EXHIBIT 1.1
MBR&M DRAFT
1/6/03
INTEGRATED ALARM SERVICES GROUP, INC.
UNDERWRITING AGREEMENT
__________, 2003
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇ ▇▇▇▇▇ & CO., INC.
as Representatives of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Integrated Alarm Services Group, Inc., a Delaware corporation (the
"Company"), confirms its agreement with each of the underwriters listed on
Schedule I hereto (collectively, the "Underwriters"), for whom Friedman,
Billings, ▇▇▇▇▇▇ & Co., Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Inc. are acting as
representatives (in such capacity, the "Representatives"), with respect to (i)
the sale by the Company of 13,000,000 shares (the "Initial Shares") of Common
Stock, par value $0.001 per share, of the Company ("Common Stock"), and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares of Common Stock set forth opposite the names of the
Underwriters in Schedule I hereto, and (ii) the grant of the option described in
Section 1(b) hereof to purchase all or any part of 1,950,000 additional shares
of Common Stock to cover over-allotments (the "Option Shares"), if any, from the
Company to the Underwriters, acting severally and not jointly, in proportion to
the respective numbers of shares of Common Stock set forth opposite the names of
the Underwriters in Schedule I hereto. The 13,000,000 shares of Common Stock to
be purchased by the Underwriters and all or any part of the 1,950,000 shares of
Common Stock subject to the option described in Section l(b) hereof are
hereinafter called, collectively, the "Shares."
The Company understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 (No. 333-101159) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed
(whether by incorporation by reference or otherwise) to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
of the Securities
Act Regulations) is hereinafter called the "Registration Statement," except
that, if the Company files a post-effective amendment to such registration
statement which becomes effective prior to the Closing Time (as defined below),
"Registration Statement" shall refer to such registration statement as so
amended. Any registration statement filed pursuant to Rule 462(b) of the
Securities Act Regulations is hereinafter called the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the 462(b) Registration Statement. Each prospectus included in the
Registration Statement, or amendments thereof or supplements thereto, before it
became effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Underwriters pursuant to Rule
424(a) of the Securities Act Regulations is hereinafter called a "Preliminary
Prospectus." The term "`Prospectus" means the final prospectus, as first filed
with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the
Securities Act Regulations, and any amendments thereof or supplements thereto.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus.
The Company hereby confirms its engagement of Friedman, Billings,
▇▇▇▇▇▇ & Co., Inc. as, and Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. hereby
confirms its agreement with the Company to render services as, a "qualified
independent underwriter" within the meaning of Section (b)(15) of Rule 2720 of
the National Association of Securities Dealers, Inc. (the "NASD") with respect
to the offering and sale of the Shares. Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.,
solely in its capacity as the qualified independent underwriter and not
otherwise, is referred to herein as the "QIU". The price at which the Shares
will be sold to the public shall not be higher than the maximum price
recommended by the QIU.
The Company and the Underwriters and the QIU agree as follows:
1. Sale and Purchase:
(a) Initial Shares. Upon the basis of the warranties and
representations and other terms and conditions herein set forth, at the purchase
price per share of $________, the Company agrees to sell to the Underwriters the
Initial Shares, and each Underwriter agrees, severally and not jointly, to
purchase from the Company the number of Initial Shares set forth in Schedule I
opposite such Underwriter's name, plus any additional number of Initial Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 8 hereof, subject to such adjustments among the
Underwriters as the Representatives in their sole discretion shall make to
eliminate any sales or purchases of fractional shares.
(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters, acting severally and not jointly,
to purchase from the Company at the purchase price per share set forth in
paragraph (a), all or any part of the Option Shares, plus any additional number
of Option Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 8 hereof. The option hereby granted will
expire 30 days after the date hereof and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments which may be
made in connection with the offering and distribution of
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the Initial Shares upon notice by the Representatives to the Company setting
forth the number of Option Shares as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Shares. Any such time and date of delivery (a "Date of Delivery") shall
be determined by the Representatives, but shall not be later than three full
business days (or earlier, without the consent of the Company, than two full
business days) after the exercise of such option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the Option Shares, the Company will sell that number of Option
Shares then being purchased, and each of the Underwriters, acting severally and
not jointly, will purchase that proportion of the total number of Option Shares
then being purchased which the number of Initial Shares set forth in Schedule I
opposite the name of such Underwriter bears to the total number of Initial
Shares, subject in each case to such adjustments among the Underwriters as the
Representatives in their sole discretion shall make to eliminate any sales or
purchases of fractional shares.
2. Payment and Delivery
(a) Initial Shares. The Shares to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as the Representatives may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by or on
behalf of the Company to the Representatives, including, at the option of the
Representatives, through the facilities of The Depository Trust Company ("DTC")
for the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified to the Representatives by the Company
upon at least forty-eight hours' prior notice. The Company will cause the
certificates representing the Initial Shares to be made available for checking
and packaging at least twenty-four hours prior to the Closing Time (as defined
below) with respect thereto at the office of the Representatives, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at the office of DTC or its
designated custodian, as the case may be (the "Designated Office"). The time and
date of such delivery and payment shall be 9:30 a.m., New York City time, on the
third (fourth, if pricing occurs after 4:30 p.m., New York City time) business
day after the date hereof (unless another time and date shall be agreed to by
the Representatives and the Company). The time at which such payment and
delivery are actually made is hereinafter sometimes called the "Closing Time"
and the date of delivery of both Initial Shares and Option Shares is hereinafter
sometimes called the "Date of Delivery."
(b) Option Shares. The Option Shares, if any, to be purchased by each
Underwriter hereunder, in definitive form, and in such authorized denominations
and registered in such names as the Representatives may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by or on
behalf of the Company to the Representatives, including, at the option of the
Representatives, through the facilities of DTC for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same-day) funds to the account
specified to the Representatives by the Company upon at least forty-eight hours'
prior notice. The Company will cause the certificates representing the Option
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Date of Delivery with respect thereto at the Designated
Office. The time and date of such delivery and payment shall be 9:30 a.m., New
York City time,
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on the date specified by the Representatives in the notice given by the
Representatives to the Company of the Underwriters' election to purchase such
Option Shares or on such other time and date as the Company and the
Representatives may agree upon in writing.
3. Representations and Warranties of the Company:
The Company represents and warrants to the Underwriters that:
(a) the Company has an authorized capitalization as set forth in the
Prospectus; the outstanding shares of capital stock of the Company and each
subsidiary of the Company (each, a "Subsidiary") have been duly and validly
authorized and issued and are fully paid and non-assessable, and all of the
outstanding shares of capital stock of the Subsidiaries are directly or
indirectly owned of record and beneficially by the Company except as disclosed
in the Prospectus; except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or any of the
Subsidiaries convertible into or exchangeable for any capital stock of the
Company or any such Subsidiary, (ii) warrants, rights or options to subscribe
for or purchase from the Company or any such Subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such Subsidiary to issue any shares of capital
stock, any such convertible or exchangeable securities or obligations, or any
such warrants, rights or options;
(b) each of the Company and the Subsidiaries (all of which are named in
Exhibit 21 to the Registration Statement) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation with full corporate power and authority
to own its respective properties and to conduct its respective businesses as
described in the Registration Statement and Prospectus and, in the case of the
Company, to execute and deliver this Agreement and to consummate the
transactions contemplated herein;
(c) the Company and all of the Subsidiaries are duly qualified or
licensed and are in good standing in each jurisdiction in which they conduct
their respective businesses or in which they own or lease real property or
otherwise maintain an office and in which the failure, individually or in the
aggregate, to be so qualified or licensed could have a material adverse effect
on the assets, business, operations, earnings, prospects, properties or
condition (financial or otherwise), present or prospective, of the Company and
the Subsidiaries taken as a whole (any such effect or change, where the context
so requires, is hereinafter called a "Material Adverse Effect" or "Material
Adverse Change"); except as disclosed in the Prospectus, no Subsidiary is
prohibited or restricted, directly or indirectly, from paying dividends to the
Company, or from making any other distribution with respect to such Subsidiary's
capital stock or from repaying to the Company or any other Subsidiary any
amounts which may from time to time become due under any loans or advances to
such Subsidiary from the Company or such other Subsidiary, or from transferring
any such Subsidiary's property or assets to the Company or to any other
Subsidiary; other than as disclosed in the Prospectus, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
other corporation or any ownership interest in any partnership, joint venture or
other association;
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(d) the Company and the Subsidiaries are in compliance in all material
respects with all applicable laws, rules, regulations, orders, decrees and
judgments, including those relating to transactions with affiliates;
(e) neither the Company nor any Subsidiary is in breach of or in
default under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under), its respective
organizational documents, or in the performance or observance of any obligation,
agreement, covenant or condition contained in any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or their
respective properties is bound, except for such breaches or defaults which could
not have a Material Adverse Effect;
(f) the execution, delivery and performance of this Agreement, and
consummation of the transactions contemplated herein will not (A) conflict with,
or result in any breach of, or constitute a default under (nor constitute any
event which with notice, lapse of time, or both would constitute a breach of, or
default under), (i) any provision of the organizational documents of the Company
or any Subsidiary, or (ii) any provision of any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or their
respective properties may be bound or affected, or under any federal, state,
local or foreign law, regulation or rule or any decree, judgment or order
applicable to the Company or any Subsidiary, except in the case of this clause
(ii) for such breaches or defaults which could not have a Material Adverse
Effect; or (B) result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of the Company or any Subsidiary;
(g) this Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general equitable principles, and except to
the extent that the indemnification and contribution provisions of Section 9
hereof may be limited by federal or state securities laws and public policy
considerations in respect thereof;
(h) no approval, authorization, consent or order of or filing with any
federal, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the Company's execution,
delivery and performance of this Agreement, its consummation of the transactions
contemplated herein, and its sale and delivery of the Shares, other than (A)
such as have been obtained, or will have been obtained at the Closing Time or
the relevant Date of Delivery, as the case may be, under the Securities Act and
the Securities Exchange Act of 1934 (the "Exchange Act"), (B) such approvals as
have been obtained in connection with the approval of the quotation of the
Shares on the NASDAQ National Market and (C) any necessary qualification under
the securities or blue sky laws of the various jurisdictions in which the Shares
are being offered by the Underwriters;
(i) each of the Company and the Subsidiaries has all necessary
licenses, authorizations, consents and approvals and has made all necessary
filings required under any federal, state or local law, regulation or rule, and
has obtained all necessary authorizations, consents and approvals from other
persons, required in order to conduct their respective
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businesses as described in the Prospectus, except to the extent that any failure
to have any such licenses, authorizations, consents or approvals, to make any
such filings or to obtain any such authorizations, consents or approvals could
not, individually or in the aggregate, have a Material Adverse Effect; except as
described in the Propectus neither the Company nor any of the Subsidiaries is
required by any applicable law to obtain accreditation or certification from any
governmental agency or authority in order to provide the products and services
which it currently provides or which it proposes to provide as set forth in the
Prospectus; neither the Company nor any of the Subsidiaries is in violation of,
in default under, or has received any notice regarding a possible violation,
default or revocation of any such license, authorization, consent or approval or
any federal, state, local or foreign law, regulation or rule or any decree,
order or judgment applicable to the Company or any of the Subsidiaries the
effect of which could result in a Material Adverse Change; and no such license,
authorization, consent or approval contains a materially burdensome restriction
that is not adequately disclosed in the Registration Statement and the
Prospectus;
(j) each of the Registration Statement and any Rule 462(b) Registration
Statement has become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the Securities Act and no
proceedings for that purpose have been instituted or are pending or, to the
knowledge of the Company, are threatened by the Commission, and the Company has
complied to the Commission's satisfaction with any request on the part of the
Commission for additional information;
(k) the Preliminary Prospectus and the Registration Statement comply,
and the Prospectus and any further amendments or supplements thereto will, when
they have become effective or are filed with the Commission, as the case may be,
comply, in all material respects with the requirements of the Securities Act and
the Securities Act Regulations; the Registration Statement did not, and any
amendment thereto will not, in each case as of the applicable effective date,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Preliminary Prospectus does not, and the Prospectus or any
amendment or supplement thereto will not, as of the applicable filing date and
at the Closing Time and on each Date of Delivery (if any), contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no warranty or representation with respect to any
statement contained in the Registration Statement or the Prospectus in reliance
upon and in conformity with the information concerning the Underwriters and
furnished in writing by or on behalf of the Underwriters through the
Representatives to the Company expressly for use in the Registration Statement
or the Prospectus (that information being limited to that described in the
penultimate sentence of the first paragraph of Section 9(b) hereof);
(l) the Preliminary Prospectus was and the Prospectus delivered to the
Underwriters for use in connection with this offering will be identical to the
versions of the Preliminary Prospectus and Prospectus created to be transmitted
to the Commission for filing via the
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Electronic Data Gathering Analysis and Retrieval System ("▇▇▇▇▇"), except to
the extent permitted by Regulation S-T;
(m) there are no actions, suits, proceedings, inquiries or
investigations pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary or any of their respective officers and directors
or to which the properties, assets or rights of any such entity are subject, at
law or in equity, before or by any federal, state, local or foreign governmental
or regulatory commission, board, body, authority, arbitral panel or agency which
could result in a judgment, decree, award or order having a Material Adverse
Effect;
(n) the financial statements, including the notes thereto, included in
the Registration Statement and the Prospectus present fairly the consolidated
financial position of the entities to which such financial statements relate
(the "Covered Entities") as of the dates indicated and the consolidated results
of operations and changes in financial position and cash flows of the Covered
Entities for the periods specified; such financial statements have been prepared
in conformity with generally accepted accounting principles as applied in the
United States and on a consistent basis during the periods involved and in
accordance with Regulation S-X promulgated by the Commission; the financial
statement schedules included in the Registration Statement and the amounts in
the Prospectus under the captions "Summary - Summary Financial Data" and
"Selected Financial Data" fairly present the information shown therein and have
been compiled on a basis consistent with the financial statements included in
the Registration Statement and the Prospectus; no other financial statements or
supporting schedules are required to be included in the Registration Statement;
the unaudited pro forma financial information (including the related notes)
included in the Prospectus and any Preliminary Prospectus complies as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the Securities Act Regulations, and management of the Company
believes that the assumptions underlying the pro forma adjustments are
reasonable; such pro forma adjustments have been properly applied to the
historical amounts in the compilation of the information and such information
fairly presents with respect to the Company and the Subsidiaries, the financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified; no
other pro forma financial information is required to be included in the
Registration Statement;
(o) Ernst & Young LLP, whose reports on the consolidated financial
statements of the Company and the Subsidiaries are filed with the Commission as
part of the Registration Statement and Prospectus and any other accounting firm
that has certified Company financial statements and delivered its reports with
respect thereto, are, and were during the periods covered by their reports,
independent public accountants as required by the Securities Act and the
Securities Act Regulations;
(p) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may be otherwise
stated in the Registration Statement or Prospectus, there has not been (A) any
Material Adverse Change or any development that could reasonably be expected to
result in a Material Adverse Change, whether or not arising in the ordinary
course of business, (B) any transaction that is material to the Company and the
Subsidiaries taken as a whole, contemplated or entered into by the Company or
any of the Subsidiaries, (C) any obligation, contingent or otherwise, directly
or
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indirectly incurred by the Company or any Subsidiary that is material to the
Company and Subsidiaries taken as a whole or (D) any dividend or distribution of
any kind declared, paid or made by the Company on any class of its capital
stock;
(q) the Shares conform in all material respects to the description
thereof contained in the Registration Statement and the Prospectus;
(r) there are no persons with registration or other similar rights to
have any equity or debt securities, including securities which are convertible
into or exchangeable for equity securities, registered pursuant to the
Registration Statement or otherwise registered by the Company under the
Securities Act, except for those registration or similar rights which have been
waived with respect to the offering contemplated by this Agreement, all of which
registration or similar rights are fairly summarized in the Prospectus;
(s) the Shares have been duly authorized and, when issued and duly
delivered against payment therefor as contemplated by this Agreement, will be
validly issued, fully paid and non-assessable, free and clear of any pledge,
lien, encumbrance, security interest or other claim, and the issuance and sale
of the Shares by the Company is not subject to preemptive or other similar
rights arising by operation of law, under the organizational documents of the
Company or under any agreement to which the Company or any Subsidiary is a party
or otherwise;
(t) the Shares have been approved for quotation on the NASDAQ National
Market, subject to official notice of issuance;
(u) the Company has not taken, and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might 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
the Shares;
(v) neither the Company nor any of its affiliates (i) is required to
register as a "broker" or "dealer" in accordance with the provisions of the
Exchange Act, or the rules and regulations thereunder (the "Exchange Act
Regulations"), or (ii) other than as described in the Prospectus, directly, or
indirectly through one or more intermediaries, controls or has any other
association with (within the meaning of Article I of the By-laws of the NASD)
any member firm of the NASD;
(w) the Company has not relied upon the Representatives or legal
counsel for the Representatives for any legal, tax or accounting advice in
connection with the offering and sale of the Shares;
(x) any certificate signed by any officer of the Company or any
Subsidiary delivered to the Representatives or to counsel for the Underwriters
pursuant to or in connection with this Agreement shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby;
(y) the form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of
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the organizational documents of the Company and the requirements of the NASDAQ
National Market;
(z) the Company and the Subsidiaries have good and marketable title in
fee simple to all real property, if any, and good title to all personal property
owned by them, in each case free and clear of all liens, security interests,
pledges, charges, encumbrances, mortgages and defects, except such as are
disclosed in the Prospectus or such as do not materially and adversely affect
the value of such property and do not interfere with the use made or proposed to
be made of such property by the Company and the Subsidiaries; and any real
property and buildings held under lease by the Company or any Subsidiary are
held under valid, existing and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company or
such Subsidiary;
(aa) the descriptions in the Registration Statement and the Prospectus
of the legal or governmental proceedings, contracts, leases and other legal
documents therein described present fairly the information required to be shown,
and there are no legal or governmental proceedings, contracts, leases, or other
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement which
are not described or filed as required; all agreements between the Company or
any of the Subsidiaries and third parties expressly referenced in the Prospectus
are legal, valid and binding obligations of the Company or one or more of the
Subsidiaries, enforceable in accordance with their respective terms, except to
the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and by general equitable principles;
(bb) the Company has complied and will comply with all the provisions
of Florida Statutes. Section 517.075 (Chapter 92-198, Laws of Florida); and
neither the Company nor any of the Subsidiaries or affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba;
(cc) the Company owns, possesses, licenses or has other rights to use,
on reasonable terms, all patents, patent applications, trade and service marks,
trade and service ▇▇▇▇ registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") reasonably necessary for the conduct
of the Company's business as now conducted or as proposed in the Prospectus to
be conducted and (i) to the Company's knowledge, there is no material
infringement by third parties of any such Intellectual Property owned by or
exclusively licensed to the Company; (ii) there is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by others
challenging the Company's rights in or to any such Intellectual Property, and
the Company is unaware of any facts which would form a reasonable basis for any
such claim; (iii) there is no pending or, to the Company's knowledge, threatened
action, suit, proceeding or claim by others challenging the validity or scope of
Intellectual Property owned by or exclusively licensed to the Company, and the
Company is unaware of any facts which would form a reasonable basis for any such
claim which could have a Material Adverse Effect; (iv) there is no pending or,
to the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company infringes, or otherwise violates any patent, trademark,
copyright, trade secret
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or other proprietary rights of others, and the Company is unaware of any other
fact which would form a reasonable basis for concluding that any such claim will
be asserted, or if asserted, would be successful, or if successfully asserted,
could have a Material Adverse Effect; (v) the Company and the Subsidiaries do
not in the conduct of their business as now or proposed to be conducted as
described in the Prospectus infringe or conflict with any right or patent of any
third party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the Company
or any of the Subsidiaries, which such infringement or conflict is reasonably
likely to result in a Material Adverse Change; (vi) there is no U.S. patent
which contains claims that interfere with the issued claims of any Intellectual
Property owned by or exclusively licensed to the Company; (vii) there is no art
of which the Company is aware that may render any U.S. patent held by the
Company invalid or any U.S. patent application held by the Company unpatentable
which has not been disclosed, or will not be disclosed in the required time
period, to the U.S. Patent and Trademark Office; (viii) no security interests
have been recorded in the U.S. Patent and Trademark Office with respect to any
Intellectual Property and no liens have been recorded against the Company with
respect to any Intellectual Property and (ix) the Company has paid or will pay
all maintenance and issue fees that are due or will be due, within the required
time period, and has claimed small entity status only as appropriate;
(dd) the Company and each of the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences;
(ee) each of the Company and the Subsidiaries has filed on a timely
basis all necessary federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof and have paid all taxes
shown as due thereon; and no tax deficiency has been asserted against any such
entity, nor does any such entity know of any tax deficiency which is likely to
be asserted against any such entity which, if determined adversely to any such
entity, could have a Material Adverse Effect; all tax liabilities are adequately
provided for on the respective books of such entities; the Company has duly and
properly filed an election to be taxed as an S corporation for federal and state
income tax purposes (each an "S Election"), and such S Election has been and
will be in full force and effect since inception of the Company without
interruption through the day prior to the Closing Time; and there has not been
any termination of any such S Election, including any inadvertent termination
which has been reinstated under Section 1362 of the Code and the rules and
regulations promulgated thereunder and the corresponding provisions of state
income tax laws;
(ff) each of the Company and the Subsidiaries maintains insurance
(issued by insurers of recognized financial responsibility) of the types and in
the amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real
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and personal property owned or leased by the Company and the Subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect;
(gg) neither the Company nor any of the Subsidiaries is in violation,
or has received notice of any violation with respect to, any applicable
environmental, safety or similar law applicable to the business of the Company
or any of the Subsidiaries; the Company and the Subsidiaries have received all
permits, licenses or other approvals required of them under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct their respective businesses, and the Company and the Subsidiaries are
in compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which could not,
individually or in the aggregate, result in a Material Adverse Change;
(hh) neither the Company nor any Subsidiary is in violation of or has
received notice of any violation with respect to any federal or state law
relating to discrimination in the hiring, promotion or pay of employees, nor any
applicable federal or state wages and hours law, the violation of any of which
could have a Material Adverse Effect;
(ii) the Company and each of the Subsidiaries are in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of the Subsidiaries would have any
liability; the Company and each of the Subsidiaries have not incurred and do not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Section 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder ("Code"); and each "pension plan" for
which the Company and each of its Subsidiaries would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification;
(jj) neither the Company nor any of the Subsidiaries nor any officer or
director purporting to act on behalf of the Company or any of the Subsidiaries
has at any time (i) made any contributions to any candidate for political
office, or failed to disclose fully any such contributions, in violation of law,
(ii) made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or allowed by applicable law, or (iii) engaged in
any transactions, maintained any bank account or used any corporate funds except
for transactions, bank accounts and funds which have been and are reflected in
the normally maintained books and records of the Company and the Subsidiaries;
(kk) except as otherwise disclosed in the Prospectus, there are no
material outstanding loans or advances or material guarantees of indebtedness by
the Company or any of the
-11-
Subsidiaries to or for the benefit of any of the officers or directors of the
Company or any of the Subsidiaries or any of the members of the families of any
of them;
(ll) neither the Company nor any of the Subsidiaries nor, to the
knowledge of the Company, any employee or agent of the Company or any of the
Subsidiaries, has made any payment of funds of the Company or of any Subsidiary
or received or retained any funds in violation of any law, rule or regulation or
of a character required to be disclosed in the Prospectus;
(mm) all securities issued by the Company or any of the Subsidiaries
have been issued and sold in compliance with (i) all applicable federal and
state securities laws and (ii) the laws of the applicable jurisdiction of
incorporation of the issuing entity;
(nn) in connection with this offering, the Company has not offered and
will not offer its Common Stock or any other securities convertible into or
exchangeable or exercisable for Common Stock in a manner in violation of the
Securities Act. The Company has not distributed and will not distribute any
Prospectus or other offering material in connection with the offer and sale of
the Shares;
(oo) the Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein contemplated;
(pp) no relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of the Subsidiaries
on the other hand, which is required by the Securities Act and the Securities
Act Regulations to be described in the Registration Statement and the Prospectus
and which is not so described;
(qq) neither the Company nor any of the Subsidiaries is and, after
giving effect to the offering and sale of the Shares, will be an "investment
company" or an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(rr) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company or any of the
Subsidiaries which are likely to have individually or in the aggregate a
Material Adverse Effect; and
(ss) there are no "Year 2000 ("Y2K")" issues related to the Company, or
any of the Subsidiaries, that (i) are of a character required to be described or
referred to in the Registration Statement or Prospectus by the Securities Act or
the Securities Act Regulations, which have not been accurately described in the
Registration Statement or Prospectus or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect the
Company's or any Subsidiary's properties, assets or rights.
4. Certain Covenants:
The Company hereby agrees with each Underwriter:
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(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the securities or
blue sky laws of such jurisdictions (both domestic and foreign) as the
Representatives may designate and to maintain such qualifications in effect as
long as requested by the Representatives for the distribution of the Shares,
provided that the Company shall not be required to qualify as a foreign
corporation or to consent to the service of process under the laws of any such
state (except service of process with respect to the offering and sale of the
Shares);
(b) if, at the time this Agreement is executed and delivered, it is
necessary for a post-effective amendment to the Registration Statement to be
declared effective before the offering of the Shares may commence, the Company
will endeavor to cause such post-effective amendment to become effective as soon
as possible and will advise the Representatives promptly and, if requested by
the Representatives, will confirm such advice in writing, when such
post-effective amendment has become effective;
(c) to prepare the Prospectus in a form approved by the Underwriters
and file such Prospectus (or a term sheet as permitted by Rule 434) with the
Commission pursuant to Rule 424(b) under the Securities Act not later than 10:00
a.m. (New York City time), on the day following the execution and delivery of
this Agreement or on such other day as the parties may mutually agree and to
furnish promptly (and with respect to the initial delivery of such Prospectus,
not later than 10:00 a.m. (New York City time) on the day following the
execution and delivery of this Agreement or on such other day as the parties may
mutually agree) to the Underwriters copies of the Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the Registration
Statement) in such quantities and at such locations as the Underwriters may
reasonably request for the purposes contemplated by the Securities Act
Regulations, which Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the version created to be
transmitted to the Commission for filing via ▇▇▇▇▇, except to the extent
permitted by Regulation S-T;
(d) to advise the Representatives promptly and (if requested by the
Representatives) to confirm such advice in writing, when the Registration
Statement has become effective and when any post-effective amendment thereto
becomes effective under the Securities Act Regulations;
(e) to advise the Representatives immediately, confirming such advice
in writing, of (i) the receipt of any comments from, or any request by, the
Commission for amendments or supplements to the Registration Statement or
Prospectus or for additional information with respect thereto, or (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes and, if
the Commission or any other government agency or authority should issue any such
order, to make every reasonable effort to obtain the lifting or removal of such
order as soon as possible; to advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or Prospectus and to
file no such amendment or supplement to which the Representatives shall
reasonably object in writing;
-13-
(f) to furnish to the Underwriters for a period of five years from the
date of this Agreement (i) as soon as available, copies of all annual, quarterly
and current reports or other communications supplied to holders of shares of
Common Stock, (ii) as soon as practicable after the filing thereof, copies of
all reports filed by the Company with the Commission, the NASD or any securities
exchange and (iii) such other information as the Underwriters may reasonably
request regarding the Company and the Subsidiaries;
(g) to advise the Underwriters promptly of the happening of any event
known to the Company within the time during which a Prospectus relating to the
Shares is required to be delivered under the Securities Act Regulations which,
in the judgment of the Company or in the reasonable opinion of the
Representatives or counsel for the Underwriters, would require the making of any
change in the Prospectus then being used so that the Prospectus would not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law and, during such time, to promptly prepare and furnish to the
Underwriters copies of the proposed amendment or supplement before filing any
such amendment or supplement with the Commission and thereafter promptly furnish
at the Company's own expense to the Underwriters and to dealers, copies in such
quantities and at such locations as the Representatives may from time to time
reasonably request of an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law;
(h) to file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required by
the Securities Act or requested by the Commission;
(i) prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 under the Securities Act, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and obtain the consent of the
Representatives to the filing;
(j) to furnish promptly to each Representative a signed copy of the
Registration Statement, as initially filed with the Commission, and of all
amendments or supplements thereto (including all exhibits filed therewith or
incorporated by reference therein) and such number of conformed copies of the
foregoing as the Representatives may reasonably request;
(k) to furnish to each the Representative, not less than two business
days before filing with the Commission subsequent to the effective date of the
Prospectus and during the period referred to in paragraph (f) above, a copy of
any document proposed to be filed with the Commission pursuant to Section 13,
14, or 15(d) of the Exchange Act and during such period to file all such
documents in the manner and within the time periods required by the Exchange Act
and the Exchange Act Regulations;
-14-
(l) to apply the net proceeds of the sale of the Shares in accordance
with its statements under the caption "Use of Proceeds" in the Prospectus;
(m) to make generally available to its security holders and to deliver
to the Representatives as soon as practicable, but in any event not later than
the end of the fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement an earnings statement complying
with the provisions of Section 11(a) of the Securities Act (in form, at the
option of the Company, complying with the provisions of Rule 158 of the
Securities Act Regulations,) covering a period of 12 months beginning after the
effective date of the Registration Statement;
(n) to use its best efforts to maintain the quotation of the Shares on
the NASDAQ National Market and to file with the NASDAQ National Market all
documents and notices required by the NASDAQ National Market of companies that
have securities that are traded and quotations for which are reported by, the
NASDAQ National Market;
(o) to engage and maintain, at its expense, a registrar and transfer
agent for the Shares;
(p) to refrain during a period of 270 days from the date of the
Prospectus, without the prior written consent of the Representatives, from,
directly or indirectly, (i) offering, pledging, selling, contracting to sell,
selling any option or contract to purchase, purchasing any option or contract to
sell, granting any option for the sale of, or otherwise disposing of or
transferring, (or entering into any transaction or device which is designed to,
or could be expected to, result in the disposition by any person at any time in
the future of), any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or filing any registration
statement under the Securities Act with respect to any of the foregoing, or (ii)
entering into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) any shares of Common Stock issued
by the Company upon the exercise of an option outstanding on the date hereof and
referred to in the Prospectus;
(q) not to, and to use its best efforts to cause its officers,
directors and affiliates not to, (i) take, directly or indirectly prior to
termination of the underwriting syndicate contemplated by this Agreement, any
action designed to stabilize or manipulate the price of any security of the
Company, or which may cause or result in, or which might in the future
reasonably be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or resale of
any of the Shares, (ii) sell, bid for, purchase or pay anyone any compensation
for soliciting purchases of the Shares or (iii) pay or agree to pay to any
person any compensation for soliciting any order to purchase any other
securities of the Company;
(r) to cause each 1% or greater stockholder, officer and director of
the Company to furnish to the Representatives, prior to the first Date of
Delivery, a letter or letters, substantially
-15-
in the form of Exhibit A hereto, pursuant to which each such person shall agree
not to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock or securities convertible into or
exchangeable for Common Stock or (2) enter into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case for a
period of 180 days from the date of the Prospectus, without the prior written
consent of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. on behalf of the Underwriters;
(s) that the provisions of the letter agreement dated December 20, 2001
between the Company and the Representatives (the "Engagement Letter") shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein;
(t) that the Company shall (i) obtain or maintain, as appropriate,
Directors and Officers liability insurance in the minimum amount of $xx million
which shall apply to the offering contemplated herein and (ii) cause the
Representatives to be added to such policy such that up to $xxx,xxx of its
expenses pursuant to Section 9(a) shall be paid directly by such insurer and
(iii) shall cause the Representatives to be added as an additional insured to
such policy in respect of the offering contemplated herein;
(u) if at any time during the 90-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in the reasonable
opinion of the Representatives, the market price of the Common Stock has been or
is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus) and after written notice from the Representatives advising the
Company to the effect set forth above, to forthwith prepare, consult with the
Representatives concerning the substance of, and disseminate a press release or
other public statement, reasonably satisfactory to the Representatives,
responding to or commenting on such rumor, publication or event;
(v) that the Company will comply with all of the provisions of any
undertakings in the Registration Statement; and
(w) that, during the period when the Prospectus is required to be
delivered under the Securities Act or the Exchange Act, the Company will file
all documents required to be filed with the Commission pursuant to the Exchange
Act within the time periods required by the Exchange Act and the rules and
regulations of the Commission thereunder.
5. Payment of Expenses:
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, including expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of
-16-
copies of each thereof to the Underwriters and to dealers (including costs of
mailing and shipment), (ii) the preparation, issuance and delivery of the
certificates for the Shares to the Underwriters, including any stock or other
transfer taxes or duties payable upon the sale of the Shares to the
Underwriters, (iii) the printing of this Agreement and any dealer agreements and
furnishing of copies of each to the Underwriters and to dealers (including costs
of mailing and shipment), (iv) the qualification of the Shares for offering and
sale under state laws that the Company and the Representatives have mutually
agreed are appropriate and the determination of their eligibility for investment
under state law as aforesaid (including the legal fees and filing fees and other
disbursements of counsel for the Underwriters and the printing and furnishing of
copies of any blue sky surveys or legal investment surveys to the Underwriters
and to dealers, (v) filing for review of the public offering of the Shares by
the NASD (including the legal fees and filing fees and other disbursements of
counsel for the Underwriters relating thereto), (vi) the fees and expenses of
any transfer agent or registrar for the Shares and miscellaneous expenses
referred to in the Registration Statement, (vii) the fees and expenses of the
QIU, (viii) the fees and expenses incurred in connection with the inclusion of
the Shares in the NASDAQ Stock Market, (ix) making road show presentations with
respect to the offering of the Shares, (x) preparing and distributing bound
volumes of transaction documents for the Representatives and their legal counsel
and (xi) the performance of the Company's other obligations hereunder. Upon the
request of the Representatives, the Company will provide funds in advance for
filing fees.
(b) Notwithstanding any terms to the contrary contained in this
Agreement, the Company also agrees that it will be responsible for and shall pay
all fees, disbursements, costs and expenses as provided for in the Engagement
Letter.
(c) If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (such as printing, facsimile, courier service, direct
computer expenses, accommodations, travel and the fees and disbursements of
Underwriters' counsel) and any other advisors, accountants, appraisers, etc.
reasonably incurred by such Underwriters in connection with this Agreement or
the transactions contemplated herein.
6. Conditions of the Underwriters' Obligations:
(a) The obligations of the Underwriters hereunder to purchase Shares at
the Closing Time or on each Date of Delivery, as applicable, are subject to the
accuracy of the representations and warranties on the part of the Company
hereunder on the date hereof and at the Closing Time and on each Date of
Delivery, as applicable, the performance by the Company of its obligations
hereunder and to the satisfaction of the following further conditions at the
Closing Time or on each Date of Delivery, as applicable:
(b) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of ▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf &
Marcus, LLP, counsel for the Company and the Subsidiaries, addressed to the
Underwriters and dated the Closing Time
-17-
and each Date of Delivery and in form and substance satisfactory to Mayer,
Brown, ▇▇▇▇ & Maw, counsel for the Underwriters, stating that:
(1) the Company has an authorized capitalization as set forth
in the Prospectus; the outstanding shares of capital stock of the
Company and the Subsidiaries have been duly and validly authorized and
issued and are fully paid and non-assessable, and all of the
outstanding shares of capital stock of the Subsidiaries are directly or
indirectly owned of record and beneficially by the Company; except as
disclosed in the Prospectus, there are no outstanding (i) securities or
obligations of the Company or any of the Subsidiaries convertible into
or exchangeable for any capital stock of the Company or any such
Subsidiary, (ii) warrants, rights or options to subscribe for or
purchase from the Company or any such Subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or
(iii) obligations of the Company or any such Subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or options;
(2) each of the Company and the Subsidiaries (all of which are
named in an exhibit to the Registration Statement) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of incorporation with
full corporate power and authority to own its respective properties and
to conduct its respective businesses as described in the Registration
Statement and Prospectus and, in the case of the Company, to execute
and deliver this Agreement and to consummate the transactions described
in this Agreement;
(3) the Company and the Subsidiaries are duly qualified or
licensed by each jurisdiction in which they conduct their respective
businesses and in which the failure, individually or in the aggregate,
to be so licensed could have a Material Adverse Effect, and the Company
and the Subsidiaries are duly qualified, and are in good standing, in
each jurisdiction in which they own or lease real property or maintain
an office and in which such qualification is necessary except where the
failure to be so qualified and in good standing could not have a
Material Adverse Effect; except as disclosed in the Prospectus, no
Subsidiary is prohibited or restricted, directly or indirectly, from
paying dividends to the Company, or from making any other distribution
with respect to such Subsidiary's capital stock or from repaying to the
Company or any other Subsidiary any amounts which may from time to time
become due under any loans or advances to such Subsidiary from the
Company or such other Subsidiary, or from transferring any such
Subsidiary's property or assets to the Company or to any other
Subsidiary; other than as disclosed in the Prospectus, the Company does
not own, directly or indirectly, any capital stock or other equity
securities of any other corporation or any ownership interest in any
partnership, joint venture or other association;
-18-
(4) the Company and the Subsidiaries are in compliance in all
material respects with all applicable laws, orders, rules, regulations
and orders, including those relating to transactions with affiliates;
(5) neither the Company nor any of the Subsidiaries is in
violation of any term or provision of its organizational documents, is
in breach of, or in default under (nor has any event occurred which
with notice, lapse of time, or both would constitute a breach of, or
default under), any license, indenture, mortgage, deed of trust, loan
or credit agreement or any other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
or their respective properties may be bound or affected or under any
law, regulation or rule or any decree, judgment or order applicable to
the Company or any of the Subsidiaries, except such breaches or
defaults which would not have a material adverse effect on the assets,
business, operations, earnings, prospects, properties, or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a
whole;
(6) the execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement do not and will not (A) conflict with,
or result in any breach of, or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of or default under), (i) any provisions of the
certificate of incorporation, charter or by-laws of the Company or any
Subsidiary, (ii) any provision of any license, indenture, mortgage,
deed of trust, loan, credit or other agreement or instrument to which
the Company or any Subsidiary is a party or by which any of them or
their respective properties or assets may be bound or affected, (iii)
any law or regulation binding upon or applicable to the Company or any
Subsidiary or any of their respective properties or assets, or (iv) any
decree, judgment or order applicable to the Company or any Subsidiary;
or (B) result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or assets of the Company or the
Subsidiaries;
(7) this Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding agreement of
the Company enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, and by general
principles of equity, and except that enforceability of the
indemnification and contribution provisions set forth in Section 9 of
this Agreement may be limited by the federal or state securities laws
of the United States or public policy underlying such laws;
(8) no approval, authorization, consent or order of or filing
with any federal or state governmental or regulatory commission, board,
body, authority or agency is required in connection with the execution,
delivery and performance of this Agreement, the consummation of the
transactions contemplated herein and the sale and delivery of the
Shares as contemplated herein, other than such as
-19-
have been obtained or made under the Securities Act and the Securities
Act Regulations and the Exchange Act and Exchange Act Regulations, and
except that such counsel need express no opinion as to any necessary
qualification under the state securities or blue sky laws of the
various jurisdictions in which the Shares are being offered by the
Underwriters;
(9) each of the Company and the Subsidiaries has all necessary
licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state or local law,
regulation or rule, and has obtained all necessary authorizations,
consents and approvals from other persons, required to conduct their
respective businesses, as described in the Prospectus; to the best of
such counsel's knowledge, neither the Company nor any Subsidiary is in
violation of, in default under, or has received any notice regarding a
possible violation, default or revocation of any such license,
authorization, consent or approval or any federal, state, local or
foreign law, regulation or decree, order or judgment applicable to the
Company or any of the Subsidiaries;
(10) the Company is not subject to registration as an
investment company under the Investment Company Act of 1940, as
amended, and the transactions contemplated by this Agreement will not
cause the Company to become an investment company subject to
registration under such Act;
(11) the Shares have been duly authorized and when the Shares
have been issued and duly delivered against payment therefor as
contemplated by this Agreement, the Shares will be validly issued,
fully paid and non-assessable, and the Underwriters will acquire good
and marketable title to the Shares free and clear of any pledge, lien,
encumbrance, security interest, or other claim;
(12) the issuance and sale of the Shares by the Company is not
subject to preemptive or other similar rights arising by operation of
law, under the certificate of incorporation, charter or by-laws of the
Company, or under any agreement to which the Company or any of the
Subsidiaries is a party or, to such counsel's knowledge, otherwise;
(13) there are no persons with registration or other similar
rights to have any equity or debt securities, including securities that
are convertible into or exchangeable for equity securities, registered
pursuant to the Registration Statement or otherwise registered by the
Company under the Securities Act, except for those registration or
similar rights which have been waived with respect to the offering
contemplated by this Agreement;
(14) the Shares conform in all material respects to the
descriptions thereof contained in the Registration Statement and
Prospectus;
(15) the form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with
-20-
any applicable requirements of the organizational documents of the Company and
the requirements of the NASDAQ Stock Market;
(16) the Registration Statement has become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the best of such
counsel's knowledge, no proceedings with respect thereto have been
commenced or threatened;
(17) as of the effective date of the Registration Statement,
the Registration Statement and the Prospectus (except as to the
financial statements and other financial and statistical data contained
therein, as to which such counsel need express no opinion) complied as
to form in all material respects with the requirements of the
Securities Act, the Exchange Act, the Securities Act Regulations and
the Exchange Act Regulations;
(18) the statements under the captions "Capitalization,"
"Business-Regulatory Matters," "Description of Securities,"
"Business-History," and "Shares Eligible for Future Sale," in the
Registration Statement and the Prospectus, insofar as such statements
constitute a summary of the legal matters referred to therein,
constitute accurate summaries thereof in all material respects;
(19) the 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Initial Shares and the Option Shares have been validly registered
under the Securities Act, the Exchange Act and the Securities Act
Regulations and the Exchange Act Regulations;
(20) there are no actions, suits or proceedings, inquiries, or
investigations pending or, to the best of such counsel's knowledge,
threatened against the Company or any of the Subsidiaries or any of
their respective officers and directors or to which the properties,
assets or rights of any such entity are subject, at law or in equity,
before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority, arbitral panel or agency
which are required to be described in the Prospectus but are not so
described;
(21) there are no contracts or documents of a character which
are required to be filed as exhibits to the Registration Statement or
required to be described or summarized in the Prospectus which have not
been so filed, summarized or described, and all such summaries and
descriptions, in all material respects, fairly and accurately set forth
the material provisions of such contracts and documents; and
(22) the offer and sale of the securities offered and sold by
the Company and the Subsidiaries, including the securities offered and
sold in connection with the Criticom transaction and the arrangement
with Palisades
-21-
Group LLC, are exempt from the registration requirements of the
Securities Act and the Securities Act Regulations.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company, representatives of the Representatives, at
which the contents of the Registration Statement and Prospectus were discussed
and, although such counsel is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus (except as and to the
extent stated in subparagraphs (15), (18), (19), and (22) above), they have no
reason to believe that the Registration Statement, the Preliminary Prospectus or
the Prospectus, as of their respective effective or issue date, and as of the
date of such counsel's opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that, in each case, such counsel need express no view with respect to the
financial statements and other financial and statistical data included in the
Registration Statement, Preliminary Prospectus or Prospectus).
(c) The Representatives shall have received from Ernst & Young LLP,
letters dated, respectively, as of the date of this Agreement, the Closing Time
and each Date of Delivery, as the case may be, addressed to the Representatives,
in form and substance satisfactory to the Representatives, relating to the
financial statements, including any pro forma financial statements, of the
Company and the Subsidiaries, and such other matters customarily covered by
comfort letters issued in connection with registered public offerings.
In the event that the letters referred to above set forth any
changes in indebtedness, decreases in total assets or retained earnings or
increases in borrowings, it shall be a further condition to the obligations of
the Underwriters that (A) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the Registration Statement.
(d) The Representatives shall have received at the Closing Time and on
each Date of Delivery the favorable opinion of Mayer, Brown, ▇▇▇▇ & Maw, dated
the Closing Time or such Date of Delivery, addressed to the Representatives and
in form and substance satisfactory to the Representatives.
(e) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have objected
in writing.
(f) Prior to the Closing Time and each Date of Delivery (i) no stop
order suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus has
been issued, and no proceedings for such purpose shall have been initiated or
threatened, by the Commission, and no suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or the initiation or
threatening
-22-
of any proceedings for any of such purposes, has occurred; (ii) all requests for
additional information on the part of the Commission shall have been complied
with to the reasonable satisfaction of the Representatives; and (iii) the
Registration Statement and the Prospectus shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) All filings with the Commission required by Rule 424 under the
Securities Act to have been filed by the Closing Time shall have been made
within the applicable time period prescribed for such filing by such Rule.
(h) Between the time of execution of this Agreement and the Closing
Time or the relevant Date of Delivery there shall not have been any Material
Adverse Change, and (ii) no transaction which is material and unfavorable to the
Company shall have been entered into by the Company or any of the Subsidiaries,
in each case, which in the Representatives' sole judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Registration Statement.
(i) The Shares shall have been approved for inclusion in the NASDAQ
Stock Market.
(j) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
(k) The Representatives shall have received lock-up agreements from
each stockholder of the Company, in the form of Exhibit A attached hereto, and
such letter agreements shall be in full force and effect.
(l) The Company will, at the Closing Time and on each Date of Delivery,
deliver to the Underwriters a certificate of its Chairman of the Board, Chief
Executive Officer, President, Chief Operating Officer or Vice President and
Chief Accounting Officer or Chief Financial Officer, to the effect that:
(1) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the date
hereof, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the date hereof;
(2) no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Securities Act;
(3) when the Registration Statement became effective and at
all times subsequent thereto up to the date hereof, the Registration
Statement and the Prospectus, and any amendments or supplements thereto
contained all material information required to be included therein by
the Securities Act and the
-23-
applicable rules and regulations of the Commission thereunder and in
all material respects conformed to the requirements of the Securities
Act and the applicable rules and regulations of the Commission
thereunder; the Registration Statement and the Prospectus, and any
amendments or supplements thereto, did not and do not include any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amendment or supplemented Prospectus which has not been so set forth;
and
(4) subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not
been (a) any Material Adverse Change, (b) any transaction that is
material to the Company and the Subsidiaries considered as one
enterprise, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material to
the Company and the Subsidiaries considered as one enterprise, incurred
by the Company or the Subsidiaries, except obligations incurred in the
ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company or any Subsidiary that is
material to the Company and the Subsidiaries considered as one
enterprise, (e) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company or any Subsidiary, or (f)
any loss or damage (whether or not insured) to the property of the
Company or any subsidiary which has been sustained or will have been
sustained which has a Material Adverse Effect.
(m) The Company shall have furnished to the Underwriters such other
documents and certificates as to the accuracy and completeness of any statement
in the Registration Statement and the Prospectus, the representations,
warranties and statements of the Company contained herein, and the performance
by the Company of its covenants contained herein, and the fulfillment of any
conditions contained herein, as of the Closing Time or any Date of Delivery, as
the Underwriters may reasonably request.
(n) The Company shall have performed such of its obligations under this
Agreement as are to be performed by the terms hereof and thereof at or before
the Closing Time or the relevant Date of Delivery.
7. Termination:
The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of the Representatives, at any time
prior to the Closing Time or any Date of Delivery, (i) if any of the conditions
specified in Section 6 shall not have been fulfilled when and as required by
this Agreement to be fulfilled, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
Material Adverse Change, or any development involving a prospective Material
Adverse Change, or material change in management of the Company or any
Subsidiary, whether or not arising in the ordinary course of business, or (iii)
if there has occurred any outbreak or escalation of hostilities or other
-24-
national or international calamity or crisis or change in economic, political or
other conditions the effect of which on the financial markets of the United
States is such as to make it, in the judgment of the Representatives,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, or (iv) if trading in any securities of the Company has been suspended
by the Commission or by the NASDAQ National Market, or if trading generally on
the New York Stock Exchange, the NASDAQ National Market or in the Nasdaq
over-the-counter market has been suspended (including an automatic halt in
trading pursuant to market-decline triggers, other than those in which solely
program trading is temporarily halted), or limitations on prices for trading
(other than limitations on hours or numbers of days of trading) have been fixed,
or maximum ranges for prices for securities have been required, by such exchange
or the NASD or the over-the-counter market or by order of the Commission or any
other governmental authority, or (v) if there has been any downgrade in the
rating of any of the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act), or (vi) any federal or state statute,
regulation, rule or order of any court or other governmental authority has been
enacted, published, decreed or otherwise promulgated which, in the reasonable
opinion of the Representatives, materially adversely affects or will materially
adversely affect the business or operations of the Company, or (vii) any action
has been taken by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which, in the reasonable opinion of the
Representatives, has a material adverse effect on the securities markets in the
United States.
If the Representatives elects to terminate this Agreement as provided
in this Section 7, the Company and the Underwriters shall be notified promptly
by telephone, promptly confirmed by facsimile.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply in all material respects with any of the terms of this
Agreement, the Company shall not be under any obligation or liability under this
Agreement (except to the extent provided in Sections 5 and 9 hereof) and the
Underwriters shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 9 hereof) or to one another
hereunder.
8. Increase in Underwriters' Commitments:
If any Underwriter shall default at the Closing Time or on a Date of
Delivery in its obligation to take up and pay for the Shares to be purchased by
it under this Agreement on such date, the Representatives shall have the right,
within 36 hours after such default, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Shares which such Underwriter shall have agreed but failed
to take up and pay for (the "Defaulted Shares"). Absent the completion of such
arrangements within such 36-hour period, (i) if the total number of Defaulted
Shares does not exceed 10% of the total number of Shares to be purchased on such
date, each non-defaulting Underwriter shall take up and pay for (in addition to
the number of Shares which it is otherwise obligated to purchase on such date
pursuant to this Agreement) the portion of the total number of Shares agreed to
be purchased by the defaulting Underwriter on such date in the proportion that
its underwriting obligations hereunder bears to the underwriting obligations of
all non-defaulting
-25-
Underwriters; and (ii) if the total number of Defaulted Shares exceeds 10% of
such total, the Representatives may terminate this Agreement by notice to the
Company, without liability of any party to any other party except that the
provisions of Sections 5 and 9 hereof shall at all times be effective and shall
survive such termination.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it will
not sell any Shares hereunder on such date unless all of the Shares to be
purchased on such date are purchased on such date by the Underwriters (or by
substituted Underwriters selected by the Representatives with the approval of
the Company or selected by the Company with the approval of the
Representatives).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the
non-defaulting Underwriters shall have the right to postpone the Closing Time or
the relevant Date of Delivery for a period not exceeding five business days in
order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term "Underwriter" as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 8 with the same effect as
if such substituted Underwriter had originally been named in this Agreement.
9. Indemnity and Contribution by the Company and the Underwriters:
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and any person who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any loss, expense, liability, damage or claim (including the reasonable
cost of investigation) which, jointly or severally, any such Underwriter or
controlling person may incur under the Securities Act, the Exchange Act or
otherwise, insofar as such loss, expense, liability, damage or claim arises out
of or is based upon (A) any breach of any representation, warranty or covenant
of the Company contained herein, (B) any failure on the part of the Company to
comply with any applicable law, rule or regulation relating to the offering of
securities being made pursuant to the Prospectus, (C) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof by the Company), the Prospectus (the term Prospectus for the
purpose of this Section 9 being deemed to include any Preliminary Prospectus,
the Prospectus and the Prospectus as amended or supplemented by the Company),
(D) any application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction (domestic or foreign) in order
to qualify the Shares under the securities or blue sky laws thereof or filed
with the Commission or any securities association or securities exchange (each
an "Application"), (E) any omission or alleged omission to state a material fact
required to be stated in any such Registration Statement, Prospectus or any
Application or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading, or (F) any untrue
statement or alleged untrue statement of any material fact contained in any
audio or visual materials used in connection with the marketing of the Shares,
including, without limitation, slides, videos, films and tape recordings; except
insofar as any such loss, expense, liability, damage or claim arises
-26-
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in and in conformity
with information furnished in writing by the Underwriters through the
Representatives to the Company expressly for use in such Registration Statement,
Prospectus or Application. The indemnity agreement set forth in this Section
9(a) shall be in addition to any liability which the Company may otherwise have.
If any action is brought against an Underwriter or controlling person
in respect of which indemnity may be sought against the Company pursuant to
subsection (a) above, such Underwriter shall promptly notify the Company in
writing of the institution of such action, and the Company shall assume the
defense of such action, including the employment of counsel and payment of
expenses; provided, however, that any failure or delay to so notify the Company
will not relieve the Company of any obligation hereunder, except to the extent
that its ability to defend is actually impaired by such failure or delay. Such
Underwriter or controlling person 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 Underwriter or such controlling person 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
employed counsel to have charge of the defense of such action within a
reasonable time or such indemnified party or parties shall have reasonably
concluded (based on the advice of counsel) that there may be defenses available
to it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the Company and paid as
incurred (it being understood, however, that the Company shall not be liable for
the expenses of more than one separate firm of attorneys for the Underwriters or
controlling persons in any one action or series of related actions in the same
jurisdiction (other than local counsel in any such jurisdiction) representing
the indemnified parties who are parties to such action). 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 consent.
(b) Each Underwriter agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company, the Company's directors, the Company's
officers that signed the Registration Statement, and any person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any loss, expense, liability, damage or claim
(including the reasonable cost of investigation) which, jointly or severally,
the Company, or any such person may incur under the Securities Act, the Exchange
Act or otherwise, but only insofar as such loss, expense, liability, damage or
claim arises out of or is based upon (A) any untrue statement or alleged untrue
statement of a material fact contained in and in conformity with information
furnished in writing by such Underwriter through the Representatives to the
Company expressly for use in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the Company),
the Prospectus, or any Application, or (B) any omission or alleged omission to
state a material fact in connection with such information required to be stated
either in such Registration Statement, Prospectus or any Application or
necessary to make such information, in the light of the circumstances under
which made, not misleading. The statements set forth in the twelfth and
thirteenth paragraphs under the caption "Underwriting" in the Preliminary
Prospectus and the
-27-
Prospectus (to the extent such statements relate to the Underwriters) constitute
the only information furnished by or on behalf of any Underwriter through the
Representatives to the Company for purposes of Section 3(l) and this Section 9.
The indemnity agreement set forth in this Section 9(c) shall be in addition to
any liabilities that such Underwriter may otherwise have.
If any action is brought against the Company, or any such person in
respect of which indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Company, or such person shall promptly notify the
Representatives in writing of the institution of such action and the
Representatives, on behalf of the Underwriters, shall assume the defense of such
action, including the employment of counsel and payment of expenses. The
Company, or such person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company, or such person unless the employment of such counsel shall have
been authorized in writing by the Representatives in connection with the defense
of such action or the Representatives shall not have employed counsel to have
charge of the defense of such action within a reasonable time or such
indemnified party or parties shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the Underwriters (in which
case the Representatives shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by such Underwriter and paid as incurred
(it being understood, however, that the Underwriters shall not be liable for the
expenses of more than one separate firm of attorneys in any one action or series
of related actions in the same jurisdiction (other than local counsel in any
such jurisdiction) representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, no
Underwriter shall be liable for any settlement of any such claim or action
effected without the written consent of the Representatives.
(c) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) and (b) of this Section 9 in respect of any losses, expenses,
liabilities, damages or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, expenses, liabilities, damages or claims (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, and
the Underwriters from the offering of the Shares or (ii) if (but only if) the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
of the Underwriters in connection with the statements or omissions which
resulted in such losses, expenses, liabilities, damages or claims, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Underwriters shall be deemed to be in the same proportion as
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company bear to the
underwriting discounts and commissions received by the Underwriters. The
relative fault of the Company and of the Underwriters shall be determined by
reference to, among other things, whether the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity
-28-
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim
or action.
(d) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in subsection (c)(i) and, if applicable
(ii), above. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to their respective underwriting commitments
and not joint.
(e) Without limitation and in addition to its obligations under the
other subsections of this Section 9, the Company agrees to indemnify and hold
harmless the QIU and its affiliates, and each person, if any who controls the
QIU and its affiliates within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) arising out of or based upon the QIU's acting as a
"qualified independent underwriter" (within the meaning of Rule 2720 of the
NASD's Conduct Rules) in connection with the offering contemplated by this
Agreement; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
results from the gross negligence or willful misconduct of the QIU.
10. Survival:
The indemnity and contribution agreements contained in Section 9 and
the covenants, warranties and representations of the Company contained in
Sections 3, 4 and 5 of this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or the
QIU, or any person who controls any Underwriter or the QIU within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on
behalf of the Company, its directors and officers or any person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and shall survive any termination of this Agreement or the
sale and delivery of the Shares. The Company and each Underwriter and the QIU
agree promptly to notify the others of the commencement of any litigation or
proceeding against it and, in the case of the Company, against any of the
Company's officers and directors, in connection with the sale and delivery of
the Shares, or in connection with the Registration Statement or Prospectus.
-29-
11. Notices:
Except as otherwise herein provided, all statements, requests, notices
and agreements shall be in writing or by telegram and, if to the Underwriters or
the QIU, shall be sufficient in all respects if delivered to Friedman, Billings,
▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Syndicate Department; if to the Company, shall be sufficient in all
respects if delivered to the Company at the offices of the Company at One
Capital Center, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
12. Governing Law; Headings:
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
13. Parties at Interest:
The Agreement herein set forth has been and is made solely for the
benefit of the Underwriters, the QIU, the Company and the controlling persons,
directors and officers referred to in Sections 9 and 10 hereof, and their
respective successors, assigns, executors and administrators. No other person,
partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
14. Counterparts and Facsimile Signatures:
This Agreement may be signed by the parties in counterparts which
together shall constitute one and the same agreement among the parties. A
facsimile signature shall constitute an original signature for all purposes.
-30-
If the foregoing correctly sets forth the understanding among the
Company, and the Underwriters, please so indicate in the space provided below
for the purpose, whereupon this Agreement shall constitute a binding agreement
among the Company and the Underwriters.
Very truly yours,
INTEGRATED ALARM SERVICES GROUP, INC.
By: ________________________________________
By:_____________________________________
Title:__________________________________
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇ ▇▇▇▇▇ & CO., INC.
By: FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
By: _______________________________________________
Title:
For itself and as Representatives of the other
Underwriters named on Schedule I hereto.
-31-
Schedule I
Number of Initial
Underwriter Shares to be Purchased
---------------------------------------------------- ----------------------
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. [ ]
------------
▇▇▇▇▇▇, ▇▇▇▇▇ & Co., Inc. [ ]
------------
[INSERT NAMES OF OTHER UNDERWRITER [ ]
------------
Total................................................... 13,000,000
==========
A-1
[Form of Lock-Up Agreement] EXHIBIT A
INTEGRATED ALARM SERVICES GROUP, INC.
Initial Public Offering of Common Stock
---------------------------------------
,2003
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇ ▇▇▇▇▇ & CO., INC.
as Representatives of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between Integrated Alarm
Services Group, Inc Corporation, a Delaware corporation (the "Company"), and
each of you as representatives of a group of Underwriters named therein,
relating to an underwritten public offering of Common Stock, $0.001 par value
(the "Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., offer, sell, contract to
sell, pledge or otherwise dispose of, (or enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash
settlement or otherwise) by the undersigned or any affiliate of the undersigned
or any person in privity with the undersigned or any affiliate of the
undersigned), directly or indirectly, including the filing (or participation in
the filing) of a registration statement with the Securities and Exchange
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
with respect to, any shares of capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for such capital stock, or
publicly announce an intention to effect any such transaction, for a period of
270 days after the date of this Agreement, other than shares of Common Stock
disposed of as bona fide gifts approved by Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc.
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If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[Signature of stockholder]
[Name and address of stockholder]
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