DRAFT DATED 10/1/97
O.A.O. TECHNOLOGY SOLUTIONS, INC.
6,720,000 Shares of Common Stock
($.01 Par Value Per Share)
Standby Underwriting Agreement
October __, 1997
Wheat, First Securities, Inc.
Riverfront Plaza, West Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
OAO Technology Solutions, Inc., a Delaware corporation (the
"Company"), Safeguard Scientifics (Delaware), Inc., a Pennsylvania corporation
("Safeguard"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") and ▇▇▇▇▇▇
▇. ▇▇▇▇ ("▇▇▇▇" and together with ▇▇▇▇▇▇ and Hill, the "Selling Stockholders")
(the Selling Stockholders together with Safeguard are collectively referred to
herein as the "Principal Stockholders") hereby confirm their respective
agreements with you with respect to:
(i) the proposed distribution by the Company to the Safeguard
Shareholders of up to an aggregate of 6,400,000 rights (the "Rights") (which
represent 5,915,000 shares of the Company's common stock, $.01 par value per
share (the "Common Stock"), to be sold by the Company upon the exercise of
5,915,000 of such Rights and an aggregate of 485,000 shares of Common Stock
being sold by the Selling Stockholders upon exercise of 485,000 Rights with
359,260, 62,870 and 62,870 shares of Common Stock being sold by ▇▇▇▇▇▇, ▇▇▇▇ and
▇▇▇▇,
respectively), with (A) each Right entitling the holder thereof to purchase
at any time prior to the Expiration Date, at a subscription price of $5.00
per share, one share of Common Stock of the Company, and (B) Rights being
distributed on the basis of one Right for each five shares of Safeguard Stock
held (with the holder of a number of shares of Safeguard Stock not evenly
divisible by five entitled to receive the next higher whole number of Rights);
(ii) the proposed sale of all Unsubscribed Shares by the Company
and the Selling Stockholders, acting severally and not jointly, with:
(A) the Other Purchasers Standby Shares being deemed to be
Company Unsubscribed Shares to be sold pursuant to the Other
Purchasers Standby Purchase Agreements; and
(B) all Excess Unsubscribed Shares to be sold to and purchased
by the Underwriters, severally and not jointly, in accordance with the
terms and conditions of this Agreement; and
(iii) the proposed sale by the Company to the Other Purchasers of the
Undistributed Shares; and
(iv) the grant by the Selling Stockholders to the Underwriters of an
option described in Section 3(b) hereof to purchase additional shares of Common
Stock for the purpose of covering over-allotments, if any.
The parties acknowledge that concurrently with the Offering of the
Rights, the Company intends to offer and sell to the Direct Purchasers the
Direct Shares for purchase at a subscription price of $5.00 per share. The
parties also acknowledge that, except as set forth in Section 7, the Direct
Shares shall not be deemed to be Shares for purposes of this Agreement and are
not otherwise a part of this Agreement.
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1. Certain Definitions. The following terms shall, when used in this
agreement, have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Adverse Claim" means the term as used in Section 8-302 of the Delaware
Uniform Commercial Code.
"Application" means the application described in Section 9(a)(i)(B) hereof.
"Associated Person Lock-Ups" means the agreements, acceptable in form and
substance to the Underwriters, pursuant to which each of the Company's
officers, directors and principal stockholders listed in Schedule A attached
hereto has agreed not to, without the prior written consent of the
Underwriters, transfer, sell, offer for sale, contract to sell or otherwise
dispose of any shares of Common Stock or any securities exercisable or
exchangeable for or convertible into shares of Common Stock owned by such
person or with respect to which such person has the power of disposition
during a period commencing on the date the Registration Statement is declared
effective by the Commission and ending 180 days following the Expiration
Date, except as otherwise permitted in the Associated Person Lock-Ups.
"Bona Fide Purchaser" means the term as defined in Section 8-302 of the
Delaware Uniform Commercial Code.
"Closing" means 10:00 a.m., New York City time on the sixth business day
after the Expiration Date (or the first business day thereafter), or at such
other time on the same or such other date, not later than ________ ___, 1997,
as shall be agreed to by the Selling Stockholders, the Company and the
Underwriters.
"Closing Date" means the time and date of payment for and delivery of the
Excess Unsubscribed Shares.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, $.01 par value per share,
of the Company.
"Company Unsubscribed Shares" means the shares of Common Stock which had
been offered by the Company pursuant to the Rights but which were not acquired
through the exercise of Rights on or prior to the Expiration Date (after taking
into account the agreement of the Company and the Selling Stockholders that the
560,000 shares of Common Stock that are
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expected to be sold to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ upon exercise of the ▇▇▇▇▇▇ Rights
shall be deemed to be sold by the Company).
"Controlling Person" means a person who controls the Underwriters, the
Company or the Selling Stockholders within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act.
"Designated Subsidiaries" means each Significant Subsidiary of the Company
and ___________________________.
"Direct Purchasers" means the certain persons selected by the Company to
whom the Direct Shares are being offered.
"Direct Shares" means the 320,000 shares of Common Stock offered to the
Direct Purchasers.
"Disagreement" means the term as used in Item 304 of Regulation S-K of the
Rules and Regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent named in the Rights Agent Agreement.
"Excess Unsubscribed Shares" means all of the Unsubscribed Shares other
than the Other Purchasers Standby Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the subscription price of $5.00 per share.
"Expiration Date" means 5:00 p.m., New York City time, on ________ ___,
1997 or such later date as may be agreed upon by the Underwriters and the
Company.
"Intellectual Property" means all patents, trademarks, service marks,
trade names, copyrights, inventions, trade secrets, proprietary techniques,
including, without limitation, all software service codes, processes and
substances, technology and know-how necessary to conduct (or used to conduct)
the business now operated or proposed to be operated by the Company as
described in the Prospectus.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Deloitte & Touche" means Deloitte & Touche, LLP.
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"Material Adverse Effect" means a material adverse effect on the condition,
financial or otherwise, or on the earnings, business affairs, financial
position, value, operations, properties, results of operation or business of the
Company.
"▇▇▇▇▇▇ Group" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and/or his assignees.
"▇▇▇▇▇▇ Lock-Up" means the agreement of the ▇▇▇▇▇▇ Group not to, without
the prior written consent of the Underwriters, transfer, sell, offer for
sale, contract to sell or otherwise dispose of any shares of Common Stock
acquired by the ▇▇▇▇▇▇ Group upon exercise of the ▇▇▇▇▇▇ Rights or any
securities exercisable or exchangeable for or convertible into Common Stock
(including the ▇▇▇▇▇▇ Rights) owned on the date hereof or acquired through
the rights offering or with respect to which the ▇▇▇▇▇▇ Group has the power
of disposition during a period commencing on the date the Registration
Statement is declared effective and ending 180 days after the Expiration
Date; provided, however, that the ▇▇▇▇▇▇ Group may transfer, sell, offer for
sale, contract to sell or otherwise dispose of up to 280,000 shares of Common
Stock without the prior written consent of the Underwriters.
"▇▇▇▇▇▇ Rights" means all Rights granted to the ▇▇▇▇▇▇ Group as a
shareholder of Safeguard.
"NASD" means the National Association of Securities Dealers, Inc.
"Offering" means the public offering of the Excess Unsubscribed Shares as
set forth in the Prospectus; provided that the Offering shall also include the
Other Purchasers Standby Shares purchased by the Underwriters, if any.
"Option Closing Date" means the time of delivery of any of the Option
Shares."
"Option Shares" means any and all shares of Common Stock to be purchased by
the Underwriters pursuant to the option described in Section 3(b) of this
Agreement.
"Other Purchasers" means certain persons selected by the Company.
"Other Purchasers Standby Purchase Agreement" means the agreements between
the Company and the Other Purchasers to be entered into after the date hereof
and obligating the Other Purchasers to purchase from the Company up to 300,000
Other Purchasers Standby Shares on the Closing Date at a price of $5.00 per
share.
"Other Purchasers Standby Shares" means that number of Unsubscribed Shares
purchased by the Other Purchasers pursuant to the Other Purchasers Standby
Purchase Agreement.
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"Preliminary Prospectus" means each prospectus subject to completion filed
with the Registration Statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
or any amendment thereto at the time of the Registration Statement was or is
declared effective).
"Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), the prospectus included in the Registration
Statement. For purposes of Sections 2 and 8(d)(v) hereof, all references to the
"Prospectus" are deemed to include, in the alternative, the most recent
Preliminary Prospectus if the Prospectus is not in existence.
"Provided Information" means the statements made in the second paragraph
preceding the stabilization legend on the inside of the front cover page, the
stabilization legend on the inside of the front cover page and the third and
sixth paragraph under the heading "UNDERWRITING" in the Prospectus (and the same
paragraphs and stabilization legend in any Preliminary Prospectus).
"Registration Statement" means the registration statement described in
Section 2(a)(i) hereof.
"Reportable Event" means the term as used in Item 304 of Regulation S-K of
the Rules and Regulations.
"Rights Agent" means ChaseMellon Shareholder Services, L.L.C.
"Rights Agent Agreement" means the agreement in the form previously
approved by the Underwriters, dated the date hereof, by and among the Company,
the Escrow Agent and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
"Rules and Regulations" means the rules and regulations adopted by the
Commission under either the Act or the Exchange Act.
"Safeguard Shareholders" means the holders of record of Safeguard Stock as
of June 30, 1997.
"Safeguard Stock" means the common shares, $.10 par value per share, of
Safeguard.
"Selling Stockholders Unsubscribed Shares" means the shares of Common Stock
which had been offered by the Selling Stockholders pursuant to the Rights but
which were not acquired through exercise of the Rights on or prior to the
Expiration Date (after taking into account the agreement of the Company and the
Selling Stockholders that the 560,000 shares of Common
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Stock that are expected to be sold to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ upon exercise of the
▇▇▇▇▇▇ Rights shall be deemed to be sold by the Company).
"Shares" means the Option Shares, the Excess Unsubscribed Shares to be
purchased by the Underwriters and the Other Purchasers Standby Shares purchased
by the Underwriters, if any, pursuant to Section 3.
"Significant Subsidiary" means the term as defined in Rule 405 of the Rules
and Regulations.
"Subsidiary" means the term as defined in Rule 405 of the Rules and
Regulations and includes all of the entities set forth in Schedule B hereto.
"Transfer Agent and Registrar" means the transfer agent and registrar
described in Section 6(a)(ix) hereof.
"Underwriters" means Wheat, First Securities, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Inc.
"Underwriters' Counsel" means Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP.
"Undistributed Shares" means 6,400,000 shares of Common Stock less those
shares of Common Stock that had been offered by the Company and the Selling
Stockholders pursuant to the Rights if Rights to purchase fewer than 6,400,000
shares of Common Stock are granted to holders of the Safeguard Stock.
"Unsubscribed Shares" means the Selling Stockholders Unsubscribed Shares,
the Company Unsubscribed Shares and the Undistributed Shares.
2. Representations and Warranties of the Company and the Principal
Stockholders.
(a) The Company represents and warrants to, and agrees with, the
Underwriters as follows:
(i) The Company has filed with the Commission a registration
statement on Form S-1 (No. 333-33961), including a prospectus subject to
completion, for the registration of the Rights, the shares of Common Stock
subject to the Rights, the Direct Shares and the Option Shares under the
Act, and have filed with the Commission one or more amendments thereto.
After the execution of this Agreement, the Company will file with the
Commission either (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act
as of the time of effectiveness of this Agreement, a prospectus in the form
most recently included in an amendment to such registration statement (or,
if no such amendment shall
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have been filed, in such registration statement), with such changes or
insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act and as have been provided to and approved by
the Underwriters prior to the execution of this Agreement, or (B) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act as of the time
of effectiveness of this Agreement, an amendment to such registration
statement, including a form of prospectus, a copy of which amendment
has been furnished to and approved by the Underwriters prior to the
execution of this Agreement;
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or any part thereof and,
to the best knowledge of the Company, no proceedings for a stop order have
been instituted or are pending or threatened. When any Preliminary
Prospectus was filed with the Commission, it contained all statements
required to be stated therein in accordance with, and complied in all
material respects with the requirements of, the Act and the Rules and
Regulations except to the extent that such Preliminary Prospectus did not
contain any such required statements, or did not so comply, in a manner
corrected in the Prospectus. When the Registration Statement or any
amendment thereto was (or is) declared effective, it (A) contained (or will
contain) all statements required to be stated therein in accordance with,
and complied in all material respects (or will comply in all material
respects) with the requirements of, the Act and the Rules and Regulations
and (B) did not or will not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein
not misleading. When the Prospectus or any amendment or supplement thereto
is filed pursuant to Rule 424(b) (or, if the Prospectus or such amendment
or supplement is not required to be so filed, when the Registration
Statement or the amendment thereto containing such amendment or supplement
to the Prospectus was or is declared effective) and on the Closing Date and
any Option Closing Date, the Prospectus, as amended or supplemented at any
such time, (A) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the Rules and
Regulations and (B) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph (ii)
do not apply to the Provided Information;
(iii) The Company and each of the Subsidiaries are
corporations duly organized, validly existing and in good standing under
the laws of their respective jurisdictions of incorporation, are duly
qualified to transact business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership or
leasing of any properties or the character or conduct of their respective
operations requires such qualification, except where failures to be so
qualified, individually or in
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the aggregate, would not result in a Material Adverse Effect. Other than
the Subsidiaries listed on Schedule B hereto, the Company does not own
any stock of or other equity in, or otherwise control directly or
indirectly, any corporation, firm, partnership, trust, joint venture or
other business entity;
(iv) The Company and each of the Subsidiaries have all
requisite power and authority (corporate and other), and have obtained
and currently maintains in full force and effect and are operating in
compliance with any and all authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including those having jurisdiction over
environmental or similar matters) necessary or required to own or lease
their respective properties and conduct their respective business as
described in the Registration Statement, the Prospectus and any amendment
or supplement thereto, except where the failure to so maintain or operate
would not result in a Material Adverse Effect. The Company and each of the
Subsidiaries are and have been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state, local and foreign laws, rules and
regulations (including without limitation those relating to employment
matters and the payment of taxes) except as disclosed in the Prospectus and
except where failures to be in compliance, individually or in the
aggregate, would not result in a Material Adverse Effect. Neither the
Company nor any of the Subsidiaries has received any notice or notices of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit
that if the subject of unfavorable decisions, rulings or findings, would,
individually or in the aggregate, result in a Material Adverse Effect;
(v) The Company has duly executed and delivered the
Rights Agent Agreement. The shares of Common Stock to be sold by the
Company and the Selling Stockholders hereunder and upon the exercise of the
Rights are subject to the rights and interests of the Underwriters and the
Rights Agent hereunder and under the Rights Agent Agreement. Except to the
extent otherwise provided therein, the arrangements for custody or
reservation and delivery of the certificates for such shares, made by the
Company hereunder and under the Rights Agent Agreement, are irrevocable, and
are not subject to termination by any acts of the Company, the Selling
Stockholders or by operation of law;
(vi) The Company has all requisite power and authority
(corporate and other) to enter into this Agreement, the Other Purchasers
Standby Purchase Agreements and the Rights Agent Agreement, and to
consummate the transactions provided for herein and therein; and this
Agreement, the Other Purchasers Standby Purchase Agreements and the Rights
Agent Agreement have each been duly authorized by the Company. Each of this
Agreement and the Rights Agent Agreement have been and the Other Purchasers
Standby Purchase Agreements will be prior to the Closing Date
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duly executed and delivered by the Company. Each of this Agreement and
the Rights Agent Agreement constitutes and the Other Purchasers Standby
Purchase Agreements will constitute prior to the Closing Date, assuming
due authorization, execution and delivery by the other parties to such
agreements, the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with their respective
terms, subject to the effect of general principles of equity (including
standards of materiality, good faith, fair dealing and reasonableness)
whether applied by a court of law or equity, and except as rights to
indemnity and contribution hereunder may be limited by applicable law,
statutory duties or public policy. The Company's execution and
delivery of this Agreement, the Other Purchasers Standby Purchase
Agreements and the Rights Agent Agreement, its performance of its
obligations hereunder and thereunder, the consummation of the
transactions contemplated hereby and thereby by it, and its conduct of
its business as described in the Registration Statement, the Prospectus
and any amendment or supplement thereto, will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any material liens, charges, claims, encumbrances, pledges, security
interests, defects or other like restrictions or material equities of
any kind whatsoever upon, any right, property or assets (tangible or
intangible) of the Company or any of the Subsidiaries pursuant to the
terms of (A) the charter or bylaws, each as amended to date, of the
Company or any of the Subsidiaries, (B) any lease, license, permit,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement (including any
related to indebtedness) or any other agreement or instrument to which
the Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries is or by which any of them may be
bound or to which any of their respective properties or assets
(tangible or intangible) is or may be subject, except to the extent
that any such conflict, breach, violation or default, individually or
in the aggregate, does not and would not result in a Material Adverse
Effect and does not and would not interfere with the Offering or (C)
any statute, judgment, decree, order, rule or regulation applicable to
the Company or any of the Subsidiaries or any of their respective
activities or properties adopted or issued by an arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or of their respective activities or
properties (other than such as may be required under state securities
or "Blue Sky" laws and such as may be required by the by-laws and rules
of the NASD in connection with the purchase and distribution of the
Shares by the Underwriters);
(vii) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required in
connection with the offer, issuance and sale of the shares of Common Stock
to be sold by the Company hereunder or upon exercise of the Rights, the
Company's performance of its obligations hereunder,
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or the consummation by the Company of the other transactions
contemplated hereby, except (A) such as may be required under the state
securities or "Blue Sky" laws of any jurisdiction or as may be required
by the by-laws and rules of the NASD in connection with the purchase
and distribution of the Shares by the Underwriters, (B) any filing of
the Prospectus pursuant to Rule 424(b) or 430A of the Rules and
Regulations and, if the Registration Statement has not been declared
effective, an order of the Commission declaring the Registration
Statement effective under the Act, and (C) such other approvals as have
been obtained and remain in full force and effect;
(viii) The authorized, issued and outstanding capital stock of
the Company is set forth, and conforms to the description thereof
contained, in the Registration Statement, the Prospectus, and any amendment
or supplement thereto. All of the issued shares of capital stock of the
Company, including the shares to be sold by the Selling Stockholders, have
been duly authorized and validly issued, and are fully paid and
nonassessable; the holders thereof have no rights of rescission against the
Company with respect thereto and are not subject to personal liabilities
solely by reason of being such holders (except to the extent that as a
result of acquiring a substantial number of shares of Common Stock a holder
may be subject to claims of personal liability as an affiliate or control
person of the Company, as to which no representation is made hereby); and
none of such shares have been issued in violation of the preemptive rights
of any security holders of the Company arising as a matter of law or under
or pursuant to the Company's Certificate of Incorporation, as amended, the
Company's By-Laws, as amended, or any agreement or instrument to which the
Company is a party or by which it is bound. The shares of Common Stock
offered by the Company and to be sold upon the exercise of the Rights or
pursuant to this Agreement and the Other Purchasers Standby Purchase
Agreements have been duly authorized and at the Closing Date, after payment
therefor in accordance herewith or in accordance with the terms and
conditions of the Rights (as the case may be), will be validly issued,
fully paid and nonassessable and not subject to any Adverse Claim, with no
personal liability attaching to the holder solely as a result of the
ownership thereof (except to the extent that as a result of acquiring a
substantial number of shares of Common Stock a holder may be subject to
claims of personal liability as an affiliate or control person of the
Company, as to which no representation is made hereby). Upon the issuance
and delivery pursuant to this Agreement and the Rights Agent Agreement of
the Shares to be sold by the Company, assuming that each of the
Underwriters is a Bona Fide Purchaser, the Underwriters will acquire good
and marketable title to the Shares free and clear of any liens, charges,
claims, preemptive rights, encumbrances, pledges, security interests,
defects or other like restrictions or like material equity of any kind
whatsoever. The shares of Common Stock offered by the Company and to be
sold upon the exercise of the Rights or pursuant to this Agreement or the
Other Purchasers Standby Purchase Agreements will conform to the
description thereof contained in the Prospectus. There are no preemptive
or other rights to subscribe for or to purchase nor any restriction upon
the voting or transfer of, any
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shares of Common Stock pursuant to the Company's Certificate of
Incorporation or By-Laws, as each amended to date, or pursuant to any
agreement among stockholders to which the Company is a party, by which
it is bound or of which it has knowledge, and the Shares to be sold by
the Company are not otherwise subject to any preemptive or other
similar rights of any security holder. The Company is not a party to
or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the
Prospectus. Except as described in the Prospectus with respect to
Common Stock that may be registered by the Company in a registration
statement on Form S-8, no holder of any securities of the Company has
the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the
Company during a period commencing on the date the Registration
Statement is declared effective by the Commission and ending 180 days
following the Expiration Date or to require the Company to file a
registration statement under the Act during such period. All of the
(i) Rights and (ii) outstanding shares of Common Stock and all of the
shares of Common Stock to be issued by the Company as contemplated
herein have been approved for quotation upon notice of issuance on the
Nasdaq National Market of the Nasdaq Stock Market;
(ix) The consolidated financial statements and schedules
of the Company included in the Registration Statement, the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and any amendment or supplement thereto fairly present the
consolidated financial position and results of operations of the Company as
of the dates and for the periods therein specified. Such financial
statements and schedules have been prepared in accordance with generally
accepted accounting principles as in effect in the United States and as
consistently applied throughout the periods involved and in accordance with
the Rules and Regulations. The selected consolidated financial data set
forth under the caption "SELECTED CONSOLIDATED FINANCIAL DATA" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated therein, the
information included therein. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (C)
access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company's
internal accounting controls are designed to cause the Company to comply in
all material respects with the Foreign Corrupt Practices Act of 1977, as
amended. Deloitte & Touche, whose reports are filed with the Commission
as a part of the Registration Statement, are independent auditors
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as required by the Act and the Rules and Regulations. Since
____________ __, 199_, Deloitte & Touche has been the only public
accountants engaged by the Company, and the Company has not had any
Disagreement with Deloitte & Touche, and has not experienced any
Reportable Event since that date;
(x) The Company and each of the Subsidiaries have filed all
federal, state, local and foreign tax returns that are required to be filed
by them or have duly requested extensions thereof, except in any case in
which the failure so to file, individually or in the aggregate, would not
have a Material Adverse Effect. The Company and each of the Subsidiaries
have paid all taxes required to be paid by them and all other assessments,
fines or penalties, if any, levied against them, to the extent that any of
the foregoing are due and payable, except for (A) any such assessment, fine
or penalty that is currently being contested in good faith or (B) any case
in which the failure so to pay, individually or in the aggregate, would not
have a Material Adverse Effect;
(xi) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with the issuance
by the Company, or the purchase by the Underwriters, of the Shares to be
sold by the Company or any resales of such Shares by the Underwriters;
(xii) The Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and
clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other like restrictions or like equities of any kind
whatsoever, other than (A) liens for taxes not yet due and payable, (B)
liens as described or referred to in the Prospectus, and (C) liens that are
not material in amount in relation to the business of the Company and which
do not interfere with the Offering;
(xiii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
the Company and each of the Subsidiaries own or possess adequate licenses
or other rights, in each case free of fees, charges or royalties payable
after the date hereof, to use the Intellectual Property, except where the
lack thereof would not result in a Material Adverse Effect. Except as
disclosed in the Prospectus, neither the Company nor any of the
Subsidiaries has received any notice of infringement of or conflict with
(and does not know of any such infringement of or conflict with) rights or
claims of others with respect to the Intellectual Property, any of the
activities engaged in, or proposed to be engaged in, by the Company or any
challenge to the ownership or right of the Company with respect to the
Intellectual Property which could result in a Material Adverse Effect or
which could have a material adverse effect on the development, marketing or
sale of any of the Company's existing
-13-
or contemplated products, services or processes as described in the
Prospectus. None of the products, services or processes of the Company
or any of the Subsidiaries referred to in such Prospectus and relating
to the business of the Company or any of the Subsidiaries now operated
or proposed to be operated by any of them as described in such
Prospectus infringes or conflicts with any right or patent, or with any
discovery, invention, product or process which is the subject of any
patent application known to the Company, in a manner which would result
in a Material Adverse Effect;
(xiv) The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the business in
which they are engaged, and the Company has no reason to believe that it or
any of the Subsidiaries will not be able to renew their respective existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue their
respective business at a cost that would not result in a Material Adverse
Effect;
(xv) Neither the Company nor any of the Subsidiaries is in
breach of, or in default under, any term, covenant or provision of any
license, permit, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which
it is a party or by which it may be bound or to which any of its property or
assets (tangible or intangible) is subject or affected, except as disclosed
in the Registration Statement and Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and except as to
defaults that (A) individually or in the aggregate would not have a Material
Adverse Effect and (B) would not interfere with the Offering. Neither the
Company nor any of the Subsidiaries is in violation of any term or provision
of its charter or bylaws, each as amended to date;
(xvi) Other than as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
there is not pending or, to the Company's knowledge, threatened against the
Company or any of the Subsidiaries or involving the properties or business
of the Company or any of the Subsidiaries (or, to the Company's knowledge,
any circumstance that may give rise to the same), any action, suit,
proceeding, investigation, litigation or governmental proceeding (including
those having jurisdiction over environmental or similar matters), domestic
or foreign, that (A) is required to be disclosed in the Registration
Statement and is not so disclosed, (B) questions the validity of the
capital stock of the Company or the validity or enforceability of this
Agreement, (C) questions the validity of any action taken or to be taken by
the Company pursuant to or in connection with this Agreement, or (D) could
materially adversely affect the present or prospective ability of the
Company to perform its obligations under this Agreement or result in a
Material Adverse Effect. Any such
-14-
proceedings summarized in the Prospectus are accurately summarized in
all material respects;
(xvii) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and except as may otherwise be indicated or contemplated
herein or therein, neither the Company nor any of the Subsidiaries has (A)
issued any securities other than the Rights, the shares of Common Stock to
be sold by the Company upon the exercise of the Rights, the Shares to be
sold by the Company pursuant to this Agreement and shares of Common Stock
issuable upon the exercise of stock options disclosed in the Prospectus as
outstanding as of the date hereof, (B) incurred any liability or
obligation, direct or contingent, for borrowed money, (C) entered into any
transaction other than in the ordinary course of business, (D) declared or
paid any dividend or made any other distribution on or in respect of its
capital stock, or (E) entered into any transactions with any affiliate,
including, without limitation, the Principal Stockholders or their
respective affiliates;
(xviii) The Company and each of the Subsidiaries have
satisfactory employer-employee relationships with their respective
employees. No labor or other dispute with the employees of the Company or
any of the Subsidiaries exists, or, to the best knowledge of the Company,
is imminent;
(xix) Except as disclosed in the Registration Statement or
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), each employee benefit plan, within the meaning of
Section 3(3) of ERISA that is maintained, administered or contributed to by
the Company or any of its affiliates for employees or former employees of
the Company and its affiliates has been maintained in compliance with its
terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code; no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of
the Code has occurred with respect to any such plan excluding transactions
effected pursuant to a statutory or administrative exemption; and for each
such plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA no "accumulated funding deficiency" as defined in
Section 412 of the Code has been incurred, whether or not waived, and the
fair market value of the assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeded the present value of
all benefits accrued under such plan determined using reasonable actuarial
assumptions;
(xx) The minutes books of the Company and each of the
Subsidiaries made available to Underwriters' Counsel, (A) contain minutes
and consents from all meetings and actions of the Company's stockholders,
board of directors, and the
-15-
committees of such board since the respective dates of organization of
the Company and (B) reflect all transactions referred to in such minutes
accurately in all material respects;
(xxi) All agreements filed as exhibits to the Registration
Statement to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries may be bound or to which any
of their respective assets, properties or businesses may be subject have
been duly and validly authorized, executed and delivered by the Company or
such Subsidiary, as appropriate, and constitute the legal, valid and
binding agreements of the Company or such Subsidiary, as appropriate,
enforceable in accordance with their respective terms, subject in each case
to the effect of general principles of equity (including standards of
materiality, good faith, fair dealing and reasonableness) whether applied
by a court of law or equity and except as rights to indemnity and
contribution under this Agreement may be limited by applicable law,
statutory duties or public policy. The descriptions in the Registration
Statement, the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and any amendment or supplement thereto
of agreements, whether written or oral, and of other documents are accurate
and fairly present the information required to be shown with respect
thereto by Form S-1 under the Act. There are no agreements, whether
written or oral, or other documents that are required by the Act or the
Rules and Regulations to be described in the Registration Statement or
filed as exhibits to the Registration Statement that are not described or
filed as required;
(xxii) Neither the Company nor any of its officers, directors,
or affiliates (within the meaning of the Rules and Regulations) has taken
or will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock or the
Rights in violation of Regulation M under the Exchange Act;
(xxiii) There are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's, advisory or
origination fee or otherwise, either with respect to the sale of the shares
of Common Stock to be sold by the Company upon exercise of the Rights, the
sale of the Shares hereunder or with respect to the proceeds received by
the Company from such sales. Other than as reflected in this Agreement,
there are no other arrangements, agreements, understandings, payments or
issuances with respect to the Company or, to the Company's knowledge, any
of its officers, directors, or affiliates that may constitute
"underwriter's compensation," as determined by the NASD;
(xxiv) The Company has delivered or caused to be delivered to
the Underwriters the Associated Person Lock-Ups;
-16-
(xxv) All of the Rights have been duly authorized, and, when
issued and distributed as set forth in the Prospectus, will be legally
issued and valid and binding obligations of the Company having the rights
summarized in the Prospectus; and none of such Rights will have been issued
in violation of the preemptive rights of any security holders of the
Company arising as a matter of law or under or pursuant to the Company's
Certificate of Incorporation, as amended, the Company's By-Laws, as
amended, or any agreement or instrument to which the Company is a party or
by which it is bound.
(xxvi) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
there has not been any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company otherwise than
as set forth or contemplated in the Prospectus;
(xxvii) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or Safeguard, on the
other hand, which is required by the Act to be described in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) which is not so
described;
(xxviii) The Company is not and, after giving effect to the
Offering, will not be an "investment company" or entity "controlled" by an
"investment company," as such terms are defined in the Investment Company
Act; and
(xxix) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida), relating to
doing business with the Government of Cuba or with any person or affiliate
located in Cuba;
(xxx) To the best of the Company's knowledge, no Unsubscribed
Shares or Direct Shares have been sold to any person listed in Section
IM-2110-1(b)(3)-(8) of the NASD's Conduct Rules.
(b) Each Selling Stockholder severally represents and warrants to,
and agrees with, the Underwriters as follows:
(i) The Selling Stockholder has delivered certificates in
negotiable form for the shares of Common Stock to be sold by him upon the
exercise of the Rights and pursuant to this Agreement to the Company to be
placed in custody for delivery pursuant to the terms of the Rights Agent
Agreement and this Agreement. The shares
-17-
represented by the certificates so held in custody for the Selling
Stockholder are subject to the interests hereunder of the Underwriters,
the Company and the Rights Agent under the Rights Agent Agreement. The
arrangements for custody and delivery of such certificates are, to the
extent provided hereunder, irrevocable, and are not subject to
termination by any acts of the Selling Stockholder, or by operation of
law;
(ii) The Selling Stockholder has the capacity and legal
right to enter into this Agreement and to sell, transfer and deliver the
Shares proposed to be sold by him hereunder and the shares of Common
Stock to be sold by him upon the exercise of the Rights. This Agreement
has been executed and delivered by the Selling Stockholder and, assuming
due authorization, execution and delivery by the other respective parties
hereto, constitutes the legal, valid and binding obligation of the
Selling Stockholder enforceable against the Selling Stockholder in
accordance with its terms, subject to the effect of general principles of
equity (including standards of materiality, good faith, fair dealing and
reasonableness) whether applied by a court of law or equity, and except
as rights of indemnity and contribution hereunder may be limited by
applicable law, statutory duties or public policy;
(iii) The execution and delivery of this Agreement and the
performance by the Selling Stockholder of his obligations hereunder will
not conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under (A) any lease, permit,
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or credit agreement or any
other agreement or instrument to which the Selling Stockholder is a party
or by which he is or may be bound or to which any of his properties or
assets (tangible or intangible) is or may be subject, or any indebtedness,
except to the extent that any such conflict, breach, violation or default,
individually or in the aggregate, does not and would not interfere with the
Offering or (B) any statute, judgment, decree, order, rule or regulation
applicable to the Selling Stockholder or any of his activities or
properties adopted or issued by any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Selling Stockholder or any of his
activities or properties. No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required
for the consummation by the Selling Stockholder of the transactions
contemplated herein, except (A) such as may be required under the state
securities or "Blue Sky" laws of any jurisdiction or as may be required by
the by-laws of the NASD in connection with the purchase and distribution of
the Shares by the Underwriters, (B) any filing of the Prospectus pursuant
to Rule 424(b) or 430A of the Rules and Regulations and, if the
Registration Statement has not been declared effective, an order of the
Commission declaring the Registration Statement effective under the Act,
and (C) such other approvals as have been obtained and remain in full force
and effect;
-18-
(iv) The Selling Stockholder has, and on the Closing Date
will have, good and marketable title to the Shares proposed to be sold by
the Selling Stockholder hereunder and the shares of Common Stock to be sold
upon the exercise of the Rights, and none of such shares will be subject to
any Adverse Claim. Upon delivery of and payment for the Shares to be
sold by the Selling Stockholder hereunder, assuming that each of the
Underwriters is a Bona Fide Purchaser, the Underwriters will acquire good
and marketable title thereto free and clear of any liens, charges, claims,
preemptive rights, encumbrances, pledges, security interests, voting trusts,
defects or other like restrictions or other like material equity of any kind
whatsoever;
(v) To the best knowledge of the Selling Stockholder, the
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or any part thereof and, to the best knowledge of
the Selling Stockholder, no proceedings for a stop order have been
instituted or are pending or threatened.
(vi) The Selling Stockholder has not (a) made or caused to be
effected any transaction, directly or indirectly, designed to or that has
constituted or that might reasonably be expected to cause or result in
stabilization of the price of the Common Stock or the Rights, (b) taken or
will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in
manipulation of the price of the Common Stock or the Rights in violation of
Regulation M under the Exchange Act, or (c) failed to comply with the Act
or the Rules and Regulations in order to effect the transactions
contemplated hereby.
(c) Each of Hill and ▇▇▇▇▇▇ severally represents and warrants to, and
agrees with, the Underwriters as follows:
(i) To the best knowledge of such Selling Stockholder, the
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or any part thereof and, to the best knowledge of
such Selling Stockholder, no proceedings for a stop order have been
instituted or are pending or threatened. When any Preliminary Prospectus
was filed with the Commission, it contained all statements required to be
stated therein in accordance with, and complied in all material respects
with the requirements of, the Act and the Rules and Regulations except to
the extent that such Preliminary Prospectus did not contain any such
required statements, or did not so comply, in a manner corrected in the
Prospectus. To the best knowledge of such Selling Stockholder, when the
Registration Statement (or any amendment thereto) was (or is) declared
effective, it (A) contained (or will contain) all statements required to be
stated therein in accordance with, and complied in all material respects
(or will comply in all material respects) with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a
-19-
material fact or omit to state any material fact necessary to make the
statements therein not misleading. To the best knowledge of such Selling
Stockholder, when the Prospectus or any amendment or supplement thereto
is filed pursuant to Rule 424(b) (or, if the Prospectus or such amendment
or supplement is not required to be so filed, when the Registration
Statement or the amendment thereto containing such amendment or
supplement to the Prospectus was or is declared effective) and on the
Closing Date and any Option Closing Date, the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (v) do not apply to the Provided Information;
(ii) To the best knowledge of such Selling Stockholder, the
descriptions in the Registration Statement, the Prospectus and any
amendment or supplement thereto of agreements, whether written or oral, and
of other documents are accurate and fairly present the information required
to be shown with respect thereto by Form S-1 under the Act. To the best
knowledge of such Selling Stockholder, there are no agreements, whether
written or oral, or other documents that are required by the Act or the
Rules and Regulations to be described in the Registration Statement or
filed as exhibits to the Registration Statement that are not described or
filed as required;
(d) ▇▇▇▇ represents and warrants to, and agrees with, the
Underwriters as follows:
(i) When any Preliminary Prospectus was filed with the
Commission, it contained all statements specifically relating to ▇▇▇▇
required to be stated therein in accordance with, and such statements
complied in all material respects with the requirements of, the Act and the
Rules and Regulations except to the extent that such were corrected in the
Prospectus. To the best knowledge of ▇▇▇▇, when the Registration Statement
(or any amendment thereto) was (or is) declared effective, it (A) contained
(or will contain) all statements specifically relating to ▇▇▇▇ required to
be stated therein in accordance with, and complied in all material respects
(or will comply in all material respects) with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement specifically relating to ▇▇▇▇ of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading. To the best knowledge of ▇▇▇▇, when the Prospectus or any
amendment or supplement thereto is filed pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required to be so
filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus
-20-
was or is declared effective) and on the Closing Date and any Option
Closing Date, the Prospectus, as amended or supplemented at any such
time, (A) contained or will contain all statements specifically relating
to ▇▇▇▇ required to be stated therein in accordance with, and complied or
will comply in all material respects with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement relating specifically to ▇▇▇▇ of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The foregoing provisions of this paragraph (i) do not
apply to the Provided Information;
(ii) To the best knowledge of ▇▇▇▇, there are no agreements,
whether written or oral, or other documents, in each case in which ▇▇▇▇ is
a party, that are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the
Registration Statement that are not described or filed as required;
(e) Safeguard represents and warrants to, and agrees with, the
Underwriters as follows:
(i) Safeguard has the legal right, power and authority to
enter into this Agreement. This Agreement has been executed and
delivered by the Safeguard and, assuming due authorization, execution and
delivery by the other respective parties hereto, constitutes the legal,
valid and binding obligation of Safeguard enforceable against Safeguard in
accordance with its terms, subject to the effect of general principles of
equity (including standards of materiality, good faith, fair dealing and
reasonableness) whether applied by a court of law or equity, and except as
rights of indemnity and contribution hereunder may be limited by applicable
law, statutory duties or public policy;
(ii) The execution and delivery of this Agreement and the
performance by Safeguard of its obligations hereunder will not conflict
with or result in a breach or violation of any of the terms and provisions
of, or constitute a default under (A) any lease, permit, license, contract,
indenture, mortgage, deed of trust, voting trust agreement, shareholders
agreement, note, loan or credit agreement or any other agreement or
instrument to which Safeguard is a party or by which it is or may be bound
or to which any of its properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, except to the extent that any such
conflict, breach, violation or default, individually or in the aggregate,
does not and would not result in a material adverse effect on the
condition, financial or otherwise, or on the earnings, business affairs,
financial position, prospects, value, operation, properties, results of
operation or business of Safeguard and does not and would not interfere
with the Offering or (B) any statute, judgment, decree, order, rule or
regulation applicable to Safeguard or any of its
-21-
activities or properties adopted or issued by any arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body (including those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over Safeguard or any
of its activities or properties. No consent, approval, authorization or
order of, or filing with, any governmental agency or body or any court is
required for the consummation by Safeguard of the transactions
contemplated herein, except (A) such as may be required under the state
securities or "Blue Sky" laws of any jurisdiction or as may be required
by the by-laws of the NASD in connection with the purchase and
distribution of the Shares by the Underwriters, (B) any filing of the
Prospectus pursuant to Rule 424(b) or 430A of the Rules and Regulations
and, if the Registration Statement has not been declared effective, an
order of the Commission declaring the Registration Statement effective
under the Act, and (C) such other approvals as have been obtained and
remain in full force and effect;
(iii) To the best knowledge of Safeguard, the Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus or any part thereof and, to the best knowledge of Safeguard, no
proceedings for a stop order have been instituted or are pending or
threatened. When any Preliminary Prospectus was filed with the Commission,
it contained all statements required to be stated therein in accordance
with, and complied in all material respects with the requirements of, the
Act and the Rules and Regulations except to the extent that such
Preliminary Prospectus did not contain any such required statements, or did
not so comply, in a manner corrected in the Prospectus. To the best
knowledge of Safeguard, when the Registration Statement (or any amendment
thereto) was (or is) declared effective, it (A) contained (or will contain)
all statements required to be stated therein in accordance with, and
complied in all material respects (or will comply in all material respects)
with the requirements of, the Act and the Rules and Regulations and (B) did
not or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading. To the best knowledge of Safeguard, when the Prospectus or any
amendment or supplement thereto is filed pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required to be so
filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared
effective) and on the Closing Date and any Option Closing Date, the
Prospectus, as amended or supplemented at any such time, (A) contained or
will contain all statements required to be stated therein in accordance
with, and complied or will comply in all material respects with the
requirements of, the Act and the Rules and Regulations and (B) did not or
will not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (iii) do not apply to the Provided
Information;
-22-
(iv) To the best knowledge of Safeguard, the descriptions
in the Registration Statement, the Prospectus and any amendment or
supplement thereto of agreements, whether written or oral, and of other
documents are accurate and fairly present the information required to be
shown with respect thereto by Form S-1 under the Act. To the best knowledge
of Safeguard, there are no agreements, whether written or oral, or other
documents that are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the
Registration Statement that are not described or filed as required;
(v) Safeguard has not (a) made or caused to be effected any
transaction, directly or indirectly, designed to or that has constituted or
that might reasonably be expected to cause or result in stabilization of
the price of the Common Stock or the Rights, (b) taken or will take,
directly or indirectly, any action designed to or that has constituted or
that might reasonably be expected to cause or result in manipulation of the
price of the Common Stock or the Rights in violation of Regulation M under
the Exchange Act, or (c) failed to comply with the Act or the Rules and
Regulations in order to effect the transactions contemplated hereby.
(vi) To the best of Safeguard's knowledge, no Unsubscribed
Shares or Direct Shares have been sold to any person listed in Section
IM-2110-1(b)(3)-(8) of the NASD's Conduct Rules.
3. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to issue and the Company and the Selling Stockholders
agree, severally and not jointly, to sell to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase in the percentages
set forth in Schedule C hereto, all of the Excess Unsubscribed Shares at a price
of $5.00 per share.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained and upon not less than two business
days' notice from the Underwriters, for a period of 20 days after the Expiration
Date, the Selling Stockholders agree to sell to the Underwriters all or part of
up to 640,000 Option Shares (representing 478,240, 124,630 and 37,130 Option
Shares being sold by ▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇, respectively) at a purchase price of
$5.00 per share for the sole purpose of covering over-allotments that may be
made in connection with the offering and distribution of the shares of Common
Stock. The Underwriters may exercise their option to purchase all or any
portion of the Option Shares from the Company up to two times, provided that the
aggregate number of Option Shares purchased by the Underwriters shall not exceed
640,000. Delivery of the Option Shares shall be made
-23-
concurrently with payment therefor. Option Shares may be purchased by the
Underwriters only for the purpose of covering over-allotments that may be
made in connection with the offering and distribution of the shares of Common
Stock. No Option Shares shall be delivered unless the Excess Unsubscribed
Shares (if any are purchased by the Underwriters) shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the respective aggregate purchase prices of the Excess
Unsubscribed Shares purchased from the Company and the Selling Stockholders
shall be made by the Underwriters on the Closing Date by wire transfer in same
day funds, payable to or upon the order of the Company and the Selling
Stockholders at the offices of Wheat, First Securities, Inc. at Riverfront
Plaza, West Tower, ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such
other place as shall be agreed upon by the Underwriters and the Company, upon
delivery of certificates (in form and substance satisfactory to the
Underwriters) representing the Excess Unsubscribed Shares to the Underwriters.
Delivery and payment for the Excess Unsubscribed Shares shall be made at the
Closing. In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Shares shall be made at the above mentioned
office or at such other place as shall be agreed upon by the Underwriters and
the Company, on each Option Closing Date as specified in the notice from the
Underwriters to the Company. Certificates for the Excess Unsubscribed Shares
and the Option Shares, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least two
business days prior to the Closing Date or the relevant Option Closing Date, as
the case may be. The certificates for the Excess Unsubscribed Shares and the
Option Shares, if any, shall be made available to the Underwriters at such
office or such other place as the Underwriters may designate for inspection,
checking and packaging not later than 9:30 a.m., New York City time, on the last
business day prior to the Closing Date or the relevant Option Closing Date, as
the case may be.
(d) Delivery of certificates representing the shares of Common Stock
to be sold pursuant to the exercise of the Rights, and the payment of the
subscription price therefor to the Company and the Selling Stockholders shall be
made at the Closing on the Closing Date pursuant to the Rights Agent Agreement,
irrespective of whether or not any Excess Unsubscribed Shares are to be
purchased by the Underwriters at such Closing.
4. Public Offering of the Excess Unsubscribed Shares.
As soon after the Registration Statement becomes effective as the
Underwriters deem advisable, the Underwriters shall make the Offering.
-24-
5. Registration of Common Stock in Certain States.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth,
the Underwriters will act (or at their expense, will cause another
broker-dealer registered in such state to act) as the agent of the Company
and the Selling Stockholders to effect the offering of the Rights and the
sale of the shares of Common Stock upon exercise thereof or pursuant to the
Other Purchasers Standby Purchase Agreements in the States of Connecticut,
Florida, Nebraska, Nevada, New Hampshire and New York, such states being
those states in which applicable state law requires that a registered
broker-dealer effect the offering of the Rights or the shares of Common Stock
purchasable upon exercise thereof or pursuant to the Other Purchasers Standby
Purchase Agreements. The Underwriters may delegate their obligations under
the immediately preceding sentence through another registered broker-dealer
satisfactory to them in states where the Underwriters are not registered as
such. The Underwriters shall not be liable under this Section 5(a), except
for gross negligence, lack of good faith and for their obligations expressly
assumed hereunder.
(b) The Company will deliver to the Underwriters, on or before the
day the Registration Statement becomes effective, a "Blue Sky Memorandum"
(herein so called), prepared by ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP relating to the
securities or Blue Sky laws of any jurisdictions in which the transfer of the
Rights or the offer and sale of the Common Stock is required to be qualified
or registered, which will set forth the circumstances under which said
transfer or offers and sales may be made and advising that the appropriate
action, if any, will be taken in each of such jurisdictions so as to permit
the transfer of the Rights and the offer and sale of the Common Stock
(whether upon or in connection with the exercise of Rights, as part of the
public offering of the Shares by the Underwriters or pursuant to the Other
Purchasers Standby Purchase Agreements) to the persons resident in the
jurisdictions indicated in such survey. Such Blue Sky Memorandum may be
based upon qualification of the Rights and the Common Stock as necessary with
appropriate persons in such jurisdictions and an examination of the statutes
and regulations, if any, of such jurisdictions as reported in standard
compilations and upon interpretive advice obtained from representatives of
certain securities commissions and such local counsel as may be necessary.
Such Blue Sky Memorandum will be furnished only for the Underwriters' general
information and guidance rather than as an opinion of counsel with regard to
the laws of the jurisdictions referred to therein.
6. Covenants of the Company and the Principal Stockholders.
(a) The Company covenants and agrees with the Underwriters as
follows:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto, to become effective as promptly as
possible. Unless required by
-25-
law, the Company will not file with the Commission the prospectus or
amendment referred to in the second sentence of Section 2(a)(i) hereof,
any amendment or supplement to such prospectus, any amendment to the
Registration Statement, or any document under the Exchange Act before
termination of the offering of the Shares by the Underwriters of which
the Underwriters shall not previously have been advised and furnished
with a copy, or to which the Underwriters shall have reasonably objected
by notice to the Company in writing after having been provided a copy
thereof, or which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations. During the time when a prospectus relating to
the Shares is required to be delivered under the Act, the Company will
comply with all requirements imposed upon it by the Act and the Rules and
Regulations to the extent necessary to permit the continuance of sales of
or dealings in the Shares in accordance with the provisions hereof and of
the Prospectus, as amended or supplemented. The Company will prepare and
file with the Commission, promptly upon the reasonable request by the
Underwriters or Underwriters' Counsel, any amendments to the Registration
Statement or amendments or supplements to the Prospectus that may be
necessary or advisable in connection with the distribution of the Shares
by the Underwriters, and will use its best efforts to cause the same to
be filed with the Commission as promptly as possible;
(ii) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters, with a confirmation in
writing, of (A) the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any
amendment or supplement thereto has been filed, (B) the issuance by the
Commission of any stop order, or of the initiation or threatening of any
proceeding, suspending the effectiveness of the Registration Statement or
any amendment thereto or any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, (C) the issuance by any state securities commission
of any notice of any proceedings for the suspension of the qualification
of the Shares for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (D)
the receipt of any comments from the Commission, and (E) any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information.
The Company will use its best efforts to prevent the issuance of any such
order or the imposition of any such suspension and, if any such order is
issued or suspension is imposed, to obtain the withdrawal thereof as
promptly as possible;
(iii) If required, the Company will file the Prospectus and
any amendment or supplement thereto with the Commission in the manner and
within the time period required by Rule 424(b) and Rule 430A(a)(3) of the
Rules and Regulations;
-26-
(iv) The Company will arrange for the qualification of the
shares of Common Stock for offering and sale under the securities or "Blue
Sky" laws of such jurisdictions in which recipients of Rights and the Other
Purchasers are resident and such jurisdictions as the Underwriters may
reasonably designate and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the shares of
Common Stock, provided, however, that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction;
(v) If, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event occurs as a
result of which, in the opinion of the Company or counsel for the Company,
the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is otherwise necessary at any time to amend or
supplement the Prospectus to comply with the Act or the Rules and
Regulations, the Company will promptly notify the Underwriters thereof and,
subject to Section 6(a)(i) hereof, prepare and file with the Commission, at
the Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance. If, at any time when a prospectus
relating to the Shares is required to be delivered under the Act, any event
occurs as a result of which, in the opinion of the Underwriters or
Underwriters' Counsel, the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the Underwriters will promptly notify the Company
thereof and the Company will, subject to Section 6(a)(i) hereof, prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance. The Company
will furnish to the Underwriters and dealers (whose names and addresses
shall be furnished to the Company by the Underwriters) to which Shares may
have been sold on behalf of the Underwriters and to any other dealers upon
request, a reasonable number of copies of any amendment or supplement
prepared pursuant to this paragraph (v);
(vi) The Company will furnish to each of the Underwriters
and to Underwriters' Counsel, without charge, a signed copy of the
registration statement originally filed with respect to the Shares and each
amendment thereto. So long as the Underwriters or any dealer is required by
the Act or the Rules and Regulations to deliver a prospectus, the Company
will also furnish as many copies of each Preliminary
-27-
Prospectus or the Prospectus or any amendment or supplement thereto as
the Underwriters may reasonably request.
(vii) As soon as practicable after the effective date of the
Registration Statement, the Company will make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Underwriters an earnings statement that will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations;
(viii) For a period of five years following the date hereof,
the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent
public accountants) and will deliver to the Underwriters unaudited
quarterly reports of earnings (through delivery of the Company's quarterly
reports filed with the Commission on Form 10-Q or Form 10-QSB) and the
following:
(A) concurrently with furnishing quarterly reports, if any,
to the stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders;
(B) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
public accountants;
(C) as soon as they are available, copies of all reports
(financial or other) mailed to its stockholders;
(D) as soon as they are available, copies of all reports
(other than preliminary proxy materials) and financial statements
furnished to or filed with the Commission, the NASD or Nasdaq which
are available to the public;
(E) as soon as they are available every press release and
every material news item or article of interest to the financial
community in respect of the Company or its affairs that is released or
prepared by the Company; and
(F) any additional information of a public nature
concerning the Company that the Underwriters may reasonably request
from time to time;
-28-
(ix) The Company will maintain a Transfer Agent and
Registrar for the shares of Common Stock. Effective as of the Closing
Date, the Company will cause the Transfer Agent for the shares of Common
Stock to make appropriate "stop transfer" restrictions in its records
relating to the certificates representing all shares of Common Stock subject
to restrictions under the agreements described in Sections 2(a)(xxiv),
2(b)(i) and 6(b)(i) hereof;
(x) During the period commencing on the date the
Registration Statement is declared effective by the Commission and ending
180 days after the Expiration Date, the Company, will not, without the
prior written consent of the Underwriters, (A) directly or indirectly,
transfer, sell, offer for sale, contract for sale, grant any option for the
sale of, or otherwise dispose of (or announce any transfer, sale, offer for
sale, contract for sale, grant of any option for sale of, or other
disposition of) any shares of Common Stock, or other securities convertible
into, or exercisable or exchangeable for, shares of Common Stock (except as
contemplated by this Agreement) or (B) file any registration statement
relating to any such securities with the Commission or any other authority
except as contemplated herein, provided, however, that (1) the Company may
grant or issue securities pursuant to any employee stock option plan or
stock purchase plan or outstanding stock options described in the Prospectus
and, commencing after the Closing Date, may file a registration statement on
Form S-8 with respect to such plans and (2) the Company may issue shares of
Common Stock, or other securities convertible into, or exercisable or
exchangeable for shares of Common Stock, as consideration for any
acquisition by the Company so long as the party being issued such securities
signs an agreement, acceptable in form and substance to the Underwriters,
that such party will not transfer, sell, offer for sale, contract to sell or
otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for shares of Common Stock
owned by such party or with respect to which such party has the power of
disposition during a period commencing on the date of issuance of such
securities and ending 180 days following the Expiration Date;
(xi) The Company will apply the net proceeds from the sale
of the Common Stock sold by it in the manner set forth under "USE OF
PROCEEDS" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used directly or indirectly to acquire
any securities issued by the Company;
(xii) The Company will furnish to the Underwriters as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in each case shall not be earlier than the
last day of the preceding month, unless such month-end shall be less than
three business days prior to the date such statements are to be delivered)
that
-29-
have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to Section 8(h) hereof;
(xiii) The Company will cause the Shares and the Rights to be
approved for quotation on the Nasdaq National Market and will use its
reasonable commercial efforts to maintain such approvals;
(xiv) The Company will file and cause to become effective
prior to the Closing Date a registration statement with respect to the
Common Stock pursuant to Section 12(g) of the Exchange Act and will use its
best efforts to maintain such registration;
(xv) The Company will apply the net proceeds from the sale
of the shares of Common Stock sold by it and conduct its operations in a
manner that will not subject it to registration as an investment company
under the Investment Company Act of 1940, as amended; and
(xvi) The Company will furnish, without charge, to the
Underwriters and Underwriters' Counsel within four months of the Closing
Date such number of closing binders as the Underwriters and Underwriters'
Counsel may reasonably request.
(b) Each Selling Stockholder covenants and agrees with the
Underwriters as follows:
(i) During the period commencing on the date the
Registration Statement is declared effective by the Commission and ending
180 days after the Expiration Date, the Selling Stockholder will not,
without the prior written consent of the Underwriters, directly or
indirectly, transfer, sell, offer for sale, contract for sale, grant any
option for the sale of or otherwise dispose of any shares of Common Stock
or other securities convertible into, or exercisable or exchangeable for,
shares of Common Stock except as contemplated in this Agreement.
(ii) The Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the Underwriters of the
Shares to be purchased by the Underwriters from such Selling Stockholder.
(iii) The Company and the Selling Stockholders covenant and
agree with each other and covenant and agree with the Underwriters that the
Other Purchasers Standby Shares to be sold and the 560,000 shares of Common
Stock that are expected to be sold to the ▇▇▇▇▇▇ Group upon exercise of the
▇▇▇▇▇▇ Rights shall be deemed to be sold by the Company.
-30-
(c) Safeguard covenants and agrees with the Underwriters that during
the period commencing on the date the Registration Statement is declared
effective by the Commission and ending 180 days after the Expiration Date,
Safeguard will not, without the prior written consent of the Underwriters,
directly or indirectly, transfer, sell, offer for sale, contract for sale, grant
any option for the sale of or otherwise dispose of any shares of Common Stock or
other securities convertible into, or exercisable or exchangeable for, shares of
Common Stock except (A) as contemplated in this Agreement or (B) pursuant to
grants or sales of such shares to employees of Safeguard or its subsidiaries,
provided that such transferees agree to be bound by the restrictions contained
in this paragraph.
7. Payment of Expenses; Fees.
(a) As compensation to the Underwriters for their services in
connection with the transactions contemplated by this Agreement and their
commitment hereunder, the Company and the Selling Stockholders hereby agree,
jointly and severally, to pay to the Underwriters, by wire transfer, on the
sixth business day following the Expiration Date, an amount equal to the sum of
(i) 3% of the Exercise Price for each share of Common Stock subject to Rights,
(ii) 3% of the subscription price for each Direct Share and each Undistributed
Share sold to the Direct Purchasers, and (iii) an additional fee of 4% of the
Exercise Price for each share (other than the Option Shares) purchased by the
Underwriters pursuant to Section 3(a) of this Agreement or upon the exercise of
Rights by the Underwriters if such Rights were purchased by the Underwriters at
a time when the Common Stock was trading (on a "when-issued" basis) at a per
share price of less than $6.00 or with the prior acknowledgement of Safeguard
that the Underwriters would be entitled to receive such compensation pursuant to
the exercise of such Rights. As compensation to the Underwriters for their
commitment hereunder, the Company hereby agrees to pay the Underwriters, by wire
transfer, on each Option Closing Date an amount equal to 7% of the Exercise
Price for each Option Share purchased on such date by the Underwriters. As
additional compensation to the Underwriters for their commitment hereunder, the
Company shall reimburse the Underwriters, by wire transfer on the sixth business
day following the Expiration Date, for a non-accountable expense allowance of
(i) $200,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued" basis) at a per share price of less than $7.25,
(ii) $100,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued basis) at a per share price between $7.25 and
$8.25 or (iii) no expense allowance if, on the Expiration Date, the closing
price for the Common Stock was trading (on a "when-issued" basis) at a per share
price greater than $8.25.
(b) The Company hereby agrees to pay all expenses and fees incident
to the performance of the obligations by the Company and the Selling
Stockholders under this Agreement, including all expenses and fees of the
Company and the Selling Stockholders
-31-
incurred in connection with or by (i) the engagement of accountants, counsel
for the Company and the Principal Stockholders, the Rights Agent and the
Transfer Agent and Registrar for the Common Stock, (ii) preparation,
duplication, printing, filing and distribution of the registration statement
originally filed with respect to the Shares and any amendments thereto, any
Preliminary Prospectus and the Prospectus and any amendments and supplements
thereto and related documents used in connection with the Offering, including
in each case the cost of all copies supplied to the Underwriters in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of certificates representing the Rights and the Shares, (iv) the
qualification of the Shares under state securities or "Blue Sky" laws,
including filing fees, costs of printing and mailing of a "Preliminary Blue
Sky Memorandum" and "Final Blue Sky Memorandum" and disbursements and fees of
4Underwriters' Counsel in connection with the review of such materials (which
shall be paid at the Closing), (v) the approval of the Common Stock and
Rights for quotation on the Nasdaq National Market, (vi) the filing fees of
the Underwriters in connection with any filings required to be made with the
NASD, (vii) travel and out of pocket expenses of the Company in connection
with meetings with prospective investors in the Shares (other than such
expenses as shall have been specifically approved in writing by the
Underwriters to be paid for by the Underwriters), and (viii) any expenses
incurred by the Company in connection with a "road show" presentation to
potential investors.
(c) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 8, Sections 12(a)(vii) or (a)(viii), or Section
13, the Company agrees to reimburse and indemnify the Underwriters for all of
their reasonable accountable out-of-pocket expenses, including the reasonable
fees and disbursements of Underwriters' Counsel and any of the state securities,
"Blue Sky" and NASD fees and expenses identified in Sections 7(b)(iv) and
7(b)(vi) above, that shall have been incurred by them in connection with the
proposed purchase and sale of the Shares.
8. Conditions of the Underwriters' Obligations.
The obligations of the Underwriters to purchase and pay for the Shares
shall be subject, in their sole discretion, to the accuracy of the
representations and warranties of the Company and the Principal Stockholders
herein as of the date hereof and as of the Closing Date, as if they had been
made on and as of the Closing Date, to the accuracy on and as of the Closing
Date of the statements of the officers of the Company and the Principal
Stockholders made in certificates delivered pursuant to the provisions hereof,
to the performance by the Company and the Principal Stockholders on and as of
the Closing Date of their respective covenants and obligations hereunder, and to
the following further conditions:
(a) If the Registration Statement or any amendment thereto filed
prior to the Closing Date has not been declared effective as of the time of
execution hereof, the Registration Statement or such amendment shall have been
declared effective not later than the first full business day next following the
date hereof or such later date and time as shall have been
-32-
consented to in writing by the Underwriters. If required, the Prospectus
shall have been timely filed with the Commission in accordance with Rule
424(b) of the Rules and Regulations. If required, any amendment or
supplement to the Prospectus shall have been filed in accordance with Rule
424(c) under the Act. No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge
of the Company, the Principal Stockholders or the Underwriters, shall be
contemplated by the Commission. The Company shall have complied, to the
reasonable satisfaction of the Underwriters and Underwriters' Counsel, with
any request of the Commission for additional information (to be included in
the Registration Statement, the Prospectus or otherwise).
(b) The Underwriters shall not have advised the Company or any of the
Principal Stockholders that, in the opinion of the Underwriters or Underwriters'
Counsel, (i) the Registration Statement, or any amendment thereto, includes an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) the Prospectus, or any amendment or supplement
thereto, includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(c) The Underwriters shall have received from Underwriters' Counsel
an opinion dated the Closing Date, with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus and such other related
matters as the Underwriters reasonably may request. Underwriters' Counsel shall
have received from the Company and the Principal Stockholders such papers and
information as they may request to enable them to review or pass upon such
matters or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties, or covenants of the Company or any of
the Principal Stockholders contained herein.
(d) The Underwriters shall have received from ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, counsel to the Company and the Principal Stockholders, an opinion, on or
prior to the date Rights certificates and Prospectuses are first mailed to
Safeguard Shareholders and on the Closing Date, dated the respective dates
thereof and in form and substance satisfactory to Underwriters' Counsel, to the
effect that:
(i) The Company and each of the Designated Subsidiaries are
duly incorporated, validly existing and in good standing under the laws of
their respective jurisdictions of organization and are duly qualified to
transact business as foreign corporations and are in good standing in each
jurisdiction in which the Company has represented to such counsel that they
conduct business;
-33-
(ii) The Company and each of the Designated Subsidiaries
have all requisite corporate power and authority necessary or required to
own or lease their respective properties and conduct its businesses as
described in the Registration Statement and the Prospectus;
(iii) The Company has all requisite power and authority
(corporate and other) to enter into this Agreement, the Rights Agent
Agreement and the Other Purchasers Standby Purchase Agreements and to
consummate the transactions provided for herein and therein; and this
Agreement, the Other Purchasers Standby Purchase Agreements and the Rights
Agent Agreement have each been duly authorized, executed and delivered by
the Company. Each of this Agreement, assuming due authorization, execution
and delivery by the Underwriters, and each of the Other Purchasers Standby
Purchase Agreements, and the Rights Agent Agreement, assuming due
authorization, execution and delivery by the parties thereto other than the
Company, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting
creditors' rights generally or by general principles of equity (including
standards of materiality, good faith, fair dealing and reasonableness)
whether applied by a court of law or equity, and except as rights to
indemnity and contribution hereunder may be limited by applicable law,
statutory duties or public policy (provided that as of the first date of
the opinion only, such opinion need not express any opinion set forth above
with respect to the Other Purchaser Standby Purchase Agreements that have
not theretofore been executed and delivered). The Company's execution and
delivery of this Agreement, the Other Purchasers Standby Purchase
Agreements and the Rights Agent Agreement, its performance of its
obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby do not and will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition
of any liens, charges, claims, encumbrances, pledges, security interests,
defects or other like restrictions or equities of any kind whatsoever upon,
any right, property or asset (tangible or intangible) of the Company or any
of the Subsidiaries pursuant to the terms of (A) the charter or bylaws,
each as amended through the date of the opinion, of the Company and each of
the Subsidiaries, (B) any material lease, permit, license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or
instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which any of them is or may be bound or to
which any of their respective properties or assets (tangible or intangible)
is or may be subject, or any indebtedness, except that such counsel need
not express an opinion with respect to any violation based upon any
covenant of a financial or numerical nature or that requires arithmetic
computation and such counsel has not otherwise known of or had reason to
expect the occurrence of such default, or (C) to the knowledge of Company
-34-
counsel, any statute, rule, regulation, judgment, decree or order
applicable to the Company or any of the Subsidiaries or any of their
respective activities or properties adopted or issued by an arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body (including those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company
or any of the Subsidiaries or any of their respective activities or
properties (other than such as may be required under state securities or
"Blue Sky" laws and such as may be required by the by-laws and rules of the
NASD in connection with the purchase and distribution of the Shares by the
Underwriters);
(iv) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or, to such counsel's
knowledge, any court is required in connection with the issuance of the
shares of Common Stock to be sold by the Company, the Company's performance
of its obligations hereunder, the Offering, or the consummation by the
Company of the other transactions contemplated hereby, except such as may
be required under the state securities or "Blue Sky" laws of any
jurisdiction or as may be required by the by-laws and rules of the NASD in
connection with the purchase and distribution of the Shares by the
Underwriters and except such other approvals as have been obtained and
remain in full force and effect. Upon the effectiveness of the
Registration Statement, the Common Stock will be registered pursuant to
Section 12(g) of the Exchange Act, and will be included in the Nasdaq
National Market;
(v) At the date or dates indicated in the Prospectus, the
authorized, issued and outstanding capital stock of the Company was as set
forth therein, and conformed as to legal matters, to the extent that it
constitutes matters of law or legal conclusions, to the description thereof
contained therein under the captions "CAPITALIZATION" and "DESCRIPTION OF
CAPITAL STOCK." All of the issued shares of Common Stock of the Company
(including the Shares sold by the Selling Stockholders) have been duly
authorized and validly issued, and are fully paid and non-assessable; the
holders thereof are not subject to personal liabilities solely by reason of
holding such shares; and none of such shares have been issued in violation
of the preemptive rights of any security holders of the Company known to
Company counsel. The Shares to be sold by the Company have been duly
authorized and, when paid for in accordance herewith, will be validly
issued, fully paid and non-assessable, and with no personal liability
resulting solely from the ownership thereof. Upon the issuance and
delivery pursuant to this Agreement of the Shares to be sold by the Company
to the Underwriters, assuming the Underwriters do not have knowledge of any
Adverse Claim, the Underwriters will acquire good and marketable title to
such Shares free and clear of any liens, charges, claims, encumbrances,
pledges, security interests, defects or other like restrictions or like
equities of any kind whatsoever. Except as described in the Prospectus,
there are no preemptive or other rights to subscribe for or to purchase,
nor
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any restriction upon the voting or transfer of, any shares of Common
Stock pursuant to the Company's Certificate of Incorporation or By-Laws,
each as amended to date, or pursuant to any agreement among stockholders to
which the Company is a party or of which it has knowledge, and the Shares
to be sold by the Company are not subject to any preemptive or other
similar rights of any security holder. The Company is not a party to or
bound by any instrument, agreement or, to such counsel's knowledge, other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in
the Prospectus. Except as described in the Prospectus with respect to
stock options (and shares issuable upon exercise thereof) that may be
registered by the Company in a registration statement on Form S-8, no
holder of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company which are
exercisable for or convertible or exchangeable for securities of the
Company has any right (which has not been waived) to include any securities
issued by the Company in the Registration Statement or any registration
statement to be filed by the Company within the period commencing on the
date the Registration Statement is declared effective by the Commission and
ending 180 days after the Expiration Date or to require the Company to file
a registration statement under the Act during such period. Based on the
form of specimen certificate provided to such counsel, the certificates
representing the Shares are in due and proper form;
(vi) The Registration Statement has become effective under
the Act. Any required filing of the Prospectus pursuant to Rule 424(b) and
430A(a)(3) of the Rules and Regulations has been made in accordance with
the time period required thereby. To such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are
pending or threatened, by the Commission;
(vii) At the time the Registration Statement was declared
effective by the Commission, the Registration Statement and the Prospectus
and any amendment or supplement thereto (other than the financial
statements, and notes thereto, the financial schedules, and the other
financial and statistical data included in the Registration Statement or
the Prospectus or omitted therefrom, as to which such counsel need express
no opinion) complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(viii) Such counsel has reviewed all contracts and other
documents referred to in the Registration Statement and the Prospectus, and
the summaries of and other disclosures regarding such contracts and other
documents included in the Registration Statement and the Prospectus fairly
present the information required to be shown with respect thereto. To such
counsel's knowledge, there are no contracts or other documents of a
character required to be filed as exhibits to the Registration
-36-
Statement or required to be described in the Registration Statement or
the Prospectus that were not filed or disclosed as required;
(ix) Except as disclosed in the Prospectus, to such
counsel's knowledge, there is not pending or threatened or contemplated
against the Company, or involving the properties or business of the
Company, any action, suit, proceeding, inquiry, investigation, litigation
or governmental proceeding (including those having jurisdiction over
environmental or similar matters), domestic or foreign, that (A) is
required to be disclosed in the Registration Statement and is not so
disclosed, (B) questions the validity of the capital stock of the Company
or the validity or enforceability of this Agreement, (C) questions the
validity of any action taken or to be taken by the Company pursuant to or
in connection with this Agreement, or (D) could materially adversely effect
the present or prospective ability of the Company to perform its
obligations under this Agreement or result in a Material Adverse Effect;
(x) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act, nor, by receipt of the proceeds from its sale by it
of the Shares pursuant to this Agreement, will the Company become or be
deemed to be an "investment company" under such Act;
(xi) No transfer taxes are required to be paid in connection
with the sale and delivery of the Common Stock by the Company to the
Underwriters hereunder;
(xii) The certificates evidencing the Rights to be
distributed to the Safeguard Shareholders and the shares of Common Stock to
be delivered hereunder are in due and proper form under Delaware law;
(xiii) All of the Rights have been duly authorized and validly
issued, and, when issued and distributed as set forth in the Prospectus,
will be legally issued and valid and binding obligations of the Company
having the rights summarized in the Prospectus; and none of such Rights
will have been issued in violation of the preemptive rights of any security
holders of the Company arising as a matter of law or under or pursuant to
the Company's Certificate of Incorporation, as amended, the Company's
By-Laws, as amended, or any agreement or instrument to which the Company is
a party or by which it is bound.
(xiv) Each Principal Stockholder has the legal right and
power to enter into this Agreement and each Selling Stockholder has the
requisite capacity and legal right to sell, transfer and deliver hereunder
the Shares proposed to be sold hereunder. This Agreement has been executed
and delivered by each of the Selling Stockholders. This Agreement,
assuming due authorization, execution and delivery by the Underwriters
-37-
constitutes the legal, valid, and binding obligations of each Principal
Stockholder enforceable against each Principal Stockholder in accordance
with its terms, subject to the effect of general principles of equity
(including standards of materiality, good faith, fair dealing and
reasonableness) whether applied by a court of law or equity and except as
rights to indemnity and contribution hereunder or thereunder may be limited
by applicable law, statutory duties or public policy;
(xv) The execution and delivery of this Agreement, the
performance by each Principal Stockholder of its obligations hereunder will
not conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under, or result in the creation
or imposition of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other like restrictions or equities of any
kind whatsoever upon, any right, property or (tangible or intangible) of
each of the Principal Stockholders pursuant to the terms of (A) any
material lease, permit, license, contract, indenture, mortgage, deed of
trust, voting trust agreements, stockholders agreement, note, loan or
credit agreement (including any related to indebtedness) or any other
agreement or instrument to which any Principal Stockholder is a party or by
which he or it is or may be bound or to which any of his or its respective
properties or assets (tangible or intangible) is or may be subject, or (B)
any statute, judgment, decree, order, rule or regulation, known to such
counsel, applicable to any Principal Stockholder or any of his or its
respective activities or properties adopted or issued by any arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body (including those having jurisdiction over environmental or
similar matters), having jurisdiction over any Principal Stockholder or any
of his or its respective activities or properties, in each case except
where such breach, violation or default would not (i) affect the
enforceability of this Agreement, or (ii) affect the Offering or the sale
of the Common Stock contemplated hereby. To such counsel's knowledge, no
consent, approval, authorization or order of, or filing with, any
governmental agency or body or any court is required for the consummation
by any Principal Stockholder of the transactions contemplated herein,
except such as may be required under the state securities or "Blue Sky"
laws of any jurisdiction or as may be required by the by-laws and rules of
the NASD in connection with the purchase and distribution of the Shares by
the Underwriters and except such other approvals as have been obtained and
remain in full force and effect; and
(xvi) To such counsel's knowledge, each Selling Stockholder
has title to the Shares proposed to be sold by such Selling Stockholder
hereunder free of any adverse claims and upon delivery of and payment for
such Shares hereunder, assuming that each Underwriter does not have any
notice of an adverse claim, such Underwriter will be a protected purchaser
(as defined in Section 8-303 of the Uniform Commercial Code as in effect in
the State of Delaware).
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In addition, such opinion shall contain statements substantially
to the following effect:
In the course of the preparation by the Company and its counsel of
the Registration Statement and the Prospectus, such counsel attended
conferences with certain of the officers of, and the independent public
accountants for, the Company, at which the Registration Statement and the
Prospectus were discussed (some of which were attended by representatives of
the Underwriters). Between the date of effectiveness of the Registration
Statement and the Closing Date, such counsel attended (if applicable)
additional conferences with certain of the officers of, and the independent
public accountants for, the Company, at which the contents of the
Registration Statement and the Prospectus were discussed. Given the
limitations inherent in the independent verification of factual matters and
the character of determinations involved in the registration process, such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus (other than as set forth in the
first sentence of paragraph (v) and as set forth in paragraph (viii) above).
Subject to the foregoing and on the basis of the information such counsel
gained in the performance of the services referred to above, including
information obtained from officers and other representatives of the Company,
no facts have come to such counsel's attention that cause such counsel to
believe (except that such counsel need not express any opinion or belief
with respect to the financial statements, schedule and the notes thereto and
other financial and statistical data included therein) that (y) the
Registration Statement, at the time it was declared effective by the
Commission, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (z) the Prospectus, as of its date or
the Closing Date, 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 in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
provided such counsel need not express any belief as to the contents of the
eighth paragraph under the heading "UNDERWRITING" in the Prospectus.
In rendering such opinions, such counsel may rely as to matters of
fact, to the extent they deem proper, on the representations and warranties
of the Company and the Principal Stockholders contained in this Agreement and
on certificates and written statements of the Company or responsible officers
of the Company and certificates or other written statements
-39-
of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested.
The Underwriters are entitled to rely on the opinion of such firm,
filed as an exhibit to the Registration Statement, as to the matters
discussed in the Prospectus under the heading "FEDERAL INCOME TAX
CONSEQUENCES" in the Prospectus.
References to the Prospectus and Registration Statement in this
Section 8(d) shall include any amendment or supplement thereto at the date of
such opinion.
(e) The Underwriters shall have received a certificate, dated the
Closing Date and in form and substance satisfactory to the Underwriters, of
the Company signed by each of the Chief Executive Officer and Chief Financial
Officer of the Company to the effect that each of such officers has carefully
examined the Registration Statement, the Prospectus and this Agreement and,
to his best knowledge, that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing
Date, and the Company has complied in all material respects with all
agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of such officers'
knowledge, are contemplated or threatened by the Commission; and
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, (A)
there has been no material adverse change, or development involving a
prospective material adverse change (including a change in management or
control of the Company), in the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company and
the Subsidiaries, on a consolidated basis, except in each case as described
in or contemplated by the Prospectus; (B) neither the Company nor any of
the Subsidiaries has entered into any transactions not in the ordinary
course of business; (C) neither the Company nor any of the Subsidiaries has
incurred any material liabilities or obligations, direct or contingent,
other than as disclosed in the Registration Statement and the Prospectus;
(D) neither the Company nor any of the Subsidiaries has sustained a loss
material to the Company and the Subsidiaries, on a consolidated basis, by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, whether or not such loss shall have been
insured, or from any labor dispute or from any
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legal or governmental proceeding; (E) no action, suit or proceeding, at
law or in equity, has been filed or, to the knowledge of such officer, is
threatened against the Company or any of the Subsidiaries or affecting
any of their respective properties or businesses before or by any court
or federal, state or foreign commission, board or other administrative
agency that (1) alleges that the conduct of such business as currently
conducted or as proposed to be conducted infringes on any trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications or trade secrets currently held by any third party and (2)
has had as of the date of such certificate or, if pending and if decided
unfavorably, is likely to have a Material Adverse Effect; and (F) there
has not occurred any other event required to be set forth in the
Prospectus that has not been so set forth.
Except as otherwise provided in clause (iii)(A) above, references to
the Prospectus and Registration Statement in this Section 8(f) shall include
any amendment or supplement thereto at the date of such opinion.
(f) The Underwriters shall have received a certificate, dated the
Closing Date, of the Chairman and the Vice President and General Counsel of
Safeguard to the effect that such officers have carefully examined the
Registration Statement, the Prospectus and this Agreement and that the
representations and warranties of Safeguard in this Agreement are true and
correct on and as of the Closing Date, and that Safeguard has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date.
(g) The Underwriters shall have received a certificate, dated the
Closing Date, from each Selling Stockholder to the effect that such Selling
Stockholder has carefully examined the Registration Statement, the Prospectus
and this Agreement and that the representations and warranties of the Selling
Stockholder in this Agreement are true and correct on and as of the Closing
Date, and that the Selling Stockholder has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Closing Date.
(h) The Underwriters shall have received from Deloitte & Touche
letters dated, respectively, the date hereof and the Closing Date, in form
and substance satisfactory to the Underwriters and Underwriters' Counsel,
with respect to matters set forth below:
(i) confirming that they are and were independent public
accountants with respect to the Company within the meaning of the Act and
the Rules and Regulations;
(ii) stating that it is their opinion that the audited
financial statements and schedules examined by them and included in the
Registration Statement and the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Rules and Regulations;
-41-
(iii) stating that, on the basis of certain procedures which
included a reading of the latest available unaudited interim
consolidated financial statements of the Company (with an indication
of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of meetings and
actions of the stockholders and board of directors and the various
committees of the board of directors of the Company, inquiries of
officers and other employees of the Company responsible for financial
and accounting matters and other specified procedures and inquiries,
nothing came to their attention that caused them to believe that (A)
the unaudited consolidated financial statements, if any, and schedules
of the Company included in the Registration Statement and the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements
of the Company included in the Registration Statement and the
Prospectus, (B) at a specified date not more than five days prior to
the date of such letter, there was any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders'
equity, or net current assets of the Company, in each case, as
compared with amounts shown in the December 31, 1996 consolidated
balance sheet included in the Registration Statement and the
Prospectus, except for changes set forth in such letter, and (C)
during the period from December 31, 1996 to such specified date, there
was any decrease in consolidated revenues, income before income taxes,
or net income, or any decrease in net income per common share of the
Company, in each case as compared with the corresponding period
beginning January 1, 1996, except for changes set forth in such
letter;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement; and
(v) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may reasonably
request.
In the event that either of the letters referred to above set forth
any such changes, decreases or increases, it shall be a further condition of the
obligations of the Underwriters that
-42-
(A) such letter shall be accompanied by a written explanation of the Company
as to the significance thereof, unless the Underwriters deem such explanation
unnecessary, and (B) such changes, decreases or increases do not, in the sole
judgment of the Underwriters, make it impractical or inadvisable to proceed
with the purchase and delivery of the Shares as contemplated by the
registration statement originally filed with respect to the Shares, as
amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
Section 8(h) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(i) The Associated Person Lock-Ups with respect to each person listed
on Schedule A annexed hereto and the ▇▇▇▇▇▇ Lock-Up shall be in full force and
effect.
(j) The outstanding shares of Common Stock and the shares of Common
Stock to be issued by the Company as contemplated by this Agreement shall have
been approved for quotation on the Nasdaq National Market (upon notice of
issuance in the case of the latter shares).
(k) No order suspending the sale of the Shares in any jurisdiction
designated by the Underwriters pursuant to Section 6(a)(iv) hereof shall be in
effect on the Closing Date and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Underwriters, shall be
contemplated.
(l) On or prior to the date that Rights certificates are first mailed
to Safeguard Shareholders and on the Closing Date, dated the respective dates
thereof and in form and substance satisfactory to Underwriters' counsel, the
Company shall furnish to the Underwriters such information, certificates and
documents as either of the Underwriters may reasonably request.
If any condition of the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, the Underwriters
may terminate this Agreement or, if the Underwriters so elect, they may waive
any such conditions that have not been fulfilled or extend the time for their
fulfillment. In the event the Underwriters so elect to terminate this
Agreement, all Rights and the Other Purchasers Standby Purchase Agreements shall
become immediately null and void and the Company shall cause the Escrow Agent
under the Rights Agent Agreement to promptly return to the subscribers any
payments received by the Escrow Agent in respect of the exercise price relating
thereto. All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and
Underwriters' Counsel. The Company shall furnish to the Underwriters such
conformed copies of such
-43-
opinions, certificates, letters and documents in such quantities as the
Underwriters and Underwriters' Counsel shall reasonably request.
The obligations of the Underwriters to purchase and pay for any Option
Shares after having exercised an option set forth in Section 3(b) hereof shall
be subject, in its discretion, to each of the foregoing conditions of this
Section 8 to purchase the Excess Unsubscribed Shares, with all references to the
Excess Unsubscribed Shares and the Closing Date being deemed to refer to such
Option Shares and the related Option Closing Date, respectively.
9. Indemnification.
(a) The Company and each Principal Stockholder, jointly and
severally, agree to indemnify and hold harmless each of the Underwriters and
each person, if any, who is a Controlling Person with respect to either of the
Underwriters against any and all losses, claims, damages, expenses and
liabilities, joint or several (and actions in respect thereof), whatsoever
(including any and all reasonable expenses incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever), as such are incurred, (i) to which the Underwriters or such
Controlling Person may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented) or (B) in any application or other document or written
communication (in this Section 9 collectively called "Application") executed by
the Company or the Principal Stockholders or based upon written information
furnished by the Company or the Principal Stockholders in any jurisdiction in
order to qualify the Common Stock under the securities laws thereof or filed
with the Commission, any state securities commission or agency, the Nasdaq
National Market or any other securities exchange, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made, unless such statement or omission was made in
reliance upon, and in strict conformity with, the Provided Information or (ii)
to which the Underwriters or such Controlling Person may become liable to any
party which relate to, or arise out of, the Underwriters' or such Controlling
Person's consummation of the transactions contemplated hereby or the
Underwriters' or such Controlling Person's role in connection herewith
(including without limitation as a result of any breach of any representation or
warranty made by the Company or the Principal Stockholders); provided, however,
that neither the Company nor the Principal Stockholders shall be responsible for
any losses, claims, damages, expenses or liabilities that are finally judicially
determined to have resulted primarily from the gross negligence or intentional
or reckless misconduct of the Underwriters or such Controlling Person. The
indemnity agreement contained in this subsection (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of the Underwriters and
such Controlling Person with respect to a person asserting any such losses,
claims, damages, liabilities or expenses who
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purchased the Shares if at or prior to the written confirmation of the sale
of such Shares a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue
statement contained in, or omission of a material fact from, such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented). The indemnity agreements in this subsection (a) shall be in
addition to any liability that the Company or the Principal Stockholders may
have at common law or otherwise.
(b) The Underwriters agree to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, the Principal Stockholders and each other Controlling
Person, if any, who controls the Company or the Principal Stockholders, to the
same extent as the foregoing indemnity from the Company and the Principal
Stockholders to the Underwriters but only with respect to statements made in, or
omissions from, any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any Application
made in reliance upon, and in strict conformity with, the Provided Information.
(c) Promptly after receipt by any indemnified party or parties under
this Section 9 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 9, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party or parties shall not
relieve it from any liability that it may have under this Section 9 except to
the extent that it has been prejudiced in any material respect by such failure
or from any liability that it may have otherwise). In case any such action is
brought against any indemnified party or parties, and it notifies the
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent it
may elect, by written notice delivered to the indemnified party or parties
promptly after receiving the aforesaid notice from such indemnified party or
parties, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party or parties. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action within a reasonable time
after notice to the indemnifying party or parties of commencement of the action,
or (iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them that are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any
-45-
local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions
in the same jurisdiction arising out of the same general allegations or
circumstances. Anything in this Section 9 to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent; provided, however, that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 9, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 9 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
action in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Shares or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where either the
Company and/or the Principal Stockholders are the contributing parties and the
Underwriters are the indemnified parties, the relative benefits received by the
Company and/or the Principal Stockholders, on the one hand (treated collectively
as one person for this purpose), and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Shares and the shares of Common Stock sold upon exercise of the Rights (net
of underwriting discounts and other commissions paid to the Underwriters but
before deducting the other expenses incurred by the Company and the Principal
Stockholders in connection with the sale of the Shares) bear to the total
underwriting discounts and other commissions received by the Underwriters
hereunder, in each case as set forth in the table on the cover page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company and the Principal Stockholders (treated collectively, as
one person for this purpose) or by the Underwriters, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to above in this Section 9(d) shall be
deemed to include any legal or other expense reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this
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Section 9(d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount and other commissions applicable to
the Shares purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each person,
if any, who controls the Company or any Principal Stockholder within the
meaning of the Act, each officer of the Company who has signed the
Registration Statement, and each director of the Company shall have the same
rights to contribution as the Company and the Principal Stockholders, subject
in each case to this Section 9(d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution
may be made against another party or parties under this Section 9(d), notify
such party or parties from whom contribution may be sought, but the omission
so to notify such party or parties shall not relieve the party or parties
from whom contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this Section 9(d), but only to the extent
that such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
10. Representations and Agreements to Survive Delivery.
All representations, warranties, agreements and covenants contained
in this Agreement or contained in certificates of each of the officers of the
Company or of each Principal Stockholder submitted pursuant hereto, shall be
deemed to be representations, warranties, agreements and covenants at the
Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties, agreements and covenants of the Underwriters,
the Company and each Principal Stockholder, and the indemnity agreements
contained in Section 9 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the
Underwriters, the Company and each Principal Stockholder, or any Controlling
Person, and shall survive termination of this Agreement or the issuance and
delivery of the Shares to the Underwriters, provided that to the extent any
such representations, warranties, agreements or covenants are expressly
waived in writing by the Underwriters, the survival of the same shall be as
set forth in such waiver, or, if not so set forth, as provided in this
Section 10.
11. Effective Date.
This Agreement shall become effective at 9:00 a.m., New York time, on
the next full business day following the date hereof or upon the commencement of
the Rights Offering, whichever is earlier; provided, however, that the
provisions of Sections 6, 7, 9, 10 and 12 of this Agreement shall at all times
be effective.
-47-
12. Termination.
(a) Subject to subsection (c) of this Section 12, the Underwriters
shall have the right to terminate this Agreement (i) if any calamitous domestic
or international event or act or occurrence has disrupted the general securities
market in the United States; (ii) if trading in the Common Stock (on a
when-issued basis) shall have been suspended by the Commission or the Nasdaq
National Market; (iii) if trading on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or in the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; (iv) if the United States shall
have become involved in a war or major hostilities which, in the Underwriters'
opinion, affects the general securities market in the United States; (v) if a
banking moratorium has been declared by any Maryland, New York, Pennsylvania,
Virginia or federal authority; (vi) if a moratorium in foreign exchange trading
(with respect to a foreign exchange on which the Company's securities are
traded) has been declared; (vii) if the Company shall have sustained a loss
material to the Company by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not such loss shall have
been insured, or from any labor dispute or any legal or governmental proceeding;
(viii) if, in the reasonable judgment of the Underwriters, there shall have been
such material adverse change, or any development involving a prospective
material adverse change in the financial condition, net worth or results of
operations of the Company since December 31, 1996 or in the business prospects
or conditions of the Company since the date of this Prospectus, or that
materially and adversely impacts this Agreement; or (ix) on any date commencing
on the date hereof and ending on the Closing Date, if there shall be such
material adverse market conditions (whether occurring suddenly or gradually
between the date hereof and the Closing Date) affecting the markets generally as
in the Underwriters' reasonable judgment would make it inadvisable to proceed
with the offering, sale or delivery of the Shares.
(b) If the Underwriters elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 12, they
shall so notify the Company on the same day as such election is made by
telephone or telegram, confirmed by letter.
(c) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including pursuant to Section 13 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 7 and Section 9 shall not be in
any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
-48-
13. Default by the Company or the Selling Stockholders.
If the Company or the Selling Stockholders shall fail to sell and
deliver to the Underwriters the Excess Unsubscribed Shares to be sold and
delivered by the Company or the Selling Stockholders at the Closing Date or
the Option Shares to be sold and delivered by the Company at any Option
Closing Date under the terms of this Agreement, then the Underwriters may at
their option, by written notice to the Company and Selling Stockholders
either (a) terminate this Agreement without any liability on the part of any
non-defaulting party other than pursuant to Section 12 or (b) purchase the
Shares which the Company and the Selling Stockholders have agreed to sell and
deliver in accordance with the terms hereof. In the event of a failure of
the Selling Stockholders to sell and deliver as referred to in this Section,
either the Underwriters or the Company shall have the right to postpone the
Closing Date or the Option Closing Date, as the case may be, for a period not
exceeding seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any
other arrangements, as may be effected. No action taken pursuant to this
Section shall relieve the Company or the Selling Stockholders from liability
in respect of such default.
14. Notices.
All notices and communications hereunder may be mailed or
transmitted by any standard form of telecommunication and, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given when delivered to a notice party hereto at the address
specified herein or at the address subsequently communicated in writing by
the notice parties. Notices to the Underwriters shall be directed to the
Underwriters in care of Wheat, First Securities, Inc., Riverfront Plaza, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to Drinker ▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq. Notices to the
Company shall be directed to the address of the Company as set forth on the
facing page to the Registration Statement, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇ and
▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ Square, Philadelphia, Pennsylvania, Attention:
N. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. Notices to Safeguard shall be directed to Safeguard
Scientifics, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., with a copy to
▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: N. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. In each case a party
may change its address for notice hereunder by a written communication to the
other parties.
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15. Parties.
This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Underwriters, the Company and the Principal Stockholders
and the Controlling Persons, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of
or by virtue of this Agreement or any provisions herein contained. No
purchaser of Shares from the Underwriters shall be deemed to be a successor
by reason merely of such purchase.
16. Construction.
This Agreement shall be governed by the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles
thereof. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described.
17. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which taken together
shall be deemed to be one and the same instrument.
18. Entire Agreement.
This Agreement contains the entire agreement between the parties
hereto in connection with the subject matter hereof.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Principal Stockholders, please so indicate in
the space provided below for that purpose, thereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
OAO TECHNOLOGY SOLUTIONS, INC.
By:
_______________________________________
Name:
Title:
-50-
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By:
______________________________________
Name:
Title:
______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇
Confirmed and accepted
as of the date first
above written:
WHEAT, FIRST SECURITIES, INC. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, INC.
By:____________________________ By:_______________________________
Name: Name:
Title: Title:
-51-
Schedule A
Name
Safeguard Scientifics, Inc.
Safeguard Scientifics (Delaware), Inc.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Harvard ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (and his assignees, if any)
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
-52-
Schedule B
List of Subsidiaries
OAO Systems, Inc.
OAO Canada, Ltd.
Canadian Network Resources, Ltd.
Canadian Resource Management, Ltd.
OAO/ICOR De Mexico, S.A. De CV
OAO Puerto Rico, Inc.
OAO/ICOR Do Brasil S-C Ltda
OAO/ICOR New Zealand Limited
OAO/ICOR Australia PTY Limited
OAO France
OAO Deutschland Gmbh
OAO (UK) Limited
OAO/ICOR (UK) Ltd.
OAO Commercial Systems Corp.
-53-
Schedule C
Name of Underwriters % of Underwriter Shares
Wheat, First Securities, Inc. 55%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. 45%
-54-
