2,500,000 Units
(each Unit consisting of (i) one share of Class A Common Stock,
par value $.001 per share and (ii) one redeemable warrant to purchase
one share of Class A Common Stock)
TEKGRAF, INC.
UNDERWRITING AGREEMENT
____________, 1997
▇.▇. ▇▇▇▇▇ Investment Banking Corp.
As Representative of the Several Underwriters
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
TEKGRAF, INC., a Delaware corporation (the "Company"), proposes to issue
and sell to the underwriters named in Schedule A (the "Underwriters") of this
Underwriting Agreement (the "Agreement"), for whom you are acting as
representative (the "Representative"), an aggregate of 2,500,000 Units, each
unit being hereinafter referred to as a "Unit" and consisting of (i) one share
of Class A Common Stock, par value $.001 per share, of the Company ("Shares")
and (ii) one redeemable warrant ("Warrants") to purchase one share of Class A
Common Stock of the Company at a price of $7.00 from _______, 1997 to_______,
2002. The Warrants are subject to redemption, in certain instances commencing
one year from the date of this Agreement. In addition, the Company proposes to
grant to the Underwriters (or, at its option, the Representative, individually)
the option referred to in Section 2(b) to purchase all or any part of an
aggregate of 375,000 additional Units. Unless the context otherwise indicates,
the term "Units" shall include the 375,000 additional Units referred to above.
The aggregate of 2,875,000 Units to be sold by the Company, together with
all or any part of the 250,000 Units which the Underwriters have the option to
purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Common Stock of the Company to be outstanding after
giving effect to the sale of the Shares is herein called the "Common Stock." The
Shares and Warrants included in the Units (including the Units which the
Underwriters have the option to purchase) are herein collectively called the
"Securities."
You have advised the Company that you and the other Underwriters desire to
purchase, severally, the Units, and that you have been authorized by the
Underwriters to execute this Agreement on their behalf. The Company confirms the
agreements made by it with respect to the purchase of the Units by the several
Underwriters on whose behalf you are signing this Agreement, as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333-33449) on Form S-1 relating to
the public offering of the Units, including a form of prospectus subject to
completion, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Units that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Act or (B) if the
Company does not rely on Rule 434 under the Act a prospectus in the form most
recently included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act and in the case of either clause (i)(A) or (i)(B) of
this sentence, as have been provided to and approved by the Representative prior
to the execution of this Agreement, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, including
a form of prospectus, a copy of which amendment has been furnished to and
approved by the Representative prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Units that is first filed pursuant to Rule
2
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements; (B) if the Company does not rely on
Rule 434 under the Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act or (C) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to said Rule
424(b), such term means the prospectus included in the Registration Statement;
except that if such registration statement or prospectus is amended or such
prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be; and the term
"Term Sheet" means any term sheet that satisfies the requirements of Rule 434
under the Act. Any reference to the "date" of a Prospectus that includes a Term
Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the Closing
Date (as hereinafter defined) or the Option Closing Date, as the case may be,
(i) the Registration Statement and Prospectus will in all respects conform to
the requirements of the Act and the Rules and Regulations; and (ii) neither the
Registration Statement nor the Prospectus will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make statements therein not misleading; provided, however, that
the Company makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement or Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Underwriters specifically for use in the
preparation thereof. It is understood that the statements set forth in the
Prospectus on page 2 with respect to stabilization, under the headings "Risk
Factors--Possible Adverse Effect on Liquidity of the Company's Securities Due to
Securities and Exchange Commission Investigation of the Representative and ▇▇▇▇▇
& Co. and Recent Settlement by ▇▇▇▇▇ & Co. with NASD", "Underwriting" and the
identity of counsel to the Underwriters under the heading "Legal Matters"
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the Registration Statement and Prospectus,
as the case may be.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in all
other jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where failure to
so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of the Company as
of _______, 1997 is as set forth in the Prospectus under "Capitalization";
3
the shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants, or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of capital
stock of the Company have been granted or entered into by the Company; and the
capital stock conforms to all statements relating thereto contained in the
Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated in this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits provided
by the warrant agreement pursuant to which such Warrants are to be issued (the
"Warrant Agreement"), which will be substantially in the form filed as an
exhibit to the Registration Statement. The shares of Common Stock issuable upon
exercise of the Warrants have been reserved for issuance upon the exercise of
the Warrants and when issued in accordance with the terms of the Warrants and
Warrant Agreement, will be duly and validly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights and no personal liability
will attach to the ownership thereof. The Warrant Agreement has been duly
authorized and, when executed and delivered pursuant to this Agreement, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms. The
Warrants and the Warrant Agreement conform to the respective descriptions
thereof in the Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have been
duly authorized and, when duly issued and delivered, such Warrants will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the Unit
Purchase Option. The Shares included in the Unit Purchase Option (and the shares
of Common Stock issuable upon exercise of such Warrants) when issued and sold,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights and no personal liability will attach to the ownership
thereof.
(f) This Agreement, the Unit Purchase Option, the M/A Agreement, the
Consulting Agreement and the Escrow Agreement have been duly and validly
authorized, executed and delivered by the Company. The Company has full
4
power and lawful authority to authorize, issue and sell the Units to be sold by
it hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is required
in connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Units or the Unit Purchase Option, except
such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in violation,
breach or default of or under, and consummation of the transactions herein
contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of the Company pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or assets
of the Company is subject, nor will such action result in any violation of the
provisions of the articles of incorporation or the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the Company has
good and marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as are not materially significant or important in
relation to its business; all of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee or sublessee as described in
the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company is not in default in any material respect with respect
to any of the terms or provisions of any of such leases or subleases, and no
claim has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease or
sublease except as described or referred to in the Prospectus; and the Company
owns or leases all such properties described in the Prospectus as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Coopers & ▇▇▇▇▇▇▇ L.L.P., who have given their reports on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are incorporated in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
5
(j) The financial statements, and Schedules together with related notes,
set forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or the Registration Statement present fairly the
financial position and results of operations and changes in cash flow position
of the Company on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Said
statements and Schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved. The information set forth under the captions
"Dilution", "Capitalization", and "Selected Financial Data" in the Prospectus
fairly present, on the basis stated in the Prospectus, the information included
therein. The pro forma financial information filed as part of the Registration
Statement or included in the Prospectus (or such preliminary prospectus) has
been prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements, and includes all adjustments
necessary to present fairly the pro forma financial condition and results of
operations at the respective dates and for the respective periods indicated and
all assumptions used in preparing such pro forma financial statements are
reasonable.
(k) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has not incurred
any liabilities or obligations, direct or contingent, not in the ordinary course
of business, or entered into any transaction not in the ordinary course of
business, which is material to the business of the Company, and there has not
been any change in the capital stock of, or any incurrence of short-term or
long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company and the
Company has not become a party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not in
the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now pending or, to
the knowledge of the Company, threatened, any action, suit or proceeding to
which the Company is a party before or by any court or governmental agency or
body, which might result in any material adverse change in the condition
(financial or other), business prospects, net worth, or properties of the
Company, nor are there any actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race; and no labor disputes involving the employees of the Company
exist or are imminent which might be expected to adversely affect the conduct of
the business, property or operations or the financial condition or results of
operations of the Company.
6
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes shown as due thereon; and there is no tax deficiency which has
been or to the knowledge of the Company might be asserted against the Company.
(n) The Company has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service ▇▇▇▇ registrations, copyrights and
licenses necessary for the conduct of such business and had not received any
notice of conflict with the asserted rights of others in respect thereof. To the
best knowledge of the Company, none of the activities or business of the Company
are in violation of, or cause the Company to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company.
(o) The Company has not, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution in violation of law or (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or other taxes,
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction) if any, which are required to be paid in connection
with the sale and transfer of the Units to the several Underwriters hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
(q) All contracts and other documents of the Company which are, under the
Rules and Regulations, required to be filed as exhibits to the Registration
Statement have been so filed.
(r) The Company 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
Units hereby.
7
(s) Except as disclosed in the Prospectus, the Company has no subsidiaries.
(t) The Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering.
(u) Except as previously disclosed in writing by the Company to the
Representative, no officer, director or stockholder of the Company has any
affiliation or association with any member of the National Association of
Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from the sale of
the Units will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute prior to the
First Closing Date any offering material in connection with the offering and
sale of the Units other than the Preliminary Prospectus, Prospectus, the
Registration Statement or the other materials permitted by the Act, if any.
(x) The conditions for use of Form S-1, as set forth in the General
Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party transactions of
the nature described in Item 404 of Regulation S-K involving the Company, the
Subsidiaries and any person described in such Item that are required to be
disclosed in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) and that have not been so disclosed.
(z) The Acquisitions, the Merger and the Recapitalization (as each such
term is defined in the Prospectus) were consummated in accordance with all
applicable laws and the Company, as the surviving entity in the Merger,
succeeded to the business and all of the assets and liabilities of Crescent
Computer, Inc. and those of the Subsidiaries (as defined in the Prospectus). The
Acquisitions, the Merger and the Recapitalization have not and will not (i)
result in any violation of the Certificate of Incorporation or By-Laws of the
Company, (ii) result in the creation of any lien, charge or encumbrance upon any
of the assets of the Company pursuant to the terms or provisions of, or result
in a breach or violation of any of the terms or provisions of, or constitute a
default under, or give any other party a right to terminate any of its
obligations under, or result in the acceleration of any obligation under, any
contract or other agreement to which the Company is a party or by which the
Company or any of its properties is bound or affected, except such as have been
waived, consented to or would not, individually or in the aggregate, materially
and adversely affect the Company or its business, properties,
8
business prospects, condition (financial or otherwise) or results of operations
or (iii) violate or conflict with any judgment, ruling, decree, order, statute,
rule or regulation of any court or other governmental agency or body applicable
to the business or properties of the Company except such as would not,
individually or in the aggregate, materially and adversely affect the Company or
its business, properties, business prospects, condition (financial or otherwise)
or results of operations.
(aa) The Company has complied with all provisions of Section 517.075
Florida Statutes relating to doing business with the government of Cuba or with
any person or affiliate located in Cuba.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and upon the
basis of the representations, warranties, and agreements herein contained, the
Company agrees to issue and sell to the Underwriters, and each such Underwriter
agrees, severally and not jointly, to buy from the Company at $4.625 per Unit,
at the place and time hereinafter specified, the number of Units set forth
opposite the names of the Underwriters in Schedule A attached hereto (the "First
Units") plus any additional Units which such Underwriters may become obligated
to purchase pursuant to the provisions of Section 9 hereof. The First Units
shall consist of 2,500,000 Units to be purchased from the Company.
Delivery of the First Units against payment therefor shall take place at
the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be designated by
agreement between you and the Company) at 10:00 a.m., New York time, on
_________, 1997, or at such later time and date as you may designate, such time
and date of payment and delivery for the First Units being herein called the
"First Closing Date."
(b) In addition, subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants an option to the several Underwriters (or,
at its option, to the Representative, individually) to purchase all or any part
of an aggregate of an additional 375,000 Units at the same price per Unit as the
Underwriters shall pay for the First Units being sold pursuant to the provisions
of subsection (a) of this Section 2 (such additional Units being referred to
herein as the "Option Units"). This option may be exercised within 30 days after
the effective date of the Registration Statement upon notice by the
Representative to the Company advising as to the amount of Option Units as to
which the option is being exercised, the names and denominations in which the
certificates for such Option Units are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by the Representative but shall not be earlier than four nor later
than ten full business days after the exercise of said option, nor in any event
prior to the First Closing Date, and such time and date is referred to herein as
the
9
"Option Closing Date." Delivery of the Option Units against payment therefor
shall take place at the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The number of Option Units to be
purchased by each Underwriter, if any, shall bear the same percentage to the
total number of Option Units being purchased by the several Underwriters
pursuant to this subsection (b) as the number of Units such Underwriter is
purchasing bears to the total number of the First Units being purchased pursuant
to subsection (a) of this Section 2, as adjusted, in each case by the
Representative in such manner as the Representative may deem appropriate. The
Option granted hereunder may be exercised only to cover overallotments in the
sale by the Underwriters of First Units referred to in subsection (a) above. In
the event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Units on the Option Closing Date.
(c) The Company will make the certificates for the securities comprising
the Units to be purchased by the Underwriters hereunder available to you for
checking at least two full business days prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the "Closing
Dates"). The certificates shall be in such names and denominations as you may
request, at least two full business days prior to the Closing Dates. Time shall
be of the essence and delivery at the time and place specified in this Agreement
is a further condition to the obligations of each Underwriter.
Definitive certificates in negotiable form for the Units to be purchased by
the Underwriters hereunder will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the respective purchase
prices by the several Underwriters, by certified or bank cashier's checks in New
York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriters (or the Representative,
individually) exercise the option to purchase from the Company all or any
portion of the Option Units pursuant to the provisions of subsection (b) above,
payment for such Units shall be made to or upon the order of the Company by
certified or bank cashier's checks payable in New York Clearing House funds at
the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., at the time and date of
delivery of such Units as required by the provisions of subsection (b) above,
against receipt of the certificates for such Units by the Representative for the
respective accounts of the several Underwriters registered in such names and in
such denominations as the Representative may request.
It is understood that you, individually and not as Representative of the
several Underwriters, may (but shall not be obligated to) make any and all
payments required pursuant to this Section 2 on behalf of any Underwriters whose
check or
10
checks shall not have been received by the Representative at the time of
delivery of the Units to be purchased by such Underwriter or Underwriters. Any
such payment by you shall not relieve any such Underwriter or underwriters of
any of its or their obligations hereunder. It is also understood that you
individually rather than all of the Underwriters may (but shall not be obligated
to) purchase the Option Units referred to in subsection (b) of this Section 2,
but only to cover overallotments.
It is understood that the several Underwriters propose to offer the Units
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as possible. If required, the Company
will file the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto with the Commission in the manner and within
the time period required by Rules 434 and 424(b) under the Act. Upon
notification from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time, whether
before or after the effective date, file the Prospectus, Term Sheet or any
amendment to the Registration Statement or supplement to the Prospectus of which
you shall not previously have been advised and furnished with a copy or to which
you or your counsel shall have objected in writing or which is not in compliance
with the Act and the Rules and Regulations. At any time prior to the later of
(A) the completion by all of the Underwriters of the distribution of the Units
contemplated hereby (but in no event more than nine months after the date on
which the Registration Statement shall have become or been declared effective)
and (B) 25 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which, in your opinion, may be necessary or
advisable in connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will advise you, and
confirm the advice in writing, of the receipt of any comments of the Commission,
of the effectiveness of any post-effective amendment to the Registration
Statement, of the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any
11
of such purposes, and will use its best efforts to prevent the issuance of any
such order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each Preliminary
Prospectus, and the Company has consented and hereby consents to the use of such
copies for the purposes permitted by the Act. The Company authorizes the
Underwriters and dealers to use the Prospectus in connection with the sale of
the Units for such period as in the opinion of counsel to the several
Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by an underwriter or dealer of any event of
which the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the Company or
counsel for the Underwriters should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Units or in case it shall be necessary to amend or supplement the Prospectus to
comply with law or with the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriters,
except that in case any Underwriter is required, in connection with the sale of
the Units to deliver a Prospectus nine months or more after the effective date
of the Registration Statement, the Company will upon request of and at the
expense of the Underwriter, amend or supplement the Registration Statement and
Prospectus and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations and the
Securities Exchange Act of 1934 and the rules and regulations thereunder in
connection with the offering and issuance of the Units.
(b) The Company will use its best efforts to qualify to register the Units
for sale under the securities or "blue sky" laws of such jurisdictions as the
Representative may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent of service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the
12
Units. The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect for
so long a period as the Underwriters may reasonably request.
(c) If the sale of the Units provided for herein is not consummated for any
reason caused by the Company, the Company shall pay all costs and expenses
incident to the performance of the Company's obligations hereunder, including
but not limited to, all of the expenses itemized in Section 8, including the
accountable expenses of the Representative.
(d) The Company will use its best efforts to (i) cause a registration
statement under the Securities Exchange Act of 1934 to be declared effective
concurrently with the completion of this offering and will notify the
Representative in writing immediately upon the effectiveness of such
registration statement, and (ii) if requested by the Representative, to obtain a
listing on the Pacific Stock Exchange and to obtain and keep current a listing
in the Standard & Poors or ▇▇▇▇▇'▇ Industrial OTC Manual.
(e) For so long as the Company is a reporting company under either Section
12(g) or 15(d) of the Securities Exchange Act of 1934, the Company, at its
expense, will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any of its subsidiaries as at the end of such
fiscal year, together with statements of income, surplus and cash flow of the
Company and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, consolidated summary financial
information of the Company for such quarter in reasonable detail; (iii) as soon
as they are available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.
(f) To the extent the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to you at or before the First Closing Date two
signed copies of the Registration Statement including all financial statements
and exhibits filed therewith, and of all amendments thereto, and will deliver to
the
13
several Underwriters such number of conformed copies of the Registration
Statement, including such financial statements but without exhibits, and of all
amendments thereto, as the several Underwriters may reasonably request. The
Company will deliver to or upon the order of the several Underwriters, from time
to time until the effective date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the effective
date of the Registration Statement as the Underwriters may reasonably request.
The Company will deliver to the Underwriters on the effective date of the
Registration Statement and thereafter for so long as a Prospectus is required to
be delivered under the Act, from time to time, as many copies of the Prospectus,
in final form, or as thereafter amended or supplemented, as the Underwriters may
from time to time reasonably request. The Company, not later than (i) 5:00 p.m.,
New York City time, on the date of determination of the public offering price,
if such determination occurred at or prior to 12:00 noon, New York City time, on
such date or (ii) 6:00 p.m., New York City time, on the business day following
the date of determination of the public offering price, if such determination
occurred after 12:00 noon, New York City time, on such date, will deliver to the
Underwriters, without charge, as many copies of the Prospectus and any amendment
or supplement thereto as the Underwriters may reasonably request for purposes of
confirming orders that are expected to settle on the First Closing Date.
(h) The Company will make generally available to its security holders and
to the registered holders of its Warrants and deliver to you as soon as it is
practicable to do so but in no event later than 90 days after the end of twelve
months after its current fiscal quarter, an earnings statement (which need not
be audited) covering a period of at least 12 consecutive months beginning after
the effective date of the Registration Statement, which shall satisfy the
requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the Units for
the purposes set forth under "Use of Proceeds" in the Prospectus, and will file
such reports with the Commission with respect to the sale of the Units and the
application of the proceeds therefrom as may be required pursuant to Rule 463
under the Act.
(j) The Company will, promptly upon your request, prepare and file with the
Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
several Underwriters, may be reasonably necessary or advisable in connection
with the distribution of the Units, and will use its best efforts to cause the
same to become effective as promptly as possible.
14
(k) The Company will reserve and keep available that maximum number of its
authorized but unissued securities which are issuable upon exercise of the Unit
Purchase Option outstanding from time to time.
(l) For a period of 13 months from the First Closing Date, no officer,
director or stockholder of the Company will directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Representative. In order to enforce this covenant,
the Company shall impose stop-transfer instructions with respect to the shares
owned by the stockholders of the Company until the end of such period.
(m) [INTENTIONALLY OMITTED]
(n) Prior to completion of this offering, the Company will make all filings
required, including registration under the Securities Exchange Act of 1934, to
obtain the listing of the Units, Common Stock, and Warrants on the Nasdaq
National Market (or a listing on such other market or exchange as the
Underwriters consent to), and will effect and maintain such listing for at least
five years from the date of this Agreement.
(o) The Company represents that it has not taken and agrees that it will
not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Units, Shares or the Warrants
or to facilitate the sale or resale of the Securities.
(p) On the Closing Date and simultaneously with the delivery of the Units,
the Company shall execute and deliver to you, individually and not as
representative of the Underwriters, the Unit Purchase Option. The Unit Purchase
Option will be substantially in the form of the Representative's Unit Purchase
Option filed as an Exhibit to the Registration Statement.
(q) Without the prior written consent of the Representative, (i) during the
18 month period commencing on the date of this Agreement, the Company will not
grant options to purchase shares of Common Stock at an exercise price less than
the greater of (x) the initial public offering price of the Units (without
allocating any value to the Warrants) or (y) the fair market value of the Common
Stock on the date of grant; (ii) during the six month period commencing on the
date of this Agreement, grant options to any current officer of the Company;
(iii) during the three year period commencing on the date of this Agreement,
offer or sell any of its securities pursuant to Regulation S under the Act; (iv)
grant registration rights to any person which are exercisable sooner than 13
months from the First Closing Date; or (v) issue any securities which have per
share voting rights greater than the voting rights of the Shares (or take any
corporate action which would have this effect).
15
(r) ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Mr. ▇▇▇ ▇▇▇▇▇▇ shall be the
Chairman of Board, Co-President - Graphics Division and Co-President Technology
Division of the Company, respectively, on the Closing Dates. The Company has
obtained key person life insurance on the lives of each of Messrs. Aginsky,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ in an amount of not less than $2 million and will use its best
efforts to maintain such insurance during the five year period commencing with
the First Closing Date unless their employment with the Company are earlier
terminated. In such event, the Company will obtain a comparable policy on the
lives of each of their successor for the balance of the five year period. For a
period of thirteen months from the First Closing Date, the compensation of the
executive officers of the Company shall not be increased from the compensation
levels disclosed in the Prospectus.
(s) On the Closing Date and simultaneously with the delivery of the Units
the Company shall execute and deliver to you, individually and not as
representative of the Underwriters, an agreement with you regarding mergers,
acquisitions, joint ventures and certain other forms of transactions, in the
form previously delivered to the Company by you (the "M/A Agreement").
(t) On the Closing Date and simultaneously with the delivery of the Units,
the Company shall execute and deliver to you, and pay the first annual payment
under, a two year consulting agreement in the form previously delivered to the
Company by you (the "Consulting Agreement").
(u) So long as any Warrants are outstanding, the Company shall use its best
efforts to cause post-effective amendments to the Registration Statement to
become effective in compliance with the Act and without any lapse of time
between the effectiveness of any such post-effective amendments and cause a copy
of each Prospectus, as then amended, to be delivered to each holder of record of
a Warrant and to furnish to each Underwriter and dealer as many copies of each
such Prospectus as such Underwriter or dealer may reasonably request. The
Company shall not call for redemption any of the Warrants unless a registration
statement covering the securities underlying the Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, for so long as any Warrant is outstanding, the
Company will promptly notify the Representative of any material change in the
business, financial condition or prospects of the Company.
(v) Upon the exercise of any Warrant or Warrants after _______, 1998, the
Company will pay the Representative, in its individual capacity and not as
16
representative of the underwriters, a fee of 5% of the aggregate exercise price
of the Warrants, of which a portion may be reallowed to the dealer who solicited
the exercise (which may also be the Representative) if (i) the market price of
the Company's Common Stock is greater than the exercise price of the Warrants on
the date of exercise; (ii) the exercise of the Warrant was solicited by a member
of the NASD; (iii) the Warrant holder designates in writing that the exercise of
the Warrant was solicited by a member of the NASD and designates in writing the
broker-dealer to receive compensation for such exercise; (iv) the Warrant is not
held in a discretionary account; (v) the disclosure of compensation arrangements
has been made in documents provided to customers, both as part of the original
offering and at the time of exercise, and (vi) the solicitation of the Warrant
was not in violation of Regulation M promulgated under the Securities Exchange
Act of 1934, as amended. The Company agrees not to solicit the exercise of any
Warrants other than through the Representative and will not authorize any other
dealer to engage in such solicitation without the prior written consent of the
Representative.
(w) For a period of five years from the Effective Date the Company (i) at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders and
(ii) shall not change its accounting firm without the prior written consent of
the Chairman or the President of the Representative.
(x) As promptly as practicable after the Closing Date, the Company will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute at least four of such volumes to the individuals
designated by the Representative or counsel to the Underwriters.
(y) For a period of five years from the First Closing Date (i) the
Representative shall have the right, but not the obligation, to designate one
director of the Board of Directors of the Company and (ii) the Company shall
engage a public relations firm acceptable to the Underwriter.
(z) The Company shall, for a period of six years after date of this
Agreement, submit which reports to the Secretary of the Treasury and to
stockholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in the Company.
(aa) On or prior to the Effective Date the Company shall have obtained
officers and directors insurance and property and casualty insurance in
appropriate amounts and shall maintain such insurance coverage for a period of
five years from the Effective Date.
17
4. Conditions of Underwriters' Obligation. The obligations of the several
Underwriters to purchase and pay for the Units which they have respectively
agreed to purchase hereunder, are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New
York time, on the date on which the amendment to the registration
statement originally filed with respect to the Units or to the
Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Units has been
filed with the Commission, or such later time and date as shall have
been agreed to by the Representative; if required, the Prospectus or
any Term Sheet that constitutes a part thereof and any amendment or
supplement thereto shall have been filed with the Commission in the
manner and within the time period required by Rule 434 and 424(b)
under the Act; on or prior to the Closing Dates no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or a similar purpose shall
have been instituted or shall be pending or, to your knowledge or to
the knowledge of the Company, shall be contemplated by the Commission;
any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of Paul,
Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the several Underwriters;
(b) At the First Closing Date, you shall have received the
opinion, together with copies of such opinion for each of the other
several Underwriters, dated as of the First Closing Date, of Bachner,
Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, with full corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and
is duly qualified or licensed to do business as a foreign
corporation and is in good standing in Georgia and in each
other jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such
qualification;
(ii) to the best knowledge of such counsel, (a) the Company
has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations
necessary to the conduct of its business as described in the
Prospectus, (b) such licenses, permits
18
and other governmental authorizations obtained are in full
force and effect, and (c) the Company is in all material
respects complying therewith;
(iii) the authorized capitalization of the Company as of
June 30, 1997 is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding stock
requiring authorization for issuance by the Company's board
of directors have been duly authorized, validly issued, are
fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding shares
of Common Stock of the Company have not been issued in
violation of the preemptive rights of any shareholder and
the shareholders of the Company do not have any preemptive
rights or other rights to subscribe for or to purchase, nor
are there any restrictions upon the voting or transfer of
any of the Stock; the Common Stock, the Warrants, the Unit
Purchase Option and the Warrant Agreement conform to the
respective descriptions thereof contained in the Prospectus;
the Shares have been, and the shares of Common Stock to be
issued upon exercise of the Warrants and the Unit Purchase
Option, upon issuance in accordance with the terms of such
Warrants, the Warrant Agreement and Unit Purchase Option
have been duly authorized and, when issued and delivered,
will be duly and validly issued, fully paid, non-assessable,
free of preemptive rights and no personal liability will
attach to the ownership thereof; all prior sales by the
Company of the Company's securities have been made in
compliance with or under an exemption from registration
under the Act and applicable state securities laws and no
shareholders of the Company have any rescission rights with
respect to Company securities; a sufficient number of shares
of Common Stock has been reserved for issuance upon exercise
of the Warrants and Unit Purchase Option and to the best of
such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Units
as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which
have been waived or satisfied for or relating to the
registration of any shares of Common Stock;
(iv) this Agreement, the Unit Purchase Option, the Warrant
Agreement, the M/A Agreement and the Escrow Agreement have
been duly and validly authorized, executed and delivered by
the Company and, assuming due execution by each other party
hereto or thereto, each constitutes a legal, valid and
binding obligation of the Company enforceable against the
Company in accordance with its respective terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization,
19
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;
(v) the certificates evidencing the shares of Common Stock
are in valid and proper legal form; the Warrants will be
exercisable for shares of Common Stock of the Company in
accordance with the terms of the Warrants and at the prices
therein provided for; at all times during the term of the
Warrants the shares of Common Stock of the Company issuable
upon exercise of the Warrants have been duly authorized and
reserved for issuance upon such exercise and such shares,
when issued upon such exercise in accordance with the terms
of the Warrants and at the price provided for, will be duly
and validly issued, fully paid and non-assessable;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party
which could materially adversely affect the business,
property, financial condition or operations of the Company;
or which question the validity of the Securities, this
Agreement, the Warrant Agreement, the Unit Purchase Option,
the M/A Agreement or the Escrow Agreement, or of any action
taken or to be taken by the Company pursuant to this
Agreement, the Warrant Agreement, the Unit Purchase Option,
the M/A Agreement or the Escrow Agreement; and no such
proceedings are known to such counsel to be contemplated
against the Company; there are no governmental proceedings
or regulations required to be described or referred to in
the Registration Statement which are not so described or
referred to;
(vii) the Company is not in violation of or default under,
nor will the execution and delivery of this Agreement, the
Unit Purchase Option, the Warrant Agreement, the M/A
Agreement or the Escrow Agreement, and the incurrence of the
obligations herein and therein set forth and the
consummation of the transactions herein or therein
contemplated or those contemplated in connection with the
Acquisitions, result in a breach or violation of, or
constitute a default under the certificate or articles of
incorporation or by-laws of the Company, or, to such
counsel's knowledge, in the performance or observance of any
material obligations, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or
instrument known to such counsel to which the Company is a
party or by which it or any of its properties may be bound
or in violation of any material order, rule, regulation,
writ, injunction, or
20
decree of any government, governmental instrumentality or
court, domestic or foreign;
(viii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for that purpose
have been instituted or are pending before, or threatened
by, the Commission; the Registration Statement and the
Prospectus (except for the financial statements and other
financial data contained therein, or omitted therefrom, as
to which such counsel need express no opinion) comply as to
form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(ix) such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has
come to the attention of such counsel to cause such counsel
to have reason to believe that the Registration Statement or
any amendment thereto at the time it became effective or as
of the Closing Dates contained any untrue statement of a
material fact required to be stated therein or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein,
in light of the circumstances under which they were made,
not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and
any supplement thereto, for the financial statements, notes
thereto and other financial information and schedules
contained therein, as to which such counsel need express no
opinion);
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of
contracts and other documents are accurate and fairly
present the information required to be shown, and such
counsel is familiar with all contracts and other documents
referred to in the Registration Statement and the Prospectus
and any such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not know
of any contracts or documents of a character required to be
summarized or described therein or to be filed as exhibits
thereto which are not so summarized, described or filed;
(xi) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary
in connection with the authorization, issuance, transfer,
sale or delivery
21
of the Units by the Company, in connection with the
execution, delivery and performance of this Agreement by the
Company or in connection with the taking of any action
contemplated herein, or the issuance of the Unit Purchase
Option or the Securities underlying the Unit Purchase
Option, other than registrations or qualifications of the
Units under applicable state or foreign securities or Blue
Sky laws and registration under the Act;
(xii) the statements in the Registration Statement under the
captions "Business", "Use of Proceeds", "Management", and
"Description of Securities" have been reviewed by such
counsel and insofar as they refer to descriptions of
agreements, statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiii) Such counsel has received notification from The
Nasdaq Stock Market, Inc. that the Units, the Common Stock
and the Warrants have been duly authorized for quotation on
the Nasdaq National Market; and
(xiv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature
described in Item 404 of Regulation S-K involving the
Company, any Subsidiary and any person described in such
Item that are required to be disclosed in the Prospectus and
which have not been so disclosed.
(xv) The Acquisitions, the Merger and the Recapitalization
(as each such term is defined in the Prospectus) were
consummated in accordance with all applicable laws and the
Company, as the surviving entity in the Merger, succeeded to
the business and all of the assets and liabilities of
Crescent Computer, Inc. and those of the Subsidiaries (as
defined in the Prospectus).
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Representative or counsel for the Underwriters shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law other than the law of the United
States or of the State of Delaware upon opinions of counsel satisfactory to you,
in which case the opinion shall state that they have no reason to believe that
you and they are not entitled to so rely.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be satisfactory to or approved by Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to the several Underwriters, and you shall have received from such
counsel a signed opinion, dated as of the First Closing Date, together with
copies thereof for each of the other Underwriters, with respect to the validity
of the issuance of the Units, the form of the Registration Statement and
Prospectus (other than the financial statements and other financial data
contained therein), the execution of this Agreement and other related matters as
you may reasonably require. The Company shall have furnished to counsel for the
several Underwriters such documents as they may reasonably request for the
purpose of enabling them to render such opinion.
22
(d) You shall have received a letter prior to the effective date of the
Registration Statement and again on and as of the First Closing Date from
Coopers & ▇▇▇▇▇▇▇ L.L.P., independent public accountants for the Company,
substantially in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period ending at the end of
the month immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct with the same
effect as if made on and as of the Closing Dates and the Company shall have
performed all of its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; (iii)
there shall have been, since the respective dates as of which information is
given, no material adverse change, or any development involving a prospective
material adverse change, in the business, properties, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term debt
or general affairs of the Company from that set forth in the Registration
Statement and the Prospectus, except changes which the Registration Statement
and Prospectus indicate might occur after the effective date of the Registration
Statement, and the Company shall not have incurred any material liabilities or
entered into any agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; and (iv) except as set
forth in the Prospectus, no action, suit or proceeding at law or in equity shall
be pending or threatened against the Company which would be required to be set
forth in the Registration Statement, and no proceedings shall be pending or
threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company, and (v) you shall have received, at the First Closing
Date, a certificate signed by each of the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated as of
the First Closing Date, evidencing compliance with the provisions of this
subsection (e).
(f) Upon exercise of the option provided for in Section 2(b) hereof, the
obligations of the several Underwriters (or, at its option, the Representative,
individually) to purchase and pay for the Option Units referred to therein will
be subject (as of the date hereof and as of the Option Closing Date) to the
following additional conditions:
23
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of Paul, Hastings, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel to the several Underwriters.
(ii) At the Option Closing Date there shall have been delivered
to you as Representative the signed opinion of Bachner, Tally,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel for the Company, dated as of the
Option Closing Date, in form and substance satisfactory to Paul,
Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the several
Underwriters, together with copies of such opinion for each of
the other several underwriters, which opinion shall be
substantially the same in scope and substance as the opinion
furnished to you at the First Closing Date pursuant to Section
4(b) hereof, except that such opinion, where appropriate, shall
cover the Option Units.
(iii) At the Option Closing Date there shall have been delivered
to you a certificate of the Chairman of the Board or the
President and the principal financial or accounting officer of
the Company, dated the Option Closing Date, in form and substance
satisfactory to Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to
the several Underwriters, substantially the same in scope and
substance as the certificate furnished to you at the First
Closing Date pursuant to Section 4(e) hereof.
(iv) At the Option Closing Date there shall have been delivered
to you a letter in form and substance satisfactory to you from
Coopers & ▇▇▇▇▇▇▇ L.L.P., dated the Option Closing Date and
addressed to the Underwriters confirming the information in their
letter referred to in Section 4(d) hereof and stating that
nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date
not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Units
shall be satisfactory in form and substance to you and Paul,
Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the several
Underwriters, shall have been furnished with all such documents,
certificates, and
24
opinions as you may request in connection with this transaction
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained
herein.
(g) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Units, Common Stock or the Warrants and no proceedings for the taking of such
action shall have been instituted or shall be pending, or, to the knowledge of
the Representative or the Company, shall be contemplated by the Commission or
the NASD. The Company represents that at the date hereof it has no knowledge
that any such action is in fact contemplated by the Commission or the NASD. The
Company shall have advised the Underwriters of any NASD affiliation of any of
its officers, directors, stockholders or their affiliates known to the Company
after due inquiry.
(h) The estimated revenues and earnings of the Company for the nine months
ending September 30, 1997 will be greater than those of the nine months ended
September 30, 1996.
(i) If any of the conditions herein provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the several Underwriters under this Agreement may be cancelled at, or at any
time prior to, each Closing Date by the Representative. Any such cancellation
shall be without liability of the Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Units is subject to the condition that at the
Closing Dates, no stop orders suspending the effectiveness of the Registration
Statement shall have been issued under the Act or any proceedings therefor
initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
such
25
Underwriter or such controlling person may become subject, under the Act or
otherwise, and will reimburse, as incurred, such Underwriters and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) 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 Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
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;
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 the Underwriters
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 or
supplement thereto. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) Each Underwriter severally, but not jointly, will indemnify and hold
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (i) in reliance upon and in conformity with written
26
information furnished to the Company by you or by any Underwriter through you
specifically for use in the preparation thereof and (ii) relates to the
transactions effected by the Underwriters in connection with the offer and sale
of the Units contemplated hereby. This indemnity agreement will be in addition
to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Representative, it is advisable for the Representative or such Underwriters or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnifying party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnifying party.
27
7. Contribution.
In order to provide for just and equitable contribution under the Act in
any case in which (i) any Underwriter makes claim for indemnification pursuant
to Section 6 hereof 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 Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of any Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
any such Underwriter shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that all such Underwriters are
responsible in the aggregate for that portion of such losses, claims, damages or
liabilities represented by the percentage that the underwriting discount per
Unit appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriters and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, or the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriters to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriters in the aggregate were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 7 and (b) that the contribution of each contributing Underwriter
shall not be in excess of its proportionate share (based on the ratio of the
number of Units purchased by such Underwriter to the number of Units purchased
by all contributing Underwriters) of the portion of such losses, claims, damages
or liabilities for which the Underwriters are responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the Company within the
meaning of Section 15 of the Act. If the full amount of the contribution
specified in this paragraph is not permitted by law, then any Underwriter and
each person who controls any Underwriter shall be entitled to contribution from
the
28
Company, its officers, directors and controlling persons to the full extent
permitted by law. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriters. No contribution shall be
requested with regard to the settlement of any matter from any party who did not
consent to the settlement; provided, however, that such consent shall not be
unreasonably withheld in light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Units to the Underwriters is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company including,
but not limited to, the fees and expenses of counsel to the Company (which fees
shall not exceed $150,000) and of the Company's accountants; the costs and
expenses incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus and the
Prospectus, as amended or supplemented, or the Term Sheet, the fee of the NASD
in connection with the filing required by the NASD relating to the offering of
the Units contemplated hereby; all expenses, including reasonable fees and
disbursements of counsel to the Underwriters, in connection with the
qualification of the Units under the state securities or blue sky laws which the
Representative shall designate; the cost of printing and furnishing to the
several Underwriters copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, the Agreement Among Underwriters,
Selling Agreement, Underwriters' Questionnaire, Underwriters' Power of Attorney
and the Blue Sky Memorandum, any fees relating to the listing of the Units,
Common Stock and Warrants on the Nasdaq National Market or any other securities
exchange, the cost of printing the certificates representing the securities
comprising the Units, the fees of the transfer agent and warrant agent the cost
of publication of at least three "tombstones" of the offering (at least one of
which shall be in national business newspaper and one of which shall be in a
major New York newspaper) and the cost of preparing at least four hard cover
"bound volumes" relating to the offering, in accordance with the Underwriters'
request. The Company shall pay any and all taxes (including any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales to
the Underwriters hereunder. The Company will also pay all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to be
attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at the First
Closing Date pay to the Representative, in its individual rather than
representative capacity, a non-accountable expense allowance of $_______ of
which $_______ has been paid. In the event the overallotment option is
exercised, the Company shall pay to the Representative at the Option Closing
Date an additional amount equal to 3% of
29
the gross proceeds received upon exercise of the overallotment option. In the
event the transactions contemplated hereby are not consummated by reason of any
action by the Representative (except if such prevention is based upon a breach
by the Company of any covenant, representation or warranty contained herein or
because any other condition to the Underwriters' obligations hereunder required
to be fulfilled by the Company is not fulfilled) the Company shall be liable for
the accountable expenses of the Representative, including legal fees, up to a
maximum of $_______. In the event the transactions contemplated hereby are not
consummated by reason of any action of the Company or because of a breach by the
Company of any covenant, representation or warranty herein, the Company shall be
liable for the accountable expenses of the Representative, including legal fees,
up to a maximum of $_______.
(c) No person is entitled either directly or indirectly to compensation
from the Company, from the Representative or from any other person for services
as a finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Representative and the other Underwriters,
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), to which the
Representative or such other Underwriter or person may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Substitution of Underwriters.
If any Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase the First Units hereunder, or shall fail to take
up and pay for the number of First Units set forth opposite their respective
names in Schedule A hereto upon tender of such First Units in accordance with
the terms hereof, then:
(a) If the aggregate number of First Units which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of First Units, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the First
Units which such defaulting Underwriter or Underwriters agreed but failed to
purchase.
(b) If any Underwriter or Underwriters so default and the agreed number of
First Units with respect to which such default or defaults occurs is more than
10% of the total number of First Units, the remaining Underwriters shall have
the right to take up and pay for (in such proportion as may be agreed upon among
them) the First Units which the defaulting Underwriter or Underwriters agreed
but failed to purchase. If such remaining Underwriters do not, at the First
Closing Date, take up and pay for the First Units which the defaulting
Underwriter or Underwriters
30
agreed but failed to purchase, the time for delivery of the First Units shall be
extended to the next business day to allow the several Underwriters the
privilege of substituting within twenty-four hours (including nonbusiness hours)
another underwriter or underwriters satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid, within
such twenty-four hour period, the time of delivery of the First Units may, at
the option of the Company, be again extended to the next following business day,
if necessary, to allow the Company the privilege of finding within twenty-four
hours (including nonbusiness hours) another underwriter or underwriters to
purchase the First Units which the defaulting Underwriter or Underwriters agreed
but failed to purchase. If it shall be arranged for the remaining Underwriters
or substituted Underwriters to take up the First Units of the defaulting
Underwriter or Underwriters as provided in this Section, (i) the Company or the
Representative shall have the right to postpone the time of delivery for a
period of not more than seven business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective numbers
of First Units to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken at the basis of the underwriting obligation for all
purposes of this Agreement.
If in the event of a default by one or more Underwriters and the remaining
Underwriters shall not take up and pay for all the First Units agreed to be
purchased by the defaulting Underwriters or substitute another underwriter or
underwriters as aforesaid, the Company shall not find or shall not elect to seek
another underwriter or underwriters for such First Units as aforesaid, then this
Agreement shall terminate.
If, following exercise of the option provided in Section 2(b) hereof, any
Underwriter or Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase Option Units at the Option Closing Date, or shall
fail to take up and pay for the number of Option Units, which they become
obligated to purchase at the Option Closing Date upon tender of such Option
Units in accordance with the terms hereof, then the remaining Underwriters or
substituted Underwriters may take up and pay for the Option Units of the
defaulting Underwriters in the manner provided in Section 9(b) hereof. If the
remaining Underwriters or substituted Underwriters shall not take up and pay for
all such Option Units, the Underwriters shall be entitled to purchase the number
of Option Units for which there is no default or, at their election, the option
shall terminate, the exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any nondefaulting Underwriter to the
Company,
31
provided that the provisions of this Section 9 shall not in any event affect the
liability of any defaulting Underwriter to the Company arising out of such
default.
10. Effective Date.
The Agreement shall become effective upon its execution except that you
may, at your option, delay its effectiveness until 11:00 A.M., New York time on
the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first commence the initial public
offering by the Underwriters of any of the Units. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Units, or the time when the Units are first
generally offered by you to dealers by letter or telegram, whichever shall first
occur. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 13, 14, 15 and
16 shall remain in effect notwithstanding such termination.
11. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 13, 14, 15 and 16
hereof, may be terminated at any time prior to the First Closing Date, and the
option referred to in Section 2(b) hereof, if exercised, may be cancelled at any
time prior to the Option Closing Date, by you if in your judgment it is
impracticable to offer for sale or to enforce contracts made by the Underwriters
for the resale of the Units agreed to be purchased hereunder by reason of (i)
the Company having sustained a material loss, whether or not insured, by reason
of fire, earthquake, flood, accident or other calamity, or from any labor
dispute or court or government action, order or decree; (ii) trading in
securities on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq SmallCap Market or the Nasdaq National Market having been suspended or
limited; (iii) material governmental restrictions having been imposed on trading
in securities generally (not in force and effect on the date hereof); (iv) a
banking moratorium having been declared by federal or New York state
authorities; (v) an outbreak of international hostilities or other national or
international calamity or crisis or change in economic or political conditions
having occurred; (vi) a pending or threatened legal or governmental proceeding
or action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which could materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal commitment
for the foregoing or any other material change of ownership or control occurs;
(viii) the passage by the Congress of the United States or by any state
legislative body or federal or state agency or other authority of any act, rule
or regulation, measure, or the adoption of any orders, rules or regulations by
any governmental body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by the
32
Representative to have a material impact on the business, financial condition or
financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or otherwise, whether or not arising in the
ordinary course of business.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11 or in Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
12. Unit Purchase Option.
At or before the First Closing Date, the Company will sell to the
Representative (for its own account and not as Representative of the several
Underwriters), or its designees for a consideration of $250, and upon the
terms and conditions set forth in the form of Unit Purchase Option annexed as an
exhibit to the Registration Statement, a Unit Purchase Option to purchase an
aggregate of 250,000 Units. In the event of conflict in the terms of this
Agreement and the Unit Purchase Option, the language of the Unit Purchase Option
shall control.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company or its Principal Stockholders, where
appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in writing, if
sent to the Underwriters, will be mailed, delivered and confirmed to them at
▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, with a copy sent to Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or if sent to the Company, will be mailed,
delivered and confirmed to it at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇.
33
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
several Underwriters and the Company, any person controlling the Company or any
of the several Underwriters, and directors of the Company, nominees for
directors (if any) named in the Prospectus, its officers who have signed the
Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right under or
by virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser, as such purchaser, from any of the several Underwriters of the
Units. All of the obligations of the Underwriters hereunder are several and not
joint.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with, the
laws of the State of New York applicable to agreements made and to be entirely
performed within New York.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the several Underwriters in accordance with
its terms.
Very truly yours,
TEKGRAF, INC.
By:___________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
▇.▇. ▇▇▇▇▇ INVESTMENT BANKING
CORP.
By:________________________________
For itself and as Representative
of the several Underwriters
34
SCHEDULE A
Underwriter Number of Units to be Purchased
[UNDERWRITER]
Total:__________
___________Units
35