Exhibit 1
1,575,000 Shares of Common Stock
VICON INDUSTRIES, INC.
FORM OF UNDERWRITING AGREEMENT
New York, New York
_______ __, 1998
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
SOUTHEAST RESEARCH PARTNERS, INC.
c/o Fahnestock & Co. Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Vicon Industries, Inc., a New York corporation (the "Company"),
proposes to issue and sell to the Underwriters named in Schedule A hereto
(the "Underwriters") 1,250,000 shares (the "Company Shares") of Common Stock,
$.01 par value, (such class of stock being herein called the "Common Stock"),
of the Company. In addition, certain shareholders of the Company named in
Schedule B hereto (the "Selling Shareholders"), propose to sell to the
Underwriters an additional 325,000 shares of Common Stock (the "Selling
Shareholder Shares"). The Company shares and the Selling Shareholder Shares
are herein called the "Firm Shares." In addition, the Company will grant to
the Underwriters an option to purchase up to an additional 237,250 shares of
Common Stock (the "Option Shares") for the purpose of covering
over-allotments in connection with the sale of Firm Shares. The Firm Shares
and any Option Shares purchased pursuant to this Underwriting Agreement are
herein called "Shares."
The Company also proposes to issue and sell to the Underwriters
warrants (the "Underwriters' Warrants") pursuant to the Underwriters' Warrant
Agreement (the "Underwriters' Warrant Agreement") for the purchase of an
additional aggregate 157,500 shares of Common Stock. The shares of Common
Stock issuable upon exercise of the Underwriters' Warrants are hereinafter
referred to as the "Underwriters' Shares." The Firm Shares, the Option
Shares, the Underwriters' Warrants and the Underwriters' Shares (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of
the date hereof, and as of the Closing Date (hereinafter defined) and the
Option Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-2 (No. 333-_____), including any
related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act,
and the rules and regulations (the "Regulations") of the Commission under the
Act. The Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Underwriters, and will not
file any other amendment thereto to which the Underwriters shall have
objected to in writing after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated
therein (including, but not limited to, those documents or information
incorporated by reference therein) and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement", and the
form of prospectus in the form first filed with the Commission pursuant to
Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or to the Company's knowledge, threatened. Each of
the Preliminary Prospectus, Registration Statement and Prospectus at the time
of filing thereof conformed with the requirements of the Act and the Rules
and Regulations, and none of the Preliminary Prospectus, Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein and necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, provided,
however, that this representation and warranty does not apply to statements
made or statements omitted in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or
on behalf of any Underwriter expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus.
2
(c) When the Registration Statement becomes effective and at
all times subsequent thereto, the Registration Statement and the Prospectus
will contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and will conform to
the requirements of the Act and the Rules and Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of any Underwriter expressly for
use in the Preliminary Prospectus, Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
(d) (i) Each of the Company and its subsidiaries, all of
which are identified in the Registration Statement (each, a "Subsidiary and,
collectively the "Subsidiaries"), has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its organization. Neither the Company nor the Subsidiaries owns an
interest in any corporation, partnership, trust, joint venture or other
business entity, except as described in the Registration Statement. Each of
the Company and its Subsidiaries is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its ownership
or leasing of any properties or the character of its operations requires such
qualification or licensing. Each of the Company and its Subsidiaries has all
requisite corporate power and authority, and each of the Company and its
Subsidiaries has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
to own or lease its properties and conduct its business as described in the
Prospectus; each of the Company and its Subsidiaries is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state and
local laws, rules and regulations; and neither the Company nor the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, value, operation, properties, business or
results of operations of the Company and its Subsidiaries, taken as a whole.
The disclosures in the Registration Statement concerning the effects of
federal, state and local laws, rules and regulations on the Company's and the
Subsidiaries' business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which they were made.
(ii) Neither the Company nor any Subsidiary is party to any joint
venture or partnership agreement ("Joint Venture") except as set forth in the
Registration Statement. Each Joint Venture has all requisite corporate power
and authority, and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and
3
from all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
to own or lease its properties and conduct its business as described in the
Prospectus; each Joint Venture is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all applicable national and local laws, rules and
regulations; and no Joint Venture has received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Joint Venture, taken as
a whole. The disclosures in the Registration Statement concerning the
effects of national and local laws, rules and regulations on the Joint
Venture business as currently conducted and as contemplated are correct in
all material respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date and the Option Closing Date, if any, based
upon the assumptions set forth therein, and 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, the Underwriters' Warrant Agreement and as
described in the Prospectus. The Securities and all other securities issued
or issuable by the Company conform or, when issued and paid for, will
conform, in all respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable and the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. The Securities
are not and will not be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and will conform to the description thereof contained
in the Prospectus; the holders thereof will not be subject to any liability
solely by reason of being such holders; all corporate action required to be
taken for the authorization, issue and sale of the Securities has been duly
and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company or the Selling
Shareholders hereunder, the Underwriters or the Underwriters, as the case may
be, will acquire good and marketable title to such Securities free and clear
of any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever.
(f) KPMG Peat Marwick LLP, the accountants who have certified
the financial statements filed and to be filed with the Commission as part of
the Registration
4
Statement, each Preliminary Prospectus and the Prospectus, are independent
public accountants within the meaning of the Act and the Regulations. The
consolidated financial statements, including the related notes and schedules
thereto, included in the Registration Statement, each Preliminary Prospectus
and the Prospectus fairly present the financial position, income, changes in
cash flow, changes in stockholders' equity, and the results of operations of
the Company and the Subsidiaries at the respective dates and for the
respective periods to which they apply and the pro forma financial
information included in the Registration Statement and Prospectus presents
fairly, on a basis consistent with that of the audited financial statements
included therein, what the Company's pro forma capitalization would have been
for the respective periods and as of the respective dates to which they apply
after giving effect to the adjustments described therein. Such financial
statements have been prepared in conformity with generally accepted
accounting principles and the Regulations, consistently applied throughout
the periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, position, prospects, value, operation,
properties, business, or results of operations of the Company and the
Subsidiaries, whether or not arising in the ordinary course of business,
since the date of the financial statements included in the Registration
Statement and the Prospectus, and the outstanding debt, the property, both
tangible and intangible, and the business of the Company and the Subsidiaries
conform in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information set forth
in the Prospectus under the headings "Summary Consolidated Financial Data,"
"Selected Consolidated Financial Data," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
fairly present, on the basis stated in the Prospectus, the information set
forth therein, have been derived from or compiled on a basis consistent with
that of the audited financial statements included in the Prospectus.
(g) Each of the Company and the Subsidiaries (i) has paid all
federal, state, local, and foreign taxes for which it is liable and for which
payment is due, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of 1986
(the "Code"), and has furnished all information returns it is required to
furnish pursuant to the Code, (ii) has established adequate reserves for such
taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Securities, (ii) the purchase by the
Underwriters of the Securities to be sold by the Company or any Selling
Shareholder hereunder and the purchase by the Underwriters of the
Underwriters' Warrants from the Company, (iii) the consummation by each of
the Company or any Selling Shareholder of any of its obligations under this
Agreement or the Underwriters' Warrant Agreement, as the case may be or (iv)
resales of the Shares in connection with the distribution contemplated hereby.
(i) Each of the Company and the Subsidiaries maintains
insurance policies, including, but not limited to, general liability, product
liability and property insurance,
5
which insures the Company, the Subsidiaries and their respective employees,
against such losses and risks generally insured against by comparable
businesses. Neither the Company nor any of the Subsidiaries (A) has failed
to give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or employees,
under the insurance policy or surety bond in a due and timely manner, (B) has
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has not failed to pay any premiums due and payable
thereunder, or (C) has failed to comply with all conditions contained in such
insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any
insurer of its obligation to satisfy in full any valid claim of the Company
or any Subsidiary.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of, the Company or any of the Subsidiaries which (i) questions the
validity of the capital stock of the Company, this Agreement or the
Underwriters' Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement or the Underwriters'
Warrant Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized
in the Registration Statement are accurately summarized in all material
respects), or (iii) except for matters disclosed in the Prospectus, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company.
(k) The Company has full legal right, corporate power and
authority to authorize, issue, deliver and sell the Securities (other than
the Selling Shareholder Shares), enter into this Agreement and the
Underwriters' Warrant Agreement and to consummate the transactions provided
for in such agreements; and this Agreement and the Underwriters' Warrant
Agreement have each been duly and properly authorized, executed and delivered
by the Company. Each of this Agreement and the Underwriters' Warrant
Agreement constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except (i) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification or
contribution provisions may be limited under applicable laws or the public
policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Underwriters'
Warrant Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result
in the creation or imposition of any lien, charge, claim, encumbrance,
6
pledge, security interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the
Company or the Subsidiaries pursuant to the terms of, (i) the certificate of
incorporation or by-laws of any of the Company or the Subsidiaries, (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to which any of the Company or the Subsidiaries
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, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to any of the Company or the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over any of the Company or the Subsidiaries or any of its
activities or properties.
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body, domestic or foreign, is
required for the issuance of the Shares pursuant to the Prospectus and the
Registration Statement, the issuance of the Underwriters' Warrants, the
performance of this Agreement and the Underwriters' Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation,
any waiver of any preemptive, first refusal or other rights that any entity
or person may have for the issue and/or sale of any of the Shares or the
Underwriters' Warrants, except such as have been or may be obtained under the
Act or may be required under state securities or Blue Sky laws in connection
with the Underwriters' purchase and distribution of the Shares, and the
Underwriters' Warrants to be sold by the Company hereunder and under the
Underwriters' Warrant Agreement.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits
to the Registration Statement to which any of the Company or the Subsidiaries
is a party or by which it may be bound or to which any of its assets,
properties or business may be subject have been duly and validly authorized,
executed and delivered by the Company, and constitute the legal, valid and
binding agreements of the Company or the Subsidiaries, as the case may be,
enforceable against the Company, in accordance with their respective terms.
The descriptions in the Registration Statement of agreements, contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto on Form S-2, and there
are no contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are in all material respects complete and
correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein,
neither the Company nor any of the Subsidiaries has (i) issued any securities
or incurred any liability or obligation, direct or contingent, for borrowed
money, (ii) entered into any transaction other than in the ordinary course of
business, or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock of any
7
class, and there has not been any change in the capital stock, or any
material change in the debt (long or short term) or liabilities or material
adverse change in or affecting the general affairs, management, financial
operations, stockholders' equity or results of operations of the Company or
any of the Subsidiaries.
(o) No default exists in the due performance and observance
of any term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material 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 may be bound or to which the
property or assets (tangible or intangible) of the Company is subject or
affected.
(p) Each of the Company and the Subsidiaries has generally
enjoyed a satisfactory employer-employee relationship with its employees and
is in compliance with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company or any of the Subsidiaries by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or
any of the Subsidiaries pending before the National Labor Relations Board or
any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company or any of the Subsidiaries, or
any predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of the Company or any of the
Subsidiaries, and no collective bargaining agreement or modification thereof
is currently being negotiated by the Company and the Subsidiaries. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any of the Subsidiaries.
No labor dispute with the employees of the Company exists, or, is imminent.
(q) Except as described in the Prospectus, neither the
Company nor any of the Subsidiaries maintains, sponsors or contributes to any
program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan," or a "multiemployer plan" as such terms are
defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
To the Company's knowledge, neither the Company nor any of the Subsidiaries
maintains or contributes, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. To the Company's knowledge, no
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of
the Code, which could subject the Company or any of the Subsidiaries to any
tax penalty on prohibited transactions and which has not adequately been
corrected. To the Company's knowledge, each ERISA Plan is in compliance with
all reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. The Company has never completely or
partially withdrawn from a "multiemployer plan."
8
(r) Neither the Company, the Subsidiaries, nor any of their
employees, directors, stockholders, partners, or affiliates (within the
meaning of the Regulations) of any of the foregoing has taken or will take,
directly or indirectly, any action designed to or which has constituted or
which might be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
(s) None of the patents, patent applications, trademarks,
service marks, service names, trade names and copyrights, and none of the
licenses and rights to the foregoing presently owned or held by the Company
or any of the Subsidiaries are in dispute or are in any conflict with the
right of any other person or entity. Each of the Company and the Subsidiaries
(i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, all patents, patent
applications, trademarks, service marks, service names, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (ii) is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
patent application, trademark, service ▇▇▇▇, service name, trade name,
copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or
otherwise.
(t) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other proceeding,
domestic or foreign, pending or threatened (or circumstances that may give
rise to the same) against the Company which challenges the exclusive rights
of the Company with respect to any trademarks, trade names, service marks,
service names, copyrights, patents, patent applications or licenses or rights
to the foregoing used in the conduct of its business, or which challenge the
right of the Company to use any technology presently used or contemplated to
be used in the conduct of its business.
(u) Each of the Company and the Subsidiaries owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), inventions, technology, designs, processes, works of
authorship, computer programs and technical data and information
(collectively herein "intellectual property") that are material to the
development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company or any of the Subsidiaries, free
and clear of and without violating any right, lien, or claim of others,
including without limitation, former employers of its employees; provided,
however, that the possibility exists that other persons or entities,
completely independently of the Company or any of the Subsidiaries, or their
employees or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company or any of the
Subsidiaries. Neither the Company nor any of the Subsidiaries is aware of
any such development of similar or identical trade secrets or technical
information by others.
9
(v) Each of the Company and the Subsidiaries 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 restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus, taxes, lessor's
interests and liens for taxes not yet due and payable.
(w) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which the holders of the
Common Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any
shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for a
period of not less than nine (9) months following the effective date of the
Registration Statement without the prior written consent of ▇▇▇▇▇▇▇▇▇▇.
During the nine (9) month period commencing on the effective date of the
Registration Statement, neither the Company nor any Selling Shareholder
shall, without the prior written consent of the Underwriters, sell, contract
or offer to sell, issue, transfer, assign, pledge, distribute, or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any shares of Common Stock other
than the Securities pursuant hereto and other than up to 225,400 shares of
Common Stock reserved for issuance upon the exercise of options under the
Company's Stock Option Plans as described in the Prospectus which shares are
also subject to such restriction. The Company will cause the Transfer Agent,
as defined below, to place "stop transfer" orders on the Company's stock
ledgers.
(x) Except as described in the Prospectus under
"Underwriting," there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company, the Subsidiaries or any of their
respective officers, directors, stockholders, partners, employees or
affiliates that may affect the Underwriters' compensation, as determined by
the National Association of Securities Dealers, Inc. ("NASD").
(y) The Shares and the Underwriters' Common Stock have been
approved for listing on the American Stock Exchange ("AMEX").
(z) Neither the Company nor any of the Subsidiaries nor any
of their respective officers, employees, agents, or any other person acting
on behalf of the Company or the Subsidiaries, has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other
10
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist the Company or the Subsidiaries in connection with any
actual or proposed transaction) which (a) might subject the Company or the
Subsidiaries, or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign), (b)
if not given in the past, might have had a materially adverse effect on the
assets, business or operations of the Company or any Subsidiary, or (c) if
not continued in the future, might adversely affect the assets, business,
operations or prospects of the Company or any of the Subsidiaries. The
Company's and each Subsidiary's internal accounting controls are sufficient
to cause the Company to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(bb) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Regulations) of any
of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company or any Subsidiary, or (B) purchases from or
sells or furnishes to the Company or any Subsidiary any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company
or any Subsidiary is a party or by which it may be bound or affected. Except
as set forth in the Prospectus under "Certain Transactions," there are no
existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company and any officer, director, or Principal Shareholder (as
such term is defined in the Prospectus) of the Company or any Subsidiary, or
any partner, affiliate or associate of any of the foregoing persons or
entities.
(cc) Any certificate signed by any officer of the Company or
any Subsidiary, and delivered to the Underwriters or to Underwriters' Counsel
(as defined herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(dd) The minute books of each of the Company and the
Subsidiaries have been made available to the Underwriters and contains a
complete summary of all meetings and actions of the directors, stockholders,
audit committee, compensation committee and any other committee of the Board
of Directors of each of the Company and the Subsidiaries, since the time of
its incorporation, and reflects all transactions referred to in such minutes
accurately in all material respects.
(ee) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to
include any securities issued by the Company in the Registration Statement or
any registration statement to be filed by the Company or to require the
Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company.
11
(ff) The Company has as of the effective date of the
Registration Statement entered into, and there remains in effect, valid and
binding, employment agreements with each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in the forms
filed as Exhibits 10.5, 10.6, 10.7, 10.8 and 10.9, respectively, to the
Registration Statement.
2. Representations and Warranties of the Selling Shareholders.
Each Selling Shareholder (except as otherwise indicated) represents and
warrants, for such Selling Shareholder only and not for any other Selling
Shareholder, to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(a) Such Selling Shareholder has full right, power and
authority to enter into this Agreement the Power of Attorney (the "Power of
Attorney") and the Custody Agreement (the "Custody Agreement") hereinafter
referred to and at the date hereof such Selling Shareholder has, and at the
time of delivery of the Selling Shareholder Shares to the Underwriters
hereunder such Selling Shareholder will have, full right, power and authority
to sell and deliver the Selling Shareholder Shares to be sold by such Selling
Shareholder to the Underwriters, and at the date hereof such Selling
Shareholder is, and at the time of delivery of Selling Shareholders Shares to
the Underwriters such Selling Shareholder will be, the lawful owner of and
has, and will have, marketable title to such shares free and clear of any
claims, liens, encumbrances or security interests.
(b) The performance of this Agreement, the Power of Attorney
and the Custody Agreement, and the consummation of the transactions herein
and therein contemplated, will not conflict with or result in a breach of, or
default under, any agreement, indenture or other instrument to which such
Selling Shareholder is a party or by which such Selling Shareholder is bound,
or any law, rule, administrative regulation or court decree. This Agreement,
the Power of Attorney and the Custody Agreement have been validly authorized,
executed and delivered by such Selling Shareholder and each constitutes the
valid and binding agreement of such Selling Shareholder.
(c) When the Registration Statement becomes effective, and at
all times subsequent thereto, the Registration Statement and Prospectus and
any amendments thereof and supplements thereto will not contain any untrue
statement of a material fact regarding such Selling Shareholder or omit to
state a material fact regarding such Selling Shareholder required to be
stated therein or necessary in order to make the statements therein regarding
such Selling Shareholder not misleading.
(d) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Common Stock.
12
(e) Certificates in negotiable form representing all of the
Selling Shareholder Shares to be sold by such Selling Shareholder have been
placed in custody under a Custody Agreement, in the form heretofore furnished
to you, duly executed and delivered by such Selling Shareholder to the
Company, as custodian (the "Custodian"), and such Selling Shareholder has
duly executed and delivered a Power of Attorney, in the form heretofore
furnished to you, appointing, each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as
such Selling Shareholder's attorney-in-fact (together, the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholders, to authorize the delivery of the Selling
Shareholder Shares to be sold by such Selling Shareholders hereunder and
otherwise to act on behalf of such Selling Shareholder in connection with the
transactions contemplated by this Agreement and the Custody Agreement.
(f) The Selling Shareholder Shares held in custody for such
Selling Shareholder under the Custody Agreement are subject to the interests
of the Underwriters hereunder, and the arrangements made by such Selling
Shareholder for such custody, as well as the appointment by such Selling
Shareholder of the Attorney-in-Fact, are, to that extent, irrevocable. Each
Selling Shareholder specifically agrees that the obligations of the Selling
Shareholders hereunder shall not be terminated by operation of law, whether
by the death or incapacity of any individual Selling Shareholder or by the
occurrence of any other event. If any individual Selling Shareholder should
die or become incapacitated, or if any other such event should occur, before
the delivery of the Stock hereunder, certificates representing the Selling
Shareholder Shares shall be delivered by or on behalf of such Selling
Shareholder in accordance with the terms and conditions of this Agreement and
of the Custody Agreement, and the actions taken by the Attorney-in-Fact
pursuant to the Power of Attorney shall be as valid as if such death,
incapacity or other event had not occurred, whether or not the Custodian or
the Attorney-in-Fact shall have received notice of such death, incapacity or
other event.
3. Purchase, Sale and Delivery of the Securities and
Underwriters' Warrants.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, and subject to the terms and
conditions herein set forth (i) the Company agrees to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to
purchase from the Company at a price of $____ per share, that number of
Company Shares set forth in Schedule A opposite the name of such Underwriter,
and (ii) each Selling Shareholder agrees, severally and not jointly, to sell
to the Underwriters, and the Underwriters, severally and not jointly, agree
to purchase from each Selling Shareholder at a price of $____ per share, that
number of Selling Shareholder Shares set forth in Schedule B opposite the
name of such Selling Shareholder.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of
the Option Shares. The option granted hereby will expire 30 days
13
after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the Rules and Regulations,
or (ii) the date of this Agreement if the Company has elected to rely upon
Rule 430A under the Rules and Regulations, and may be exercised in whole or
in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Firm Shares upon notice by the Underwriters to the Company setting forth the
number of Option Shares as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for any
such Option Shares. Any such time and date of delivery (an "Option Closing
Date") shall be determined by the Underwriters, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Underwriters and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Shares
shall be delivered unless the Firm Shares shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of ▇▇▇▇▇▇▇▇▇▇
& Co. Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Underwriters and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
March __, 1998 or at such other time and date as shall be agreed upon by the
Underwriters and the Company, but not less than three (3) nor more than seven
(7) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the "Closing
Date"). 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 of the Underwriters 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.
(d) Delivery of the certificates for the Firm Shares and the
Option Shares, if any, shall be made to the Underwriters against payment by
the Underwriters, severally and not jointly, of the purchase price for the
Firm Shares and the Option Shares, if any, to the order of the Company for
the Firm Shares and the Option Shares, if any, by New York Clearing House
funds. In the event such option is exercised, each of the Underwriters,
acting severally and not jointly, shall purchase that proportion of the total
number of Option Shares then being purchased which the number of Firm Shares
set forth in Schedule A hereto opposite the name of such Underwriter bears to
the total number of Firm Shares, subject in each case to such adjustments as
the Underwriters in their discretion shall make to eliminate any sales or
purchases of fractional shares. Delivery of certificates for the Selling
Shareholder Shares shall be made on behalf of the Selling Shareholders by the
Custodian to the Underwriters against payment by the Underwriters, severally
and not jointly, of the purchase price therefor in New York Clearing House
Funds. Certificates for the Firm Shares and the Option Shares, if any, and
the shares sold by the Selling Shareholders 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 (2) business days prior to the Closing Date or
14
the relevant Option Closing Date, as the case may be. The certificates for
the Firm 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 no later than 9:30 a.m. on
the last business day prior to Closing Date or the relevant Option Closing
Date, as the case may be.
(e) On the Closing Date, the Company shall issue and sell to
the Underwriters, one or more Underwriters' Warrants at a purchase price of
$[.0001] per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 157,500 shares of Common Stock. The Underwriters'
Warrants shall be exercisable for a period of four years commencing one year
from the effective date of the Registration Statement at a price equaling one
hundred twenty percent (120%) of the initial public offering price of the
Firm Shares. The Underwriters' Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit 4.2 to the
Registration Statement. Payment for the Underwriters' Warrants shall be made
by the Underwriters on the Closing Date.
4. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Underwriters deem advisable, the
Underwriters shall, subject to the terms and conditions hereof, make a public
offering of the Firm Shares and such of the Option Shares as they may
determine (other than to residents of or in any jurisdiction in which
qualification of the Shares is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus. The Underwriters
may from time to time increase or decrease the public offering price after
distribution of the Shares has been completed to such extent as the
Underwriters, in their discretion deem advisable. The Underwriters may enter
into one of more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
5. Covenants and Agreements of the Company.
(a) The Company covenants and agrees with each of the
Underwriters as follows:
i) The Company shall use its best efforts to cause
the Registration Statement and any amendments thereto to become
effective as promptly as practicable and will not at any time,
whether before or after the effective date of the Registration
Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act
or 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 objected or which is not in
compliance with the Act, the Exchange Act or the Regulations.
ii) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Underwriters and
the
15
Selling Shareholders and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective,
if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the issuance by
the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of
the Registration Statement or any order preventing or suspending
the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of
proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the
Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that
purpose, (iv) of the receipt of any comments from the Commission;
and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or
any state securities commission authority shall enter a stop
order or suspend such qualification at any time, the Company will
make every effort to obtain promptly the lifting of such order.
iii) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriters) or transmit the
Prospectus by a means reasonably calculated to result in filing
with the Commission pursuant to Rule 424(b)(1) (or, if applicable
and if consented to by the Underwriters, pursuant to Rule
424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the
execution and delivery of this Agreement and (ii) the fifteenth
business day after the effective date of the Registration
Statement.
iv) The Company will give the Underwriters and the
Selling Shareholders notice of its intention to file or prepare
any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the
offering of the Securities which differs from the corresponding
prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the
Regulations), and will furnish the Underwriters with copies of
any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and
will not file any such prospectus to which the Underwriters or
▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP ("Underwriters' Counsel"),
shall object.
16
v) The Company shall endeavor in good faith, in
cooperation with the Underwriters, at or prior to the time the
Registration Statement becomes effective, to qualify the
Securities for offering and sale under the securities laws of
such jurisdictions as the Underwriters may designate to permit
the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such
information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to
service of process in any such jurisdiction. In each
jurisdiction where such qualification shall be effected, the
Company will, unless the Underwriters agree that such action
is not at the time necessary or advisable, use all reasonable
efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
vi) During the time when a prospectus is required
to be delivered under the Act, the Company shall use all
reasonable efforts to comply with all requirements imposed
upon it by the Act and the Exchange Act, as now and hereafter
amended and by the Regulations, as from time to time in force,
so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions
hereof and the Prospectus, or any amendments or supplements
thereto. If at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion
of counsel for the Company or Underwriters' Counsel, the
Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with
the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment
or supplement in accordance with Section 10 of the Act, each
such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the
Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may
request.
vii) As soon as practicable, but in any event not
later than 45 days after the end of the 12-month period
beginning on the day after the end of the fiscal quarter of
the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the
end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its
security holders,
17
in the manner specified in Rule 158(b) of the Regulations, and
to the Underwriters, an earnings statement which 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
Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12
consecutive months after the effective date of he Registration
Statement.
viii) During a period of five years after the
date hereof, the Company will furnish to its stockholders
annual reports (including financial statements audited by
independent public accountants) and will deliver to the
Underwriters:
(a) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the
Company for each quarter in the form furnished to the
Company's stockholders and certified by the Company's
principal financial or accounting officer;
(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 report thereon of independent certified public
accountants;
(c) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(d) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the NASD or any securities exchange;
(e) every press release and every material news
item or article of interest to the financial community in
respect of the Company, or its affairs which was released or
prepared by or on behalf of the Company; and
(f) any additional information of a public nature
concerning the Company (and any future subsidiary) or its
businesses which the Underwriters may request.
During such five (5) year period, if the Company has an
active subsidiary, the foregoing financial statements will be on
a consolidated basis to the extent that the accounts of the
Company and its
18
subsidiary are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not
so consolidated.
ix) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company,
a Registrar (which may be the same entity as the Transfer Agent)
for its Common Stock.
x) The Company will furnish to the Underwriters or on
the Underwriters' order, without charge, at such place as the
Underwriters may designate, copies of each Preliminary
Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be
signed and will include all financial statements and exhibits),
the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in
such quantities as the Underwriters may request.
xi) On or before the effective date of the
Registration Statement, the Company shall provide the
Underwriters with true copies of duly executed, legally
binding and enforceable agreements pursuant to which for a
period of not less than nine (9) months from the effective
date of the Registration Statement, holders of all shares of
Common Stock and holders of securities exchangeable or
exercisable for or convertible into shares of Common Stock,
will not directly or indirectly, issue, offer to sell, sell,
grant an option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either
pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein
without the prior written consent of ▇▇▇▇▇▇▇▇▇▇ (collectively,
the "Lock-up Agreements"). On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate stop transfer orders on
the Company's ledgers. During the nine (9) month period
commencing with the effective date of the Registration
Statement, the Company shall not, without the prior written
consent of ▇▇▇▇▇▇▇▇▇▇, sell, contract or offer to sell, issue,
transfer, assign, pledge, hypothecate, distribute, or
otherwise dispose of, directly or indirectly, any shares of
Common Stock or any options, rights or warrants with respect
to any shares of Common Stock. During the nine (9) month
period commencing with the effective date of the Registration
Statement, the Company shall not file any registration
statement with the Securities and Exchange Commission on Form
S-8 without the prior written consent of the Underwriters.
19
xii) Neither the Company nor any of the
Subsidiaries, nor any of their officers, directors,
stockholders, nor any of their respective affiliates (within
the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities
of the Company.
xiii) The Company shall apply the net proceeds
from the sale of the Securities in the manner, and subject to
the conditions, 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.
xiv) The Company shall timely file all such reports,
forms or other documents as may be required from time to time,
under the Act, the Exchange Act, and the Regulations, and all
such reports, forms and documents filed will comply as to form
and substance with the applicable requirements under the Act,
the Exchange Act, and the Rules and Regulations.
xv) The Company shall 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 (2) full business days prior thereto, a copy of
the latest available unaudited interim financial statements of
the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date of the Registration
Statement) which have been read by the Company's independent
public accountants, as stated in their letter to be furnished
pursuant to Section 6(j) hereof.
xvi) The Company shall cause the Common Stock to be
quoted on the AMEX or a National Securities exchange and for a
period of seven (7) years from the date hereof, and use its
best efforts to maintain the AMEX quotation or exchange
listing of the Common Stock to the extent outstanding.
xvii) For a period of five (5) years from the
Closing Date, the Company shall furnish to the Underwriters at
the Underwriters' request and at the Company's sole expense,
(i) daily consolidated transfer sheets relating to the Common
Stock, (ii) the list of holders of all of the Company's
securities and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the
Company.
xviii) As soon as practicable, (i) but in no
event more than 5 business days before the effective date of
the Registration Statement, file
20
a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities and (ii) but in no event
more than 30 days from the effective date of the Registration
Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and
▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period
of not less than seven (7) years.
xix) The Company hereby agrees that it will not
without the written consent of a majority of the Company's
stockholders who are not affiliates of the Company at such
time or the vote of a majority of such non-affiliate
stockholders, voting at a duly held stockholder's meeting for
a period of thirteen (13) months from the effective date of
the Registration Statement, adopt, propose to adopt or
otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement permitting the
grant, issue or sale of any shares of Common Stock or other
securities of the Company (i) in an amount greater than an
aggregate of _________ shares of Common Stock, (ii) at an
exercise or sale price per share less than the fair market
value of the Common Stock on the date of grant or sale, (iii)
with the payment for such securities with any form of
consideration other than cash, (iv) upon payment of less than
the full purchase or exercise price for such shares of Common
Stock or other securities of the Company.
xx) Until the completion of the distribution of the
Shares, and for 25 days thereafter, the Company shall not
without the prior written consent of the Underwriters and
Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press
conference with respect to the Company or its activities or
the offering contemplated hereby.
xxi) For a period equal to the lesser of (i) seven
(7) years from the date hereof, and (ii) the sale to the
public of the Underwriters' Shares, the Company will use
reasonable efforts not to take any action or actions which may
prevent or disqualify the Company's use of Form S-2 (or other
appropriate form) for the registration under the Act of the
Underwriters' Shares.
xxii) The Company shall enter into an investment
banking agreement with ▇▇▇▇▇▇▇▇▇▇ which, amongst other things,
will grant to ▇▇▇▇▇▇▇▇▇▇ a right of first refusal for a period
of fifteen (15) months after the effective date of the
Registration Statement (the "Effective Date") for any
investment banking services, including amongst other things,
any sales of securities to be made by the Company or any of
its present or future Subsidiaries.
21
xxiii) For a period of three (3) years after the
Effective Date, the Company shall appoint two additional
independent persons to the Company's Board of Directors, each
of whom shall be satisfactory to the Company and ▇▇▇▇▇▇▇▇▇▇.
Such persons shall be entitled to all of the rights and
privileges as each of the other members of the Company's Board
of Directors. For a period of three years after the Effective
Date, ▇▇▇▇▇▇▇▇▇▇ shall have the right to designate one person
to attend all meetings of the Company's Board of Directors.
Such person shall be entitled to attend all such meetings and
to receive all such notices and other correspondence and
communications sent by the Company to members of its Board of
Directors. The Company shall reimburse such designee for his
or her reasonable out-of-pocket expenses incurred in
connection with his or her attendance of such meetings.
xxiv) Each of the Selling Shareholders covenants
and agrees that such Selling Shareholder will not, during the
60 days following the effective date of the Registration
Statement, except with the prior written consent of
▇▇▇▇▇▇▇▇▇▇, offer for sale, sell, distribute or otherwise
dispose of any shares of Common Stock, otherwise than in
accordance with this Agreement or as contemplated in the
Prospectus.
6. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Underwriters' Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection
with the preparation, duplication, printing, (including mailing and handling
charges) filing, delivery and mailing (including the payment of postage with
respect thereto) of the Registration Statement and the Prospectus and any
amendments and supplements thereto and the printing, mailing (including the
payment of postage with respect thereto) and delivery of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreements, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing, engraving,
issuance and delivery of the Securities including, but not limited to, (x)
the purchase by the Underwriters of the Shares and the purchase by the
Underwriters of the Underwriters' Warrants from the Company, (y) the
consummation by the Company and the Selling Shareholders of any of their
obligations under this Agreement and the Underwriters' Warrant Agreement, and
(z) resale of the Shares by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities
under state or foreign securities or "Blue Sky" laws and determination of the
status of such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental
Blue Sky
22
Memorandum" and "Legal Investments Survey," if any, and disbursements and
fees of counsel in connection therewith, (v) costs and expenses in connection
with due diligence investigations, including but not limited to the fees of
any independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating
of the Securities by qualified rating agencies, (viii) the fees payable to
the Commission and the NASD, and (ix) the fees and expenses incurred in
connection with the quotation of the Securities on the AMEX and any other
exchange. Notwithstanding any other provision of this Agreement, whether or
not the offering contemplated hereby is successfully completed, it shall be
the Company's obligation to bear all of its expenses in connection with the
proposed offering, including, but not limited to, the following: filing fees,
printing and duplicating costs, all postage and mailing expenses with respect
to the transmission of prospectuses, registrar and transfer agent fees, costs
and expenses related to "Tombstone" advertisements, the Company's "road show"
and information meetings and presentation costs, its own counsel and
accounting fees, costs of due diligence investigations, bound volumes,
prospectus memorabilia, issue and transfer taxes, if any, and "Blue Sky"
filing fees, counsel fees and expenses.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriters for all of their actual
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel, but not in excess of $100,000, less any amounts already paid
pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters on the Closing Date by certified or bank cashier's check or,
at the election of the Underwriters, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to one
hundred thousand dollars ($100,000), twenty thousand dollars ($20,000) of
which has been paid to date.
7. Conditions of the Underwriters' Obligations. The obligations
of the Underwriters hereunder shall be subject to the continuing accuracy of
each of the representations and warranties of the Company and the Selling
Shareholders contained herein as of the date hereof and as of the Closing
Date and each Option Closing Date, if any, as if it had been made on and as
of the Closing Date or each Option Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Option Closing Date, if any, of the
statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company and each of the Selling
Shareholders on and as of the Closing Date and each Option Closing Date, if
any, of their respective covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement shall have become effective
not later than 12:00 Noon, New York time, on the date of this Agreement or
such later date and time as shall be consented to in writing by the
Underwriters, and, at the Closing Date and each Option Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be
23
pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected
to rely upon Rule 430A of the Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriters of such timely
filing, or a post-effective amendment providing such information shall have
been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriters' opinion, is material, or omits
to state a fact which, in the Underwriters' opinion, is material and is
required to be stated therein or is necessary to make the statements therein
not misleading, or that the Prospectus, or any supplement thereto, contains
an untrue statement of fact which, in the Underwriters' opinion, is material,
or omits to state a fact which, in the Underwriters' opinion, is material and
is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to the Closing Date, the Underwriters shall
have received from Underwriters' Counsel, such opinion or opinions with
respect to the organization of the Company, the validity of the Securities,
the Underwriters' Warrants, the Registration Statement, the Prospectus and
other related matters as the Underwriters requests and Underwriters' Counsel
shall have received such papers and information as they request to enable
them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of Schoeman, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
i) each of the Company and the Subsidiaries (A) has been
duly organized, except as to the Subsidiaries which shall be to the
knowledge of Counsel, and based upon certificates of good standing
or authorization or the like received from applicable
jurisdictions, is validly existing as a corporation in good
standing under the laws of its jurisdiction, (B) is duly qualified
and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or
the character of its operations requires such qualification or
licensing, except where the failure to be so qualified and in good
standing has no material adverse effect on the Company, and (C) has
all requisite corporate power and authority; and the Company has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies
24
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus. The disclosures
in the Registration Statement concerning the effects of federal, state
and local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects;
ii) the Company owns, directly or indirectly, one hundred
percent (100%) of the outstanding capital stock of each of the
Subsidiaries, and all such shares have been validly issued, are
fully paid and non-assessable and were not in violation of any
statutory preemptive rights;
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of
Securities, and, to the best of counsel's knowledge, 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, the
Underwriters' Warrant Agreement and as described in the Prospectus.
The Securities, and all other securities issued or issuable by the
Company conform in all material respects to all statements with
respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have, to our knowledge, no
rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights
of any holders of any security of the Company. The Shares, the
Underwriters' Warrants and the Underwriters' Shares to be sold by
the Company hereunder and under the Underwriters' Warrant Agreement
are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and conform to
the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Shares, the Underwriters'
Warrants and the Underwriters' Shares has been duly and validly
taken, and the certificates representing the Shares and the
Underwriters' Warrants are in due and proper form. The
Underwriters' Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called
for thereby. Upon the issuance and delivery pursuant to this
Agreement and the Underwriters' Warrant Agreement of the Shares and
the Underwriters' Warrants, respectively, to be sold by the
Company, the Underwriters and the Underwriters, respectively, will
acquire good and marketable title to the Shares and the
Underwriters' Warrants free and clear of any pledge, lien, charge,
claim, encumbrance, security interest,
25
or other restriction or equity of any kind whatsoever. No transfer tax
is payable by or on behalf of the Underwriters in connection with (A)
the issuance by the Company of the Shares, (B) the purchase by the
Underwriters and the Underwriters of the Shares and the Underwriters'
Warrants, respectively, from the Company, (C) the consummation by the
Company of any of its obligations under this Agreement or the
Underwriters' Warrant Agreement, or (D) resales of the Shares in
connection with the distribution contemplated hereby;
iv) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and to the
knowledge of such counsel, no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or Prospectus or
any part of any thereof or 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
counsel's knowledge, threatened or contemplated under the Act;
v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and related notes and
other financial and statistical data included therein, as to which
no opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and the Regulations;
vi) to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and
filed as exhibits to the Registration Statement other than those
described in the Registration Statement (or required to be filed
under the Exchange Act if upon such filing they would be
incorporated, in whole or in part, by reference therein) and the
Prospectus and filed as exhibits thereto, and the exhibits which
have been filed are correct copies of the documents of which they
purport to be copies; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company or
any Subsidiary is a party or by which it is bound, including any
document to which the Company or any Subsidiary is a party or by
which it is bound, incorporated by reference into the Prospectus
and any supplement or amendment thereto, are accurate in all
material respects and fairly represent the information required to
be shown by Form S-2; (C) there is no pending or threatened against
the Company or any Subsidiary any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, governmental or
other proceeding (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of
the Company or any Subsidiary which (x) is required to be disclosed
in the Registration Statement which is not so disclosed, (and such
proceedings as are summarized in the Registration Statement
26
are accurately summarized in all material respects), (y) questions the
validity of the capital stock of the Company or this Agreement or
the Underwriters' Warrant Agreement, or of any action taken or to
be taken by the Company pursuant to or in connection with any of
the foregoing; (D) no statute or regulation or legal or
governmental proceeding required to be described in the Prospectus
is not described as required; and (E) there is no action, suit or
proceeding pending, or threatened, against or affecting the Company
or any Subsidiary before any court or arbitrator or governmental
body, agency or official (or any basis thereof known to such
counsel) in which there is a reasonable possibility of an adverse
decision which may result in a material adverse change in the
condition, financial or otherwise, or results of operations of the
Company and its Subsidiaries, taken as a whole, which could
materially adversely affect the present or prospective ability of
the Company to perform its obligations under this Agreement or the
Underwriters' Warrant Agreement or which in any manner draws into
question the validity or enforceability of this Agreement or the
Underwriters' Warrant Agreement;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement and the Underwriters' Warrant
Agreement and to consummate the transactions provided for herein
and therein; and each of this Agreement and the Underwriters'
Warrant Agreement has been duly authorized, executed and delivered
by the Company. Each of this Agreement and the Underwriters'
Warrant Agreement, assuming due authorization, execution and
delivery by each other party thereto constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by applicable
law), and none of the Company's execution or delivery of this
Agreement and the Underwriters' Warrant Agreement, its performance
hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus and any
amendments or supplements thereto, conflicts with or will conflict
with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company or any
Subsidiary pursuant to the terms of (A) the certificate of
incorporation or by-laws of the Company or any Subsidiary, (B) to
our knowledge, any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement or any other agreement or instrument to which
the Company is a party or by which it is or may be bound or to
which any of its respective properties or assets (tangible
27
or intangible) is or may be subject, or any indebtedness, or (C) to
our knowledge, any statute, judgement, decree, order, rule or
regulation applicable to the Company or any Subsidiary of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over the Company or any Subsidiary, or
any of their activities or properties;
viii) except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body (other than such as
may be required under Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance of the Shares
pursuant to the Prospectus, the issuance of the Underwriters'
Warrants, the performance of this Agreement and the Underwriters'
Warrant Agreement and the transactions contemplated hereby and
thereby;
ix) to the best knowledge of such counsel, neither the
Company nor any of its Subsidiaries is in breach of, or in default
under, any term or provision of any license, contract, indenture,
mortgage, installment sale agreement, deed of trust, lease, voting
trust agreement, stockholders' agreement, partnership 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 the Company or any Subsidiary is a party or
by which the Company or any Subsidiary may be bound or to which the
property or assets (tangible or intangible) of the Company or any
Subsidiary is subject or affected; and neither the Company nor any
of the Subsidiaries is in violation of any term or provision of its
certificate of incorporation by-laws, or to such Counsel's
knowledge, in violation of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation;
x) the statements in the Prospectus under [identify sections]
have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
xi) the Shares and the Underwriters' Common Stock have been
accepted for listing on the AMEX;
xii) to the best knowledge of such counsel, except as
described in the Prospectus, no person, corporation, trust,
partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement
or, if filed, to include any security in such registration
statement;
28
xiii) assuming due execution by the parties thereto other
than the Company, the Lock-up Agreements are legal, valid and
binding obligations of parties thereto, enforceable against the
party and any subsequent holder of the securities subject thereto
in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by applicable
law); and
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at
which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus; and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Preliminary Prospectus, the Registration
Statement and Prospectus, on the basis of the foregoing, no facts have come
to the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto, at the time such
Registration Statement or amendment became effective or the Preliminary
Prospectus or Prospectus or amendment or supplement thereto as of the date of
such opinion contained any 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 (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Preliminary Prospectus,
the Registration Statement or Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with
the applicable laws, including but not limited to ______________________,
[patent counsel] to the Company as to licenses of the Company and ___________
as to matters of United Kingdom laws; (B) as to matters of fact, to the
extent they deem proper, on certificates and written statements of
responsible officers of the Company and the Subsidiaries, and certificates or
other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good
standing of the Company and the Subsidiaries, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel
if requested. The opinion of such counsel for the Company and the
Subsidiaries shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and that the Underwriters and they are
justified in relying thereon. Such opinion shall also state that
Underwriters' Counsel is entitled to rely thereon.
29
(e) On the Closing Date there shall have been furnished to
you the opinion of _________________________________, special counsel for the
Selling Shareholders, dated such Closing Date and in form and substance
satisfactory to Underwriter's Counsel, to the effect that:
i) this Agreement has been validly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders.
ii) a Power of Attorney and the Custody Agreement have been
validly authorized, executed and delivered by each of the Selling
Shareholders.
iii) if shares of Common Stock are sold by a Selling
Shareholder on such Closing Date, marketable title to the shares
sold by such Selling Shareholder hereunder, free and clear of any
liens, claims, encumbrances and security interests whatsoever
(other than those as may have been created by the Underwriters),
has been transferred to, and is vested in, the Underwriter who has
purchased such shares hereunder.
In rendering such opinion as to questions of the law of
jurisdictions other than the state of New York or the United States, such
counsel may rely upon an opinion (dated such Closing Date, addressed to the
Underwriters and in form satisfactory to you) of counsel acceptable to
Underwriter's Counsel. Such opinion of counsel for the Selling Shareholders
shall state that the opinion of other such counsel is in form and substance
satisfactory to counsel for the Selling Shareholders and, in their opinion,
you and they are justified in relying on such other opinion.
(f) At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinion of Schoeman, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP,
or other counsel acceptable to the Underwriter, counsel to the Company and
the Subsidiaries, dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of the Option Closing Date the statements made by Schoeman,
▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, or other counsel acceptable to the Underwriter, in its
opinion delivered on the Closing Date.
(g) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or the Selling Shareholders, or herein contained.
(h) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement
and
30
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or any of the Subsidiaries,
from the latest date as of which the financial condition of the Company and
the Subsidiaries is set forth in the Registration Statement and Prospectus
which is materially adverse to the Company or any of the Subsidiaries; (iii)
the Company shall not be in default under any provision of any instrument
relating to any outstanding indebtedness; (iv) neither the Company nor any of
the Subsidiaries shall have issued any securities (other than the
Securities); neither the Company nor any of the Subsidiaries shall have
declared or paid any dividend or made any distribution in respect of its
capital stock of any class; and there has not been any change in the capital
stock of the Company or any of the Subsidiaries, or any material change in
the debt (long or short term) or liabilities or obligations of the Company or
any of the Subsidiaries (contingent or otherwise); (v) no material amount of
the assets of the Company or any of the Subsidiaries shall have been pledged
or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall
have been pending or, to the best knowledge of the Company, threatened (or
circumstances giving rise to same) against the Company or any of the
Subsidiaries, or affecting any of its properties or business before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may adversely
affect the business, operations, prospects or financial condition or income
of the Company, except as set forth in the Registration Statement and
Prospectus; and (vii) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated, to the best knowledge of
the Company, threatened or contemplated by the Commission.
(i) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus and this
Agreement, and 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 or the Option Closing Date, as the case may be, and the
Company has complied 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 such Closing Date or
Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending
or, to the best of each of such person's knowledge, after due
inquiry, are contemplated or threatened under the Act;
iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all
statements and information
31
required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and except as disclosed in the Prospectus, (a) neither
the Company nor any of the Subsidiaries has incurred up to and
including the Closing Date or the Option Closing Date, as the case
may be, other than in the ordinary course of its business, any
material liabilities or obligations, direct or contingent; (b)
neither the Company nor any of its Subsidiaries has paid or
declared any dividends or other distributions on its capital stock;
(c) neither the Company nor any of the Subsidiaries has entered
into any material transactions not in the ordinary course of
business; (d) there has not been any change in the capital stock of
the Company or any material change in the debt (long or short-term)
of the Company or any of the Subsidiaries; (e) neither the Company
nor any of the Subsidiaries has sustained any material loss or
damage to its property or assets, whether or not insured; (g) there
is no litigation which is pending or, to the best knowledge of the
Company, threatened (or circumstances giving rise to same) against
the Company, or any affiliated party of any of the foregoing which
is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (h) there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date
of such certificate.
(j) On the Closing Date there shall have been furnished to
you a certificate, dated such Closing Date and addressed to you, signed by or
on behalf of the Selling Shareholders, to the effect that the representations
and warranties of the Selling Shareholders in this Agreement are materially
correct on and as of the date of this Agreement and on and as of such Closing
Date, as if made on and as of such Closing Date, and that the Selling
Shareholders have complied with all the agreements and satisfied all the
conditions on their part to be performed or satisfied at or prior to such
Closing Date.
(k) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriters, as described in the Registration Statement.
32
(l) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters
in form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all
respects to the Underwriters and Underwriters' Counsel, from KPMG Peat
Marwick LLP:
i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the
applicable Regulations;
ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Regulations thereunder and that the Underwriters may rely upon the
opinion of KPMG Peat Marwick LLP with respect to such financial
statements and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the Company and the Subsidiaries, a reading
of the latest available minutes of the stockholders and Board of
Directors and the various committees of the Board of Directors of
the Company, consultations with officers and other employees of the
Company and the Subsidiaries responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to
believe that (A) the unaudited financial statements and supporting
schedules of the Company and the Subsidiaries included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the 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 and the Subsidiaries included
in the Registration Statement, or (B) at a specified date not more
than five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock of the
Company, any change in the long-term debt of the Company or any of
the Subsidiaries, or any decrease in the stockholders' equity of
the Company or any of the Subsidiaries or any decrease in the net
current assets or net assets of the Company as compared with
amounts shown in the December 31, 1997 balance sheet included in
the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from January 1, 1998 to a
specified date not more than five (5) days prior to the effective
date of the Registration Statement, there was any decrease in net
revenues or net earnings of the Company or any of the Subsidiaries
or increase in net earnings per common share of the Company, in
33
each case as compared with the corresponding period in the prior
year other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
iv) setting forth, at a date not later than five (5) days
prior to the date of the Registration Statement, the amount of
liabilities of the Company and the Subsidiaries (including a
break-down of commercial paper and notes payable to the banks);
v) 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 and the
Subsidiaries 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 and the Subsidiaries and excluding any
questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(m) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from KPMG Peat Marwick LLP a letter,
dated as of the Closing Date or the Option Closing Date, as the case may be,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (i) of this Section hereof except that the specified
date referred to shall be a date not more than five days prior to the Closing
Date or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection (k) of this Section with respect to certain amounts, percentages
and financial information as specified by the Underwriters and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found
such amounts, percentages and financial information to be in agreement with
the records specified in such clause (v).
(n) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a letter, dated such date, addressed to
the Underwriters in form and substance satisfactory in all respects to the
Underwriters and counsel to the Underwriters, from KPMG Peat Marwick LLP
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to Underwriters with respect to financial
information contained in the Registration Statement and the Prospectus.
34
(o) The Company shall have delivered to the Underwriters a
letter from KPMG Peat Marwick LLP addressed to the Company stating that they
have not during the immediately preceding two-year period brought to the
attention of the Company's management any "weakness" as defined in Statement
of Auditing Standards No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's internal controls.
(p) On each of the Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Underwriters for their
respective accounts the appropriate number of Shares.
(q) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 5 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or shall be contemplated.
[(r) On or before the Closing Date, the Underwriters shall have
received the favorable opinion of ____________________, special intellectual
property counsel to the Company with respect to certain intellectual property
matters , or in such form reasonably acceptable to the Underwriters' counsel.]
(s) On or before the Closing Date, the Company shall have
executed and delivered to the Underwriters, (i) the Underwriters' Warrant
Agreement substantially in the form filed as Exhibit 4.2 to the Registration
Statement in final form and substance satisfactory to the Underwriters, and
(ii) the Underwriters' Warrants in such denominations and to such designees
as shall have been provided to the Company
(t) On or before the Closing Date, the Shares shall have been
duly approved for listing on the AMEX, subject to official notice of issuance.
(u) On or before the Closing Date, there shall have been
delivered to the Underwriters all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 8 "Underwriter" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriter, and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or
35
Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending
against such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter 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 (A) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment
or amendments or any new registration statement and prospectus in which is
included securities of the Company issued or issuable upon exercise of the
Securities; or (iii) in any application or other document or written
communication (in this Section 8 collectively called "application") executed
by the Company or based upon written information furnished by the Company
filed, delivered or used in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission,
any state securities commission or agency, AMEX or any other securities
exchange, (B) 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 case of the Prospectus, in the light of the circumstances
under which they were made), or (C) any breach of any representation,
warranty, covenant or agreement of the Company contained herein or in any
certificate by or on behalf of the Company or any of its officers delivered
pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Company with respect to any Underwriter
by or on behalf of such Underwriter expressly for use in any Preliminary
Prospectus, the Registration Statement or any Prospectus, or any amendment
thereof or supplement thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition
to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each Selling
Shareholder, each of the Company's directors, each of the Company's officers
who has signed the Registration Statement, and each other person, if any, who
controls the Company or any Selling Shareholder within the meaning of the
Act, to the same extent as the foregoing indemnity from the Company to the
Underwriters but only with respect to statements or omissions or alleged
omissions, if any, made in 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, written
information furnished to the Company with respect to any Underwriter by such
Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company
acknowledges that the
36
statements with respect to the public offering of the Securities set forth
under the heading "Underwriting" and the stabilization legend in the
Prospectus have been furnished by the Underwriters expressly for use therein
and constitute the only information furnished in writing by or on behalf of
the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition
to any liability which the Underwriters may have at common law or otherwise.
(c) Each Selling Shareholder severally, but not jointly, will
indemnify and hold harmless the Company, each of the Company's directors,
each of the Company's officers who signed the Registration Statement, each
person, if any, who controls the Company within the meaning of the 1933 Act,
the Underwriters and each person, if any, who controls the Underwriters
within the meaning of the 1933 Act against any loss, claim, damage or
liability to which the Company, the Underwriter or any such director or
officer or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in the Registration
Statement (including each Preliminary Prospectus and the Prospectus as a part
thereof) or any amendment thereof or supplement thereto, or (B) in any Blue
Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement (including any Preliminary Prospectus and the
Prospectus as a part thereof) or any amendment thereof or supplement thereto
or in any Blue Sky Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling
Shareholder specifically for use in the preparation of the Registration
Statement or any such amendment thereof or supplement thereto or any such
Blue Sky Application or any such Preliminary Prospectus or the Prospectus or
any such amendment thereof or supplement thereto; and will reimburse any
legal or other expenses reasonably incurred by the Company, or the
Underwriters or any such director or officer or controlling person in
connection with investigating or defending against or appearing as a third
party witness in connection with any such loss, claim, damage, liability or
action, and further provided, however, that the foregoing indemnity agreement
is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
Preliminary Prospectus but eliminated or remedied in the Prospectus, such
indemnity agreement shall not inure to the benefit of the Underwriters from
whom the person asserting any loss, claim, damage or liability purchased the
Stock which is the subject thereof (or to the benefit of any person who
controls such Underwriter), if a copy of the Prospectus was not sent or given
to such person with or prior to the written confirmation of the sale of such
shares of Common Stock to such person; and further provided, however, that
the Selling Shareholders will be liable under the foregoing indemnity
agreement only to the extent of the proceeds received by them from the sale
of their stock to the Underwriters pursuant to the terms hereof. This
indemnity agreement is in addition to any liability which such Selling
Shareholder may otherwise have.
37
(d) The Company will indemnify and hold harmless each Selling
Shareholder and each person, if any, who controls such Selling Shareholder,
against any loss, claim, damage or liability, joint or several, to which such
Selling Shareholder or such controlling person may be subject, under the Act
or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in the Registration
Statement (including any Preliminary Prospectus and the Prospectus as a part
thereof) or any amendment or supplement thereof, or (B) in any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the shares
of Common Stock sold hereunder under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or (ii) the omission or alleged omission to state in the
Registration Statement (including any Preliminary Prospectus and the
Prospectus as a part thereof) or any amendment or supplement thereof or in
any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse
each Selling Shareholder for any legal or other expenses reasonably incurred
by such Selling Shareholder in connection with investigating or defending
against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent,
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Selling Shareholder
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment thereof
or supplement thereto.
(e) Promptly after receipt by an indemnified party under this
Section 8 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 8, 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
shall not relieve it from any liability which it may have under this Section
8 except to the extent that it has been prejudiced in any material respect by
such failure or from any liability which it may have otherwise). In case any
such action, investigation, inquiry, suit or proceeding is brought against
any indemnified party, and it notifies an 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 promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. 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 parties in correction with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying
parties shall not have employed counsel reasonably
38
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice 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 which are different from
or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct
the defense of such action, investigation, inquiry, suit or proceeding 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 local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action, investigation, inquiry, suit or proceeding or separate but similar or
related actions, investigations, inquiries, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 8 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. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, investigation, inquiry, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action),
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action, suit or proceeding and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(f) 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 8, 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 8 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 actions, investigations, inquiries,
suits or proceedings 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 Securities 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 (i) 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 the Company or any
Selling Shareholder is the contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company or such
Selling Shareholder, as the case may be, on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares (before deducting
expenses) bear to the
39
total underwriting discounts 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 relates to information supplied by
the Company, any Selling Shareholder 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, investigations, inquiries, suits or proceedings in
respect thereof, referred to above in this subdivision (f) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action, claim,
investigation, inquiry, suit or proceeding. Notwithstanding the provisions
of this subdivision (f) the Underwriters shall not be required to contribute
any amount in excess of the underwriting discount applicable to the
Securities 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 8, each person,
if any, who controls the Company or any Selling Shareholder 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 or such Selling Shareholder, as the
case may be, subject in each case to this subparagraph (f). Any party
entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit, inquiry, investigation or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (f), 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 subparagraph (f), or 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.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company or certificates
delivered on behalf of any Selling Shareholder submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the
Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company, any controlling person of any Underwriter, the
Company, and shall survive termination of this Agreement or the issuance,
sale and delivery of the Securities to the Underwriters and the Underwriters,
as the case may be.
10. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or
at such earlier time after
40
the Registration Statement becomes effective as the Underwriters, in their
discretion, shall release the Securities for sale to the public; provided,
however, that the provisions of Sections 6, 8 and 11 of this Agreement shall
at all times be effective. For purposes of this Section 10, the Shares to be
purchased hereunder shall be deemed to have been so released upon the earlier
of dispatch by the Underwriters of telegrams to securities dealers releasing
such shares for offering or the release by the Underwriters for publication
of the first newspaper advertisement which is subsequently published relating
to the Shares.
11. Termination.
(a) Subject to subsection (b) of this Section 11, the
Underwriters shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Underwriters' opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any
material adverse change in the financial markets shall have occurred; or
(iii) if trading generally shall have been suspended or materially limited on
or by, as the case may be, any of the New York Stock Exchange, the AMEX, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange,
the Commission or any other government authority having jurisdiction; or (iv)
if trading of any of the securities of the Company shall have been suspended,
or any of the securities of the Company shall have been delisted, on any
exchange or in any over-the-counter market; or (v) if the United States shall
have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium has been declared by a state or federal authority; or (vii) if a
moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Underwriters' opinion, make it inadvisable to proceed
with the delivery of the Securities; or (viii) if there shall have occurred
any outbreak or escalation of hostilities or any calamity or crisis or there
shall have been such a material adverse change in the conditions or prospects
of the Company, or such material adverse change in the general market,
political or economic conditions, in the United States or elsewhere as in the
Underwriters' judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (ix) if ▇▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall no longer serve the Company in
their present capacity.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 11(a) the Company shall promptly
reimburse and indemnify the Underwriters for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel for
the Underwriters (less amounts previously paid pursuant to Section 6(c)
above). Notwithstanding any contrary provision contained in this Agreement,
if this Agreement shall not be carried out within the time specified herein,
or any extension thereof granted to the Underwriters, by reason of any
failure on the part of the Company to perform any undertaking or satisfy any
condition of this Agreement by it to be performed or satisfied (including,
without limitation, pursuant to Section 7 or Section 13) then, the Company
shall promptly reimburse and
41
indemnify the Underwriters for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 6(c) above). Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 7, 11, 12 and 13 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 6 and Section 8 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.
12. Default by the Company. If the Company or any Selling
Shareholder shall fail at the Closing Date or at any Option Closing Date, as
applicable, to sell and deliver the number of Shares which it is obligated to
sell hereunder on such date, then this Agreement shall terminate (or, if such
default shall occur with respect to any Option Shares to be purchased on an
Option Closing Date, the Underwriters may at the Underwriters' option, by
notice from the Underwriters to the Company, terminate the Underwriters'
obligation to purchase Option Shares from the Company on such date) without
any liability on the part of any non-defaulting party other than pursuant to
Section 6, Section 8 and Section 11 hereof. No action taken pursuant to this
Section shall relieve the Company from liability, if any, in respect of such
default.
13. Substitution of Underwriters. If one of the Underwriters
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 7, 11, or 12
hereof to purchase and pay for the number of Shares agreed to be purchased by
such Underwriter upon tender to you of such shares in accordance with the
terms hereof, then (unless within 48 hours after such default arrangements
satisfactory to the Company and the non-defaulting Underwriter shall have
been made for the purchase of the defaulted Stock by another Underwriter or
Underwriters) this Agreement will terminate without liability on the part of
any non-defaulting Underwriter or on the part of the Company except as
otherwise provided in Sections 5 and 8 hereof. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter
under this paragraph. Nothing in this Section 13, and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
14. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriters shall be directed to the
Underwriters c/o Fahnestock & Co. Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇
Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇, Esq. Notices to the Company shall be directed
to the Company at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President, with a copy to Schoeman, ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
15. Parties. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Underwriters, the Company, the Selling
Shareholders and the controlling persons, directors and officers referred to
in Section 8 hereof, and their respective successors,
42
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 Securities from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
16. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
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; Amendments. This Agreement and the
Underwriters' Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof.
This Agreement may not be amended except in a writing, signed by the
Underwriters, the Company and the Selling Shareholders.
If the foregoing correctly sets forth the understanding between the
Underwriters, the Company and the Selling Shareholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
VICON INDUSTRIES, INC.
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
▇▇▇▇▇▇ ▇. ▇▇▇▇, Selling Shareholder
By:
---------------------------------------
Attorney-in-Fact
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Selling Shareholder
By:
---------------------------------------
Attorney-in-Fact
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Selling Shareholder
By:
---------------------------------------
Attorney-in-Fact
43
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
By:
---------------------------------
Name:
Title:
As Attorney-in-Fact for each of the
Underwriters
SOUTHEAST RESEARCH PARTNERS, INC.
By:
---------------------------------
Name:
Title:
As Attorney-in-Fact for each of
the Underwriters
44
SCHEDULE A
Underwriter Number of Shares
----------- ----------------
▇▇▇▇▇▇▇▇▇▇ & Co. Inc.
Southeast Research Partners, Inc.
TOTAL 1,575,000
---------
---------
45
SCHEDULE B
Selling Shareholder Number of Shares
------------------- ----------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ 48,605
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 257,700
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 18,695
46
Exhibit A
[FORM OF INTELLECTUAL PROPERTY OPINION]
_____________, 1998
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
Southeast Research Partners, Inc.
c/o Fahnestock & Co. Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Public Offering of Vicon Industries, Inc.
Gentlemen:
We have acted as special counsel to VICON INDUSTRIES, INC., a New York
corporation (the "Company"), in connection with the entering into by the
Company of that certain Underwriting Agreement by and between ▇▇▇▇▇▇▇▇▇▇ &
CO. INC. ("▇▇▇▇▇▇▇▇▇▇") and SOUTHEAST RESEARCH PARTNERS, INC. ("Southeast"),
as representatives of the several underwriters named in Schedule A thereto,
and the Company, dated _____________, 1998 (the "Underwriting Agreement").
This opinion is provided to you pursuant to Section 7(p) of the Underwriting
Agreement.
For the purpose of rendering the opinions set forth below we have reviewed
the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Registration Statement filed _________,
1998, together with any and all amendments thereof exhibits
thereto (collectively, the "Registration Statement");
(iii) the company's Prospectus dated _________________, 1998
(the "Prospectus");
(iv) a search of the United States Patent and Trademark
Office records relevant to ownership of any and all:
47
patents and patent applications (including, without
limitation, the patents and patent applications listed on
Schedule A annexed hereto and hereby incorporated by reference
herein (collectively, the "Patents")), and trademarks,
trademark applications, service marks and service ▇▇▇▇
applications (collectively, the "Marks") (including, without
limitation, the Marks listed on Schedule B annexed hereto and
hereby incorporated by reference herein (collectively, the
"Trademarks")),
owned, purportedly owned or licensed by the Company
(including, those patents, patent applications and Marks
licensed, without limitation, pursuant to the licenses listed
on Schedule C annexed hereto and hereby incorporated by
reference herein (collectively, the "Licenses")), conducted by
_____________________ and certified as true and correct as of
_________________, 1998 (no earlier than 5 days prior to the
date of the Closing (as defined in the Underwriting
Agreement));
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material
(including, without limitation, the copyright in, or license
permitting the Company's actual use of, the material licensed
or otherwise distributed by the Company and listed on Schedule
D annexed hereto and hereby incorporated by reference herein
(collectively, the "Copyrighted Material")), owned,
purportedly owned or licensed by the Company conducted by
_______________________ and certified as true and correct as
of ___________________, 1998 (no earlier than 5 days prior to
the date of the Closing);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted Material,
listed on Schedules A, B, C and D, respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
[________________________, ________________ and
____________________], with respect to the following two
categories of general intangibles:
(a) the intellectual property general intangibles of the
Company, including, without limitation, the Company's
48
patents, patent applications, inventions, know how,
trademarks, service marks, copyrights, service and trade
names, intellectual property licenses and other rights, and
(b) the intellectual property general intangibles licensed to
the Company, including, without limitation, the patents,
patent applications, inventions, know how, trademarks, service
marks, copyrights, service and trade names and other
intellectual property rights licensed to the Company pursuant
to the Licenses (listed on Schedule C),
said search certified to us as complete and accurate by
________________________ and current through _______________ ,
1998 (no earlier than 5 days prior to the date of the Closing)
and said jurisdictions being the only jurisdictions in which
filing of UCC financing statements or other documents may be
filed to effectively evidence a security or other interest in
said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating to
the Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other
makers, as we have deemed necessary or appropriate as a basis
for the opinions set forth herein. Whenever our opinion herein
is qualified by the phrase "to the best of our knowledge" or
"to the best of our knowledge, after due inquiry," such
language means that, based upon (i) our inquiries of officers
of the Company, (ii) our review of the Documents, and (iii)
our review of such other corporate records, documents,
instruments and agreements described in the first sentence of
this paragraph, we believe that such opinions are factually
correct.
To the best of our knowledge, as to all matters of fact represented to you by
the Company, we advise you that nothing has come to our attention that would
cause us to believe that such facts are incorrect, incomplete or misleading
or that reliance thereon is not warranted under the circumstances. We call
to your attention that our opinion is limited to such facts as they exist on
the date hereof and do not take into account any change of circumstances,
fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion that:
49
1. To the best of our knowledge, after due inquiry, except as described in
the Registration Statement, the Company owns or has the right to use, free
and clear of all liens, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever,
(i) all patents and patent applications (including, without
limitation, the Patents),
(ii) all trademarks and service marks (including, without
limitation, the Trademarks),
(iii) all copyrights (including, without limitation, the
Copyrighted Material),
(iv) all service and trade names,
(v) all intellectual property licenses (including, without
limitation, the Licenses), and
(vi) all technology
used in, contemplated to be used in or required for, the conduct of the
Company's business.
2. To the best of our knowledge, after due inquiry, the Company possesses
all material intellectual property licenses or rights used in, or required
for, the conduct of its business (including, the Licenses and without
limitation, any such licenses or rights described in the Registration
Statement as being owned, possessed or licensed by the Company, as the case
may be), such licenses and rights are in full force and effect, and the
Company's products, methods and services do not infringe any unlicensed
intellectual property of any third parties.
3. To the best of our knowledge, after due inquiry, there is no claim or
action, pending, threatened or potential, which affects or could affect the
rights of the Company with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications or
licenses used in, or required for, the conduct of the Company's business and
all trademarks, service marks, copyrights, trade names, and patents owned or
licensed to the Company are valid.
4. To the best of our knowledge, after due inquiry, there is no
intellectual property based claim or action, pending, threatened or
potential, which affects or could affect the rights of the Company with
respect to any products, services, processes or licenses, including, without
limitation, the Licenses used in the conduct of the Company's business.
5. To the best of our knowledge, after due inquiry, except as described in
the Registration Statement, the Company is not under any obligation to pay
royalties or fees to any third party with respect to any material, technology
or intellectual properties developed, employed, licensed or used by the
Company.
50
6. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement under the headings, "Risk Factors - Patents,
Trademarks and Proprietary Information" and "Business - Patents, Trademarks
and Proprietary Information," are accurate in all material respects, fairly
represent the information disclosed therein and do not omit to state any fact
necessary to make the statements made therein complete and accurate.
7. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement and the Prospectus do not contain any untrue statement
of a material fact with respect to the intellectual property position of the
Company, or omit to state any material fact relating to the intellectual
property position of the Company which is required to be stated in the
Registration Statement and the Prospectus or is necessary to make the
statements therein not misleading.
We call your attention to the fact that the members of this firm are licensed
to practice law in the State of _______________________ and before the United
States Patent and Trademark Office as Registered Patent Attorneys.
Accordingly, we express no opinion with respect to the laws, rules and
regulations of any jurisdictions other than the State of ___________ and the
United States of America.
The opinions expressed herein are for the sole benefit of, and may be relied
upon only by, the several Underwriters named in Schedule A to the
Underwriting Agreement and ▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP.
Very truly yours,
51