Default by an Underwriter.
(h) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Stock hereunder, and if the number of shares
of Firm Stock to which the defaults of all Underwriters in the aggregate relate
does not exceed 10% of the number of shares of Firm Stock, which all
Underwriters have agreed to purchase hereunder, then such shares of Firm Stock
to which such defaults relate shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(i) If such defaults exceed in the aggregate 10% of the number
of shares of Firm Stock, which all Underwriters have agreed to purchase
hereunder, the Representative may, in its discretion, arrange to purchase itself
or for another party or parties to purchase such shares of Firm Stock to which
such default relates on the terms contained herein. If the Representative does
not arrange for the purchase of such shares of Firm Stock within one business
day after the occurrence of defaults relating to in excess of 10% of the Firm
Stock, then the Company shall be entitled to a further period of one business
day within which to procure another party or parties satisfactory to the
Representative to purchase such shares of Firm
Stock on such terms. If the Representative or the Company do not arrange for
the purchase of the shares of Firm Stock to which such defaults relate as
provided in this Section 9(b), this Agreement may be terminated by the
Representative or by the Company without liability on the part of the Company
(except that the provisions of Sections 6, 8, 10, and 13 shall survive such
termination) or the several Underwriters, but nothing in this Agreement shall
relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for any damages occasioned by its default
hereunder.
(j) If the shares of Firm Stock to which such defaults relate
are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties as aforesaid, the Representative or the Company
shall have the right to postpone the Closing Date for a reasonable period but
not in any event more than seven business days in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements with respect to the Firm
Stock, and the Company agrees to prepare and file promptly any amendment or
supplement to the Registration Statement or the Prospectus which in the
reasonable opinion of counsel for the Underwriters may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 as if such party had originally been a
party to this Agreement and had been allocated the number of shares of Firm
Stock actually purchased by it as a result of its original commitment to
purchase Firm Stock and its purchase of shares of Firm Stock pursuant to this
Section 9.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters, the
Company, and the Selling Shareholders, including the indemnity and contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by, or on behalf of, any Underwriter
or any indemnified person, or by, or on behalf of, the Company, the Selling
Shareholders, or any person or entity which is entitled to be indemnified under
Section 8(b), and shall survive termination of this Agreement or the delivery of
the Firm Stock and the Additional Stock, if any, to the several Underwriters.
In addition, the provisions of Sections 6, 8, 10, 11, and 13 shall survive
termination of this Agreement, whether such termination occurs before or after
the Closing Date or any Additional Closing Date. Notwithstanding anything in
the second or third sentences of Section 6 hereof to the contrary, and
in addition to the obligations assumed by the Company pursuant to the first
sentence of Section 6 hereof, if the offering should be terminated, the Company
shall be liable to the Underwriters only for out-of-pocket expenses incurred by
the Underwriters in connection with this Agreement or the proposed, offer, sale,
and delivery of the Securities.
11. Effective Date of This Agreement and Termination Thereof.
(k) This Agreement shall become effective at 9:30 A.M., New York
City local time, on the first full business day following the day on which the
Registration Statement becomes effective under the Securities Act or at the time
of the initial public offering by the Underwriters of the Firm Stock, whichever
is earlier. The time of the initial public offering shall mean the time, after
the Registration Statement becomes effective under the Securities Act, of the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Firm Stock or the
time, after the Registration Statement becomes effective under the Securities
Act, when the Firm Stock is first released by the Representative for offering by
the Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative shall promptly notify the Company of the time of the initial
public offering. The Representative or the Company may prevent this Agreement
from becoming effective without liability of any party to any other party,
except as noted below in this Section 11, by giving the notice indicated in
Section 11(d) before the time this Agreement becomes effective.
(l) If the purchase price of the Firm Stock has not been
determined as provided for in Section 3 prior to 4:30 p.m., New York City local
time, on the fifth full business day after the date on which the Registration
Statement was declared effective under the Securities Act, this Agreement may
be terminated at any time thereafter either by the Representative or by the
Company by giving notice to the other unless before such termination the
purchase price for the Firm Stock has been so determined. If the purchase price
of the Firm Stock has not been so determined prior to 4:30 p.m., New York City
local time, on the tenth full business day after the date on which the
Registration Statement was declared effective under the Securities Act, this
Agreement shall automatically terminate forthwith.
(m) In addition to the right to terminate this Agreement
pursuant to Sections 7 and 9 hereof, the Representative shall have the right to
terminate this Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company and the
Selling Shareholders, and, if exercised, the Over-allotment Option, at any time
prior to any Additional Closing Date, by giving notice to the Company, (i) if
any domestic or international event, act, or occurrence has materially and
adversely disrupted, or, in the opinion of the Representative, will in the
immediate future materially and adversely disrupt, the securities markets; or
(ii) if there shall have been a general suspension of, or a general limitation
on prices for, trading in securities on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market; or (iii) if there
shall have been an outbreak or increase in the level of
major hostilities or other national or international calamity; or (iv) if a
banking moratorium has been declared by a state or federal authority; or (v) if
a moratorium in foreign exchange trading by major international banks or persons
has been declared; or (vi) if there shall have been a material interruption in
the mail service or other means of communication within the United States; or
(vii) if the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage, or other calamity
or malicious act, whether or not such loss shall have been insured, or from any
labor dispute or court or government action, order, or decree, which will, in
the opinion of the Representative, make it inadvisable to proceed with the
offering, sale, or delivery of the Firm Stock or the Additional Stock, as the
case may be; or (viii) if any material governmental restrictions shall have been
imposed on trading in securities in general, which restrictions are not in
effect on the date hereof; or (ix) if there shall be passed by the Congress of
the United States or by any state legislature any act or measure, or adopted by
any governmental body or authoritative accounting institute or board, or any
governmental executive, any orders, rules, or regulations, which the
Representative believes likely to have a material adverse effect on the
business, financial condition, or financial statements of the Company or any of
the Subsidiaries or the market for the Common Stock; or (x) if there shall have
been such material and adverse change in the market for the Company's
securities or securities in general or in political, financial, or economic
conditions as in the judgment of the Representative makes it inadvisable to
proceed with the offering, sale, and delivery of the Firm Stock or the
Additional Stock, as the case may be, on the terms contemplated by the
Prospectus.
(n) If the Representative elects to prevent this Agreement from
becoming effective, as provided in this Section 11, or to terminate this
Agreement pursuant to Section 7 of this Agreement or this Section 11, the
Representative shall notify the Company and the Selling Shareholders promptly by
telephone, telex, or telegram, confirmed by letter. If, as so provided, the
Company elects to prevent this Agreement from becoming effective or to terminate
this Agreement, the Company shall notify the Representative and the Selling
Shareholders promptly by telephone, telex, or telegram, confirmed by letter.
(o) Anything in this Agreement to the contrary notwithstanding
other than Section 11(f), if this Agreement shall not become effective by reason
of an election pursuant to this Section 11 or if this Agreement shall terminate
or shall otherwise not be carried out within the time specified herein by reason
of any failure on the part of the Company or any Selling Shareholder
to perform any covenant or agreement or satisfy any condition of this Agreement
by it to be performed or satisfied, the sole liability of the Company or any
Selling Shareholder to the several Underwriters, in addition to the obligations
the Company and the Selling Shareholders assumed pursuant to the first sentence
of Section 6, will be to reimburse the several Underwriters for such
out-of-pocket expenses (including the fees and disbursements of their counsel)
as shall have been incurred by them in connection with this Agreement or the
proposed offer, sale, and delivery of the Securities, and, upon demand, the
Company and each of the Selling Shareholders, severally, agrees to pay promptly
the full amount thereof to the Representative for the respective accounts of the
Underwriters. Anything in this Agreement to the contrary notwithstanding other
than Section 11(f), if this Agreement shall not be carried out within the time
specified herein for any reason other than the failure on the part of the
Company or any Selling Shareholder to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed or satisfied, the
Company and the Selling Shareholders shall have no liability to the several
Underwriters other than for obligations assumed by the Company and the Selling
Shareholders pursuant to Section 6.
(p) Notwithstanding any election hereunder or any termination of
this Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 6, 8, 10, and 13 shall not be in any way affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof. Notwithstanding anything in the second or third sentences
of Section 6 hereof to the contrary, and in addition to the obligations assumed
by the Company pursuant to the first sentence of Section 6 hereof, if the
offering should be terminated, the Company shall be liable to the several
Underwriters only for out-of-pocket expenses incurred by the several
Underwriters in connection with this Agreement or the proposed, offer, sale, and
delivery of the Securities.
12. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to such Underwriter, c/o Hampshire Securities Corporation, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇ ▇. ▇▇▇▇, Executive Vice
President, with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLC,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.; or if sent to the Company or any Selling Shareholder, shall
be mailed, delivered, or telexed or telegraphed and confirmed by letter, to the
Company, Level 8 Systems, Inc., ____________, Attention: ▇▇. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, Chairman of the Board of Directors, with a copy to Proskauer ▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. All notices hereunder shall be effective upon receipt by
the party to which it is addressed.
13. Parties. Hampshire represents that it is authorized to act as
Representative on behalf of the several Underwriters named in Schedule I hereto,
and the Company and the Selling Shareholders shall be entitled to act and rely
on any request, notice, consent, waiver, or agreement purportedly given on
behalf of the Underwriters when the same shall have been given by Hampshire on
such behalf. Each Selling Shareholder represents that each of the
attorneys-in-fact named in the power of attorney referred to in Section 2(b)(1)
hereof is authorized to act on such Selling Shareholder's behalf, and the
Underwriters and the Company shall be entitled to act and rely upon any request,
notice, consent, waiver, or agreement purportedly given on behalf of such
Selling Shareholder when the same shall have been given by either of such
attorneys-in-fact. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the Selling
Shareholders and the persons and entities referred to in Section 8 who are
entitled to indemnification or contribution, and their respective successors,
legal representatives, and assigns (which shall not include any buyer, as such,
of the Firm Stock or the Additional Stock), and no other person shall have, or
be construed to have, any legal or equitable right, remedy, or claim under, in
respect of, or by virtue of this Agreement or any provision herein contained.
Notwithstanding anything contained in this Agreement to the contrary, all of the
obligations of the Underwriters hereunder are several and not joint.
14. Construction. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
conflict of laws. Time is of the essence in this Agreement.
15. Consent to Jurisdiction. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that service thereof may be made in accordance with
Section 12. Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding, the Company shall appear or answer such summons, complaint, or
other process. Should the Company fail to appear or answer within such 30-day
period or such extended
period, as the case may be, the Company shall be deemed in default and judgment
may be entered against the Company for the amount as demanded in any summons,
complaint, or other process so served.
If the foregoing correctly sets forth the understandings among the
Representative, the Company, and the Selling Shareholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
LEVEL 8 SYSTEMS, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board of Directors
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as Attorney-in-
Fact for each of the Selling
Shareholders
Accepted as of the date first above
written in New York, New York
HAMPSHIRE SECURITIES CORPORATION*
By: -----------------------------------
▇▇▇ ▇. ▇▇▇▇
Managing Director
*On behalf of itself and the other several
Underwriters named in Schedule I hereto.
SCHEDULE I
Total
Number
of Shares
to be
Underwriter Purchased
Hampshire Securities Corporation
-----------
Total 1,000,000
SCHEDULE II
Name of Selling Shareholder
Number of Shares
of Selling
Shareholder Firm
Stock
Number of Shares
of Selling
Shareholder
Additional Stock