CROSSZ SOFTWARE CORPORATION
3,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
New York, New York
November , 1997
GKN Securities Corp.
00 Xxxxxxxx
Xxx Xxxx, X.X. 00000
Xxxxxxxxx Capital Group, L.P
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, X.X. 00000
Ladies and Gentlemen:
The undersigned, CrossZ Software Corporation, a Delaware
corporation ("Company"), hereby confirms its agreement with GKN Securities
Corp. ("GKN") and Barington Capital Group, L.P. ("Barington," together with
GKN, being referred to herein variously as "you" or the "Representatives") and
the other underwriters named on Schedule I hereto (the Representatives and the
other underwriters being collectively called the "Underwriters" or
individually, an "Underwriter"), as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally
and not jointly, to the several Underwriters 3,000,000 shares of the Company's
Common Stock, par value $.001 ("Common Stock"), at a purchase price (net of
commissions) of $__________ [INSERT NET PRICE TO Representatives] per share
(such shares of Common Stock being referred to herein as "Firm Securities").
The Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Securities set forth opposite their respective
names on Schedule I attached hereto and made a part hereof at a purchase price
of [INSERT NET PRICE] per share of Common Stock.
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1.1.2 Payment and Delivery. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M., New York time, on or before the
third business day following the date the Firm Securities commence trading or
at such earlier time as the Representatives shall determine, or at such other
time as shall be agreed upon by the Representatives and the Company, at the
offices of GKN or at such other place as shall be agreed upon by the
Representatives and the Company. The hour and date of delivery and payment for
the Firm Securities are called the "Closing Date." Payment for the Firm
Securities shall be made on the Closing Date at the Representatives' election
by certified or bank cashier's check(s) in New York Clearing House funds,
payable to the order of the Company upon delivery to you of certificates (in
form and substance satisfactory to the Representatives) representing the Firm
Securities for the respective accounts of the Underwriters. The Firm
Securities shall be registered in such name or names and in such authorized
denominations as the Representatives may request in writing at least two full
business days prior to the Closing Date. The Company will permit the
Representatives to examine and package the Firm Securities for delivery at
least one full business day prior to the Closing Date. The Company shall not
be obligated to sell or deliver the Firm Securities except upon tender of
payment by the Underwriters for all the Firm Securities.
1.2 Over-Allotment Option.
1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Underwriters are hereby granted an option for an aggregate
purchase price of $__________ purchase up to an additional 450,000 shares of
Common Stock from the Company ("Over-allotment Option"). Such additional
450,000 shares of Common Stock are hereinafter referred to as the "Option
Securities." The Firm Securities and the Option Securities are hereinafter
referred to collectively as the "Public Securities." The purchase price to be
paid for the Option Securities will be the same price per Option Security as
the price per Firm Security set forth in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representatives on
behalf of the Underwriters as to all or any part of the Option Securities at
any time, from time to time, within forty-five days after the effective date
("Effective Date") of the Registration Statement (as hereinafter defined). The
Underwriters will not be under any obligation to purchase any Option
Securities prior to the exercise of the Over-allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company from the Representatives, which must be confirmed by a
letter or telecopy setting forth the number of Option Securities to be
purchased, the date and time for delivery of and payment for the Option
Securities and stating that the Option Securities referred to therein are to
be used for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Securities. If such notice is given at least
two full business days prior to the Closing Date, the date set forth therein
for such delivery and payment will be the Closing Date. If such notice is
given thereafter, the date set forth therein for such delivery and payment
will not be earlier than three full business days after the date of the
notice. If such delivery and payment for the Option Securities does not occur
on the Closing Date, the date and time of the closing for such Option
Securities will be as set forth in the notice (hereinafter the "Option Closing
Date"). Upon exercise
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of the Over-allotment Option, the Company will become obligated to convey to
the Underwriters, and, subject to the terms and conditions set forth herein,
the Underwriters will become obligated to purchase, the number of Option
Securities specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option
Securities will be at the Representatives' election by certified or bank
cashier's check(s) in New York Clearing House funds, payable to the order of
the Company at the offices of GKN Securities Corp. or at such other place as
shall be agreed upon by the Representatives and the Company upon delivery to
you of certificates representing such securities for the respective accounts
of the Underwriters. The certificates representing the Option Securities to be
delivered will be in such denominations and registered in such names as the
Representatives request not less than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be, and will be made
available to the Representatives for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less
than one full business day prior to such Closing Date.
1.3 Representatives' Purchase Option.
1.3.1 Purchase Option. The Company hereby agrees to issue
and sell to the Representatives (and/or their designees) on the Closing Date
an option ("Representatives' Purchase Option") for the purchase of an
aggregate of 300,000 shares of Common Stock ("Representatives' Shares") at an
initial exercise price of $_________ per share. The Representatives' Shares
are identical to the Firm Securities. The Representatives' Purchase Option and
the Representatives' Shares, are hereinafter referred to collectively as the
"Representatives' Securities." The Public Securities and the Representatives'
Securities are hereinafter referred to collectively as the "Securities."
1.3.2 Payment and Delivery. Delivery and payment for the
Representatives' Purchase Option shall be made on the Closing Date. The
Company shall deliver to the Representatives, upon payment therefor,
certificates for the Representatives' Purchase Option in the name or names and
in such authorized denominations as the Representatives may request. The
Representatives' Purchase Option shall be exercisable for a period of four
years commencing one year from the Effective Date.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Representatives as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 333-34667 including any
related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
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been prepared by the Company in conformity with the requirements of the Act,
and the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated
therein and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the Regulations), is hereinafter
called the "Registration Statement," and the form of the final prospectus
dated the Effective Date (or, if applicable, the form of final prospectus
filed with the Commission pursuant to Rule 424 of the Regulations), is
hereinafter called the "Prospectus." The Registration Statement has been
declared effective by the Commission on the date hereof.
2.1.2 Pursuant to the Exchange Act. The Company has filed
with the Commission a registration statement on Form 8-A [INSERT FILE NUMBER]
providing for the registration under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), of the Public Securities. Such registration of the
Public Securities has been declared effective by the Commission on the date
hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of
the Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has
instituted or, to the best of the Company's knowledge, threatened to institute
any proceedings with respect to such an order.
2.3 Disclosures in Registration Statement.
2.3.1 Securities Act and Exchange Act Representation. At
the time the Registration Statement became effective and at all times
subsequent thereto up to and including the Closing Date and the Option Closing
Date, if any, the Registration Statement and the Prospectus and any amendment
or supplement thereto contained and will contain all material statements which
are required to be stated therein in accordance with the Act and the
Regulations, and conformed and will conform in all material respects to the
requirements of the Act and the Regulations; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, during
such time period and on such dates, contained or will contain any untrue
statement of a material fact or omitted or will omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, nor did they or will they contain any untrue statement of a
material fact or did they or will they omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. When
any Preliminary Prospectus was first filed with the Commission (whether filed
as part of the Registration Statement for the registration of the Securities
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such Preliminary Prospectus and any amendments thereof and
supplements thereto at the time such filing was made complied in all material
respects with the applicable provisions of the Act and the Regulations. The
representation and warranty made in this Section 2.3.1 does not apply to
statements made or statements omitted in reliance upon and in conformity with
written information
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furnished to the Company with respect to the Underwriters by the
Representatives expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and
there are no contracts or other documents required to be described in the
Registration Statement or the Prospectus or to be filed with the Commission as
exhibits to the Registration Statement which have not been so described or
filed. Each contract or other instrument (however characterized or described)
to which the Company is a party or by which its property or business is or may
be bound or affected and (i) which is referred to in the Prospectus, or (ii)
is material to the Company's business, has been duly and validly executed, is
in full force and effect in all material respects and is enforceable against
the parties thereto in accordance with its terms, and none of such contracts
or instruments has been assigned by the Company, and neither the Company nor,
to the best of the Company's knowledge, any other party is in default
thereunder and, to the best of the Company's knowledge, no event has occurred
which, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. None of the material provisions of such
contracts or instruments violates or will result in a violation of any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of
its respective assets or businesses, including, without limitation, those
relating to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the
Company have been sold by the Company or by or on behalf of, or for the
benefit of, any person or persons controlling, controlled by, or under common
control with the Company within the three years prior to the date hereof,
except as disclosed in the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, except as otherwise specifically stated therein, (i) there has
been no material adverse change in the condition, financial or otherwise, or
in the results of operations, business or business prospects of the Company,
including, but not limited to, a material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, whether or not arising in the ordinary course of
business, and (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to
the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities
or incurred any liability or obligation, direct or contingent, for borrowed
money; or (ii) declared or paid any dividend or made any other distribution on
or in respect to its capital stock.
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2.5 Independent Accountants. Price Waterhouse LLP , whose report is
filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
2.6 Financial Statements. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein.
2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no options, warrants, or other rights to purchase or otherwise
acquire any authorized but unissued shares of Common Stock of the Company,
including any issuances pursuant to anti-dilution provisions, or any security
convertible into shares of Common Stock of the Company, or any contracts or
commitments to issue or sell shares of Common Stock or any such options,
warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. The outstanding
options and warrants to purchase shares of Common Stock constitute the valid
and binding obligations of the Company, enforceable in accordance with their
terms. The authorized Common Stock and outstanding options and warrants to
purchase shares of Common Stock conform to all statements relating thereto
contained in the Registration Statement and the Prospectus. The offers and
sales of the outstanding Common Stock, options and warrants to purchase shares
of Common Stock were at all relevant times either registered or qualified
under the Act and the applicable state securities or Blue Sky Laws or exempt
from such registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security
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of the Company or similar contractual rights granted by the Company; and all
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. When issued, the
Representatives' Purchase Option will constitute the valid and binding
obligation of the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for thereby
and the Representatives' Purchase Option and will be enforceable against the
Company in accordance with its respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
2.8.3 Preferred Stock. All outstanding shares of the
Company's preferred stock (including any dividends thereon) will convert into
_________ shares of Common Stock concurrently with the consummation of the
sale of the Firm Securities and, upon such conversion, such holders of the
preferred stock shall have no rights with respect to the Company, and the
Company shall have no obligations to such holders, except as may apply to
shareholders of Common Stock of the Company or except as provided in contracts
described in the Registration Statement or the Prospectus.
2.9 Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register
any such securities of the Company under the Act or to include any such
securities in a registration statement to be filed by the Company.
2.10 Validity and Binding Effect of Agreements. This Agreement has
been duly and validly authorized by the Company and constitutes the valid and
binding agreement of the Company, enforceable against the Company in
accordance with its respective terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities laws, and
(iii) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by
the Company of this Agreement and the Representatives' Purchase Option and the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and
thereof have been duly authorized by all necessary corporate action and do not
and will not, with or without the giving of notice or the lapse of time or
both, (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to the terms of any
indenture, mortgage, deed of trust,
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note, loan or credit agreement or any other agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to
which the Company 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; (ii) result in any
violation of the provisions of the Certificate of Incorporation or the By-Laws
of the Company; (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
business; or (iv) have a material adverse effect on any permit, license,
certificate, registration, approval, consent, license or franchise concerning
the Company.
2.12 No Defaults; Violations. Except as described in the Prospectus,
no default exists in the due performance and observance of any term, covenant
or condition of any license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject.
The Company is not in violation of any term or provision of its Certificate of
Incorporation or By-Laws or in violation of any franchise, license, permit,
applicable law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or business, except as described in the Prospectus.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies to own or lease its properties
and conduct its business as described in the Prospectus, and the Company is
and has been doing business in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently contemplated are correct in
all material respects and do not omit to state a material fact.
2.13.2 Transactions Contemplated Herein. The Company has
all corporate power and authority to enter into this Agreement and to carry
out the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery, of
the Securities pursuant to this Agreement and the Representatives' Purchase
Option, and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws.
2.14 Title to Property; Insurance. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items
of real and personal property (tangible and intangible) owned or leased by it,
free and clear of all liens, encumbrances, claims, security interests, defects
and restrictions of any material nature whatsoever, other than those referred
to
8
in the Prospectus and liens for taxes not yet due and payable. The Company has
adequately insured its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar business.
2.15 Litigation; Governmental Proceedings. Except as set forth in
the Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of, the Company which might
materially and adversely affect the financial position, prospects, value or
the operation or the properties or the business of the Company, or which
question the validity of the capital stock of the Company or this Agreement or
of any action taken or to be taken by the Company pursuant to, or in
connection with, this Agreement. There are no outstanding orders, judgments or
decrees of any court, governmental agency or other tribunal naming the Company
and enjoining the Company from taking, or requiring the Company to take, any
action, or to which the Company, its properties or business is bound or
subject.
2.16 Good Standing. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of
the state of its incorporation. The Company is duly qualified and licensed and
in good standing as a foreign corporation in each jurisdiction in which
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, except where the failure to qualify
would not have a material adverse effect on the Company.
2.17 Taxes. The Company has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. The Company
has paid all taxes (as hereinafter defined) shown as due on such returns that
were filed and has paid all taxes imposed on or assessed against the Company.
The provisions for taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement are sufficient for all
accrued and unpaid taxes, whether or not disputed, and for all periods to and
including the dates of such consolidated financial statements. Except as
disclosed in writing to the Representatives, (i) no issues have been raised
(and are currently pending) by any taxing authority in connection with any of
the returns or taxes asserted as due from the Company, and (ii) no waivers of
statutes of limitation with respect to the returns or collection of taxes have
been given by or requested from the Company. The term "taxes" mean all
federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto. The term "returns" means all returns,
declarations, reports, statements, and other documents required to be filed in
respect to taxes.
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2.18 Employees' Options. No more than [INSERT NUMBER] shares of
Common Stock are eligible for sale pursuant to Rule 701 promulgated under the
Act in the 12 months period following the Effective Date.
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 Finder's Fees. Except as described in the
Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company that may affect the Representatives' compensation, as determined
by the National Association of Securities Dealers, Inc. ("NASD").
2.19.2 Payments Within Twelve Months. Other than payments
to the Representatives, the Company has not made any direct or indirect
payments (in cash, securities or otherwise) to (i) any person, as a finder's
fee, investing fee or otherwise, in consideration of such person raising
capital for the Company or introducing to the Company persons who provided
capital to the Company, except for the issuance of 3,533 warrants to Xxxxxxx
Xxxxx, (ii) to any NASD member, or (iii) to any person or entity that has any
direct or indirect affiliation or association with any NASD member within the
twelve month period prior to the date on which the Registration Statement was
filed with the Commission ("Filing Date") or thereafter.
2.19.3 Use of Proceeds. None of the net proceeds of the
offering will be paid by the Company to any NASD member or any affiliate or
associate of any NASD member, except as specifically authorized herein.
2.19.4 Insiders' NASD Affiliation. No officer or director
of the Company or owner of any of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member. The
Company will advise the Representatives and the NASD if any officer, director
or stockholder of the Company is or becomes an affiliate or associated person
of an NASD member participating in the offering.
2.20 Foreign Corrupt Practices Act. Neither the Company nor any of
its officers, directors, employees, agents or any other person acting on
behalf of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed transaction)
which (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii)
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if not continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
2.21 Nasdaq and The Boston Stock Exchange Eligibility. As of the
Effective Date, the Public Securities have been approved for quotation on the
Nasdaq SmallCap Market and for listing on The Boston Stock Exchange ("BSE").
2.22 Intangibles. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement. The Company's Intangibles which have been
registered in the United States Patent and Trademark Office have been fully
maintained and are in full force and effect. There is no claim or action by
any person pertaining to, or proceeding pending or threatened and the Company
has not received any notice of conflict with the asserted rights of others
which challenges the exclusive right of the Company with respect to any
Intangibles used in the conduct of the Company's business except as described
in the Prospectus. The Intangibles and the Company's current products,
services and processes do not infringe on any intangibles held by any third
party. To the best of the Company's knowledge, no others have infringed upon
the Intangibles of the Company.
2.23 Relations With Employees.
2.23.1 Employee Matters. The Company has generally enjoyed
a satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. There are no pending investigations involving the Company by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending before
the National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company or
any predecessor entity, and none has ever occurred. No question concerning
representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company,
if any.
2.23.2 Employee Benefit Plans. Other than as set forth in
the Registration Statement, the Company neither maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a, "multi-employer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does
not, and has at no time, maintained or contributed to a defined benefit plan,
as defined in Section 3(35) of ERISA. If the Company does
11
maintain or contribute to a defined benefit plan, any termination of the plan
on the date hereof would not give rise to liability under Title IV of ERISA.
No ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended ("Code"), which could subject the
Company to any tax penalty for prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all material
reporting, disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been received from
the Internal Revenue Service with respect to each ERISA Plan which is intended
to comply with Code Section 401(a), stating that such ERISA Plan and the
attendant trust are qualified thereunder. The Company has never completely or
partially withdrawn from a "multi-employer plan".
2.24 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel
shall be deemed a representation and warranty by the Company to the
Representatives as to the matters covered thereby.
2.25 Reserved.
2.26 Agreements With Insiders.
2.26.1 Lock-Up Agreements. Subject to Section 2.26.2
directly below, the Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which all of the officers and directors of
the Company (including their family members and affiliates) and persons
(including their family members and affiliates) who beneficially own or hold
one percent or more of the outstanding Common Stock of the Company and all
option holders who would have the ability to sell the shares underlying their
options under Rule 701 of the Act (collectively, "Insiders") agree not to sell
any shares of Common Stock owned by them (either pursuant to Rule 144 of the
Regulations or otherwise) for a period of 13 months following the Effective
Date except with the consent of GKN and, if applicable, the Pennsylvania
Securities Commission.
2.26.2 Lock-up Agreements Exceptions. [Get from GKN &
Barington the exceptions to Lock-up] ("Excluded Insiders").
2.27 Subsidiaries. The representations and warranties made by the
Company in this Agreement shall, in the event that the Company has one or more
subsidiaries (a "subsidiary(ies)"), also apply and be true with respect to
each subsidiary, individually and taken as a whole with the Company and all
other subsidiaries, as if each representation and warranty contained herein
made specific reference to the subsidiary each time the term "Company" was
used.
2.28 Unaudited Financials. The Company has furnished to the
Representatives as early as practicable prior to the date hereof a copy of the
latest available unaudited interim financial statements ("Unaudited
Financials") of the Company (which in no event shall be as of a date more
12
than thirty days prior to the Effective Date) which have been read by the
Company's independent accountants, as stated in their letter to be furnished
pursuant to Section 4.3 hereof.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 Amendments to Registration Statement. The Company will deliver
to the Representatives, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the
Representatives shall reasonably object.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange
Act, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Public Securities in accordance
with the provisions hereof. If at any time when a Prospectus relating to the
Public Securities is required to be delivered under the Act any event shall
have occurred as a result of which, in the opinion of counsel for the Company
or counsel for the Representatives, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Representatives promptly and
prepare and file with the Commission, subject to Section 3.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Representatives) with
the Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years
from the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock and Warrants under the provisions of the
Exchange Act.
3.3 Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with the Representatives, at or prior to the time the Registration
Statement becomes Effective to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Representatives
may reasonably designate, provided that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign corporation
doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representatives
agree that such action is not at the time necessary or advisable, use all
reasonable efforts to file
13
and make such statements or reports at such times as are or may be required by
the laws of such jurisdiction.
3.4 Delivery to Underwriters of Prospectuses. The Company will
deliver to each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the
Act or the Exchange Act such number of copies of each Preliminary Prospectus
and the Prospectus as such Underwriter may reasonably request and, as soon as
the Registration Statement or any amendment or supplement thereto becomes
effective, deliver to you two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of
all exhibits filed therewith or incorporated therein by reference and all
original executed consents of certified experts.
3.5 Events Requiring Notice to Representatives. The Company will
notify the Representatives immediately and confirm the notice in writing (i)
of the effectiveness of the Registration Statement and any amendment thereto,
(ii) of the issuance by the Commission of any stop order or of the initiation,
or the threatening, of any proceeding for that purpose, (iii) of the issuance
by any state securities commission of any proceedings for the suspension of
the qualification of the Public Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v)
of the receipt of any comments or request for any additional information from
the Commission, and (vi) of the happening of any event during the period
described in Section 3.4 hereof which, in the judgment of the Company, makes
any statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of five years from
the Effective Date, the Company, 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 fiscal quarters
prior to the announcement of quarterly financial information, the filing of
the Company's Form 10-Q quarterly report and the mailing of quarterly
financial information to stockholders.
3.7 Reserved.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
take all necessary and appropriate actions to achieve accelerated publication
in Standard and Poor's Corporation Records Corporate Descriptions (within 30
days after the Effective Date) and to maintain such publication with updated
quarterly information for a period of five years from the Effective Date,
including the payment of any necessary fees and expenses. The Company shall
take such action as may be reasonably requested by the Representatives to
obtain a secondary
14
market trading exemption in such States as may be requested by the
Representatives, including the payment of any necessary fees and expenses and
the filing of a Form (e.g., 25101(b)) for secondary market trading in the
State of California on the Effective Date.
3.9 Nasdaq and BSE Maintenance. For a period of five years from the
date hereof, the Company will use its best efforts to maintain the quotation
by Nasdaq SmallCap and the listing by the BSE of the Common Stock.
3.10 Reserved.
3.11 Reserved.
3.12 Reports to the Representatives and Others.
3.12.1 Periodic Reports, Etc. For a period of five years
from the Effective Date, the Company will promptly furnish to the
Representatives, and to each other Underwriter who may so request, copies of
such financial statements and other periodic and special reports as the
Company from time to time files with any governmental authority or furnishes
generally to holders of any class of its securities, and promptly furnish to
the Representatives (i) a copy of each periodic report the Company shall be
required to file with the Commission, (ii) a copy of every press release and
every news item and article with respect to the Company or its affairs which
was released by the Company, (iii) copies of each Form SR, (iv) a copy of each
Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company, (v) a copy of monthly statements setting forth such information
regarding the Company's results of operations and financial position
(including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company, and (vi) such additional documents and information with respect to
the Company and the affairs of any future subsidiaries of the Company as the
Representatives may from time to time reasonably request.
3.12.2 Transfer Sheets and Weekly Position Listings. For a
period of five years from the Closing Date, the Company will furnish to the
Representatives at the Company's sole expense such transfer sheets and
position listings of the Company's securities as the Representatives may
request, including the daily, weekly and monthly consolidated transfer sheets
of the transfer agent of the Company and the weekly security position listings
of the Depository Trust Company.
3.12.3 Secondary Market Trading Memorandum. Until such time
as the Public Securities are listed or quoted, as the case may be, on the New
York Stock Exchange, the American Stock Exchange or Nasdaq National Market,
the Company shall cause the Representatives' legal counsel to deliver to the
Representatives at the times set forth below a written memorandum detailing
those states in which Public Securities may be traded in non-issuer
transactions under the Blue Sky laws of the fifty states ("Secondary Market
Trading Memorandum"). The Secondary Market Trading Memorandum shall be
delivered to the Representatives on the Effective Date and on the first day of
every calendar quarter thereafter.
15
The Company shall pay to Representatives' legal counsel a one-time fee of
$5,000 for such services at the Closing.
3.13 Representatives' Purchase Option. On the Effective Date, the
Company will execute and deliver the Representatives' Purchase Option to the
Representatives substantially in the form filed as an exhibit to the
Registration Statement.
3.14 Disqualification of Form S-1 (or other appropriate form). For a
period equal to five years from the date hereof, the Company will not take any
action or actions which may prevent or disqualify the Company's use of Form
S-1 (or other appropriate form) for the registration of the Representatives'
Securities under the Act.
3.15 Payment of Expenses.
3.15.1 General Expenses. The Company hereby agrees to pay
on each of the Closing Date and the Option Closing Date, if any, to the extent
not paid at Closing Date, all expenses incident to the performance of the
obligations of the Company under this Agreement, including but not limited to
(i) the preparation, printing, filing, delivery and mailing (including the
payment of postage with respect to such mailing) of the Registration
Statement, the Prospectus and the Preliminary Prospectuses and the printing
and mailing of this Agreement and related documents, including the cost of all
copies thereof and any amendments thereof or supplements thereto supplied to
the Underwriters in quantities as may be required by the Underwriters, (ii)
the printing, engraving, issuance and delivery of the shares of Common Stock
and the Representatives' Purchase Option, including any transfer or other
taxes payable thereon, (iii) the qualification of the Public Securities under
state or foreign securities or Blue Sky laws, including the filing fees under
such Blue Sky laws, the costs of printing and mailing the "Preliminary Blue
Sky Memorandum," and all amendments and supplements thereto, fees up to an
aggregate of $30,000 and disbursements of Representatives' counsel, and fees
and disbursements of local counsel, if any, retained for such purpose, and a
one-time fee of $5,000 payable to the Representatives' counsel for the
preparation of the Secondary Market Trading Memorandum, (iv) costs associated
with applications for assignments of a rating of the Public Securities by
qualified rating agencies, (v) filing fees, costs and expenses (including fees
[up to $5,000] and disbursements for the Representatives' counsel) incurred in
registering the offering with the NASD, (vi) fees and disbursements of the
transfer agent, (vii) the Company's expenses associated with "due diligence"
meetings arranged by the Underwriter, (viii) the preparation, binding and
delivery of nine sets of transaction "bibles," in form and style satisfactory
to the Representatives and transaction lucite cubes or similar commemorative
items in a style and quantity as requested by the Representatives, (ix) any
listing of the Public Securities on Nasdaq SmallCap or National Market, as the
case may be, and any securities exchange, or any listing in Standard & Poor's
and (x) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in
this Section 3.15.1. The Representatives may deduct from the net proceeds of
the offering payable to the Company on the Closing Date, or the Option Closing
Date, if any, the expenses set forth herein to be paid by the Company to the
Representatives and/or to third parties.
16
3.15.2 Non-Accountable Expenses. The Company further agrees
that, in addition to the expenses payable pursuant to Section 3.15.1, it will
pay to the Representatives a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of
the Public Securities, of which $50,000 has been paid to date, and the Company
will pay the balance on the Closing Date and any additional monies owed
attributable to the Option Securities or otherwise on the Option Closing Date
by certified or bank cashier's check or, at the election of the
Representatives, by deduction from the proceeds of the offering contemplated
herein. If the offering contemplated by this Agreement is not consummated for
any reason whatsoever then the following provisions shall apply: The Company's
liability for payment to the Representatives of the non-accountable expense
allowance shall be equal to the sum of the Representatives' actual
out-of-pocket expenses (including, but not limited to, counsel fees, "road-
show" and due diligence expenses). The Representatives shall retain such part
of the non-accountable expense allowance previously paid as shall equal its
actual out-of-pocket expenses. If the amount previously paid is insufficient
to cover such actual out-of-pocket expenses, the Company shall remain liable
for and promptly pay any other actual out-of-pocket expenses. If the amount
previously paid exceeds the amount of the actual out-of-pocket expenses, the
Representatives shall promptly remit to the Company any such excess.
3.16 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
The Company hereby agrees that, without the express prior written consent of
the Representatives, the Company will not apply any net proceeds from the
offering to pay (i) any debt for borrowed funds or (ii) any debt or obligation
owed to any Insider.
3.17 Delivery of Earnings Statements to Security Holders. The
Company will make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the Effective Date, an earnings statement (which need not be
certified by independent public or independent certified public accountants
unless required by the Act or the Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of
at least twelve consecutive months beginning after the Effective Date.
3.18 Key Person Life Insurance. The Company will maintain key person
life insurance in an amount no less than Five Million ($5,000,00) Dollars on
the life of Xxxx X. Xxxxxxxxxxxxxx and pay the annual premiums therefore
naming the Company as the sole beneficiary thereof, for at least three years
following the Effective Date.
3.19 Stabilization. Neither the Company, nor, to its knowledge, any
of its employees, directors or stockholders has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
17
3.20 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.21 Reserved.
3.22 Transfer Agent. For a period of five years from the Effective
Date, the Company shall retain a transfer agent for the Common Stock
acceptable to the Representatives.
3.23 Sale of Securities. The Company agrees not to permit or cause a
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally
or beneficially by the Insiders for a period of 13 months following the
Effective Date without obtaining the prior written consent of the
Representatives; provided, however, [insert exceptions]
3.24 Exercise Price of Options/Warrants. For a period of 12 months
after the Effective Date, the Company will not grant any option pursuant to
the Company's 1991 Incentive Stock Option Plan at an exercise price less than
the greater of [$____] per share or the fair market value of the Common Stock
on the date of the grant to persons with a pre-existing employment, consulting
or directorship relationship with the Company or at an exercise price no less
than the market price on the date of grant of options to all other persons.
4. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Securities, as provided herein, shall
be subject to the continuing accuracy of the representations and warranties of
the Company as of the date hereof and as of each of the Closing Date and the
Option Closing Date, if any, to the accuracy of the statements of officers of
the Company made pursuant to the provisions hereof and to the performance by
the Company of its obligations hereunder and to the following conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement. The
Registration Statement has been declared effective on the date of this
Agreement, and at each of the Closing Date and the Option Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for the purpose shall have been instituted
or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of Xxxxxxxx Xxxxxx & Xxxxxx, counsel to
the Representatives.
18
4.1.2 NASD Clearance. By the Effective Date, the
Representatives shall have received clearance from the NASD as to the amount
of compensation allowable or payable to the Representatives as described in
the Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale
of the Securities in any jurisdiction designated by you pursuant to Section
3.3 hereof shall have been issued on either on the Closing Date or the Option
Closing Date, and no proceedings for that purpose shall have been instituted
or shall be contemplated.
4.2 Company Counsel Matters.
4.2.1 Closing Date Opinion of Counsel. On the Closing Date
and the Option Closing Date, if any, the Representatives shall have received
the favorable opinion of Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP, counsel to
the Company, dated the Closing Date (or the Option Closing Date, if any),
addressed to the Representatives and in form and substance satisfactory to
Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the Representatives to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of
its state of incorporation. The Company is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which it owns
or leases any real property or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have
a material adverse effect on the Company.
(ii) The Company has all requisite corporate power
and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental or regulatory
officials and bodies to own or lease its properties and conduct its business
as described in the Prospectus except where the failure to obtain any Permit,
singly or in the aggregate, would not have a material adverse effect on the
Company, and the Company is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates and permits and
all federal, state and local laws, rules and regulations. The Company has all
corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consents, approvals, authorizations or orders of, and no filing with any court
or governmental agency or body (other than such as may be required under the
Act and applicable Blue Sky laws), is required for the valid authorization,
issuance, sale and delivery of the Securities, and the consummation of the
transactions and agreements contemplated by this Agreement and the
Representatives' Purchase Option, and as contemplated by the Prospectus or if
so required, all such authorizations, approvals, consents, orders,
registrations, licenses and permits have been duly obtained and are in full
force and effect and have been disclosed to the Representatives.
(iii) All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no
19
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the statutory preemptive rights of any holders of any
security of the Company or to the best of such counsel's knowledge similar
contractual rights granted by the Company. The outstanding options and
warrants to purchase shares of Common Stock constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms except,
in each case (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (b) as enforceability of any indemnification and contribution
provisions may be limited under the federal and state securities laws and
public policy, and (c) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought. To the best of our knowledge, the offers and sales of the outstanding
Common Stock and options and warrants to purchase shares of Common Stock were
at all relevant times either registered under the Act and the applicable state
securities or Blue Sky Laws or exempt from such registration requirements. The
authorized and outstanding capital stock of the Company is as set forth under
the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and,
when issued and paid for, will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to
personal liability by reason of being such holders. The Securities are not and
will not be subject to the preemptive rights of any holders of any security of
the Company or, to the best of such counsel's knowledge after due inquiry,
similar contractual rights granted by the Company. All corporate action
required to be taken for the authorization, issuance and sale of the
Securities has been duly and validly taken. When issued, the Representatives'
Purchase Option will constitute valid and binding obligations of the Company
to issue and sell, upon exercise thereof and payment therefor, the number and
type of securities of the Company called for thereby and such Representatives'
Purchase Option when issued, in each case, will be enforceable against the
Company in accordance with their respective terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (b) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (c) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought. The certificates representing the Securities are in
due and proper form.
(v) To the best of such counsel's knowledge,
except as set forth in the Prospectus, no holders of any securities of the
Company or of any options, warrants or securities of the Company exercisable
for or convertible or exchangeable into securities of the Company have the
right to require the Company to register any such securities of the Company
under the Act or to include any such securities in a registration statement to
be filed by the Company.
(vi) To the best of such counsel's knowledge,
after due inquiry, the shares of Common Stock and the Warrants are eligible
for quotation on Nasdaq SmallCap and have been approved for listing on the
BSE.
20
(vii) This Agreement and the Representatives'
Purchase Option have each been duly and validly authorized and, when executed
and delivered by the Company, will constitute valid and binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification provisions may
be limited under the federal and state securities laws, and (c) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(viii) The execution, delivery and performance by
the Company of this Agreement and the Representatives' Purchase Option, the
issuance and sale of the Securities, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the
terms and provisions hereof and thereof, do not and will not, with or without
the giving of notice or the lapse of time, or both, (a) conflict with, or
result in a breach of, any of the terms or provisions of, or constitute a
default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any material mortgage, deed of trust, note,
indenture, loan, contract, commitment or other material agreement or
instrument, to which the Company is a party or by which the Company or any of
its properties or assets may be bound, (b) result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Company,
(c) violate any statute or any judgment, order or decree, rule or regulation
applicable to the Company of any court, domestic or foreign, or of any
federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company, its properties or assets, or (d) have a
material effect on any permit, certification, registration, approval, consent,
license or franchise of the Company.
(ix) The Registration Statement, each Preliminary
Prospectus and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other
securities issued or issuable by the Company conform in all respects to the
description thereof contained in the Registration Statement and the
Prospectus. The statements in the Prospectus under "Business," "Management,"
"Certain Transactions," "Risk Factors," "Principal Stockholders," "Description
of Securities" and "Shares Eligible for Future Sale" have been reviewed by
such counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, Intangibles, rules or regulations or legal conclusions are
correct in all material respects. No statute or regulation or legal or
governmental proceeding required to be described in the Prospectus is not
described as required, nor are any contracts or documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement not so described or filed
as required.
(x) Counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Representatives at which the contents of the Registration
21
Statement, the Prospectus and related matters were discussed and although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or the Prospectus nor any
amendment or supplement thereto, as of the date of such opinion, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus). The statements in the
Prospectus have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects.
(xi) The Registration Statement is effective under
the Act, and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Act or applicable state securities laws.
(xii) To the best of such counsel's knowledge, the
Company has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property (tangible and intangible)
stated in the Prospectus to be owned or leased by it, free and clear of all
liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
(xiii) To the best of such counsel's knowledge, no
default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement
or instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject.
The Company is not in violation of any term or provision of its Certificate of
Incorporation or By-Laws or of any franchise, license, permit, or of any
applicable law, rule, regulation, or of any judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or business, except for such violations
which, singly or in the aggregate, would not have a material adverse effect on
the Company.
(xiv) To the best of such counsel's knowledge,
after due inquiry, the Company owns or possesses, free and clear of all liens
or encumbrances and rights thereto or therein by third parties, other than as
described in the Prospectus, the requisite licenses or other rights to use all
patents, licenses, Intangibles and other rights necessary to conduct its
business (including, without limitation, any such licenses or rights described
in the Prospectus as being licensed to or owned or possessed by the Company),
and there is no claim or action by any person
22
pertaining to, or proceeding, pending or to the best of such counsel's
knowledge after due inquiry threatened, which challenges the exclusive rights
of the Company with respect to any Intangibles used in the conduct of the its
business (including without limitation any such licenses or rights described
in the Prospectus as being owned or possessed by the Company); to the best of
such counsel's knowledge after due inquiry, the Company's current products,
services and processes do not infringe on any Intangibles held by third
parties except as discussed in the Prospectus; and the Company's Intangibles
which have been registered in the United States Patent and Trademark Office
have been fully maintained and are in full force and effect.
(xv) To the best of such counsel's knowledge,
after due inquiry, except as described in the Prospectus, the Company does not
own an interest in any corporation, partnership, joint venture, trust or other
business entity.
(xvi) To the best of such counsel's knowledge,
after due inquiry, except as set forth in the Prospectus, there is no action,
suit or proceeding before or by any court of governmental agency or body,
domestic or foreign, now pending, or threatened against the Company, which
might result in any material and adverse change in the condition (financial or
otherwise), business or prospects of the Company, or might materially and
adversely affect the properties or assets thereof.
(xvii) To the best of such counsel's knowledge,
after due inquiry, except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the nature
of a finder's or origination fee with respect to the sale of the Securities
hereunder or financial consulting arrangements or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Representatives' compensation, as determined by the NASD.
Unless the context clearly indicates otherwise, the term
"Company" as used in this Section 4.2.1 shall include each subsidiary of the
Company. The opinion of counsel for the Company and any opinion relied upon by
such counsel for the Company shall include a statement to the effect that it
may be relied upon by counsel for the Representatives in its opinion delivered
to the Representatives.
4.2.2 Reliance. In rendering such opinion, such counsel may
rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (in form and substance reasonably
satisfactory to Representatives' counsel) of other counsel reasonably
acceptable to Representatives' counsel, familiar with the applicable laws, and
(ii) as to matters of fact, to the extent they deem proper, on certificates or
other written statements of officers of departments of various jurisdiction
having custody of documents respecting the corporate existence or good
standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Representatives' counsel if requested. The
opinion of counsel for the Company shall include a statement to the
23
effect that it may be relied upon by counsel for the Representatives in its
opinion delivered to the Representatives.
4.2.3 Secondary Market Trading Memorandum. On the Effective
Date the Representatives shall have received the Secondary Market Trading
Memorandum.
4.3 Cold Comfort Letter. At the time this Agreement is executed and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Representatives and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to
Xxxxxxxx Xxxxxx & Xxxxxx, counsel for the Representatives, from Price
Waterhouse LLP dated, respectively, as of the date of this Agreement and as of
the Closing Date and the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of
the Act and the published Regulations thereunder;
(iii) Stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a
review of the latest available unaudited interim financial statements of the
Company (as described in SAS No. 71 Interim Financial Information), with an
indication of the date of the latest available unaudited interim financial
statements, a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the board of directors,
consultations with officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe that (a)
the unaudited financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or any
material modification should be made to the unaudited interim financial
statements included in the Registration Statement for them to be in conformity
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company
included in the Registration Statement, (b) at a date not later than five days
prior to the Effective Date, Closing Date or Option Closing Date, as the case
may be, there was any change in the capital stock or long-term debt of the
Company, or any decrease in the stockholders' equity of the Company as
compared with amounts shown in the June 30, 1997 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth the
amount of such decrease, and (c) during the period from July 1, 1997 to a
specified date not later than five days prior to the Effective Date, Closing
Date or Option Closing Date, as the case may be, there was any decrease in
revenues, net earnings or net earnings per share of Common Stock, in each case
as compared with the corresponding period in the preceding year and as
compared with the
24
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior to
the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements
and information may be derived from the general accounting records and work
sheets, of the Company with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement;
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's
management any reportable condition related to internal structure, design or
operation as defined in the Statement on Auditing Standards No. 60 --
"Communication of Internal Control Structure Related Matters Noted in an
Audit," in the Company's internal controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representatives shall have received a
certificate of the Company signed by the Chairman of the Board or the
President and the Secretary of the Company, dated the Closing Date or the
Option Closing Date, as the case may be, respectively, to the effect that the
Company has performed all covenants and complied with all conditions required
by this Agreement to be performed or complied with by the Company prior to and
as of the Closing Date, or the Option Closing Date, as the case may be, and
that the conditions set forth in Section 4.5 hereof have been satisfied as of
such date and that, as of Closing Date and the Option Closing Date, as the
case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct. In addition, the Representatives will
have received such other and further certificates of officers of the Company
as the Representatives may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Representatives shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
25
Company are true and complete, have not been modified and are in full force
and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, (iv) all correspondence between the Company or its counsel and the
NASD concerning inclusion on Nasdaq, (v) all correspondence between the
Company or its counsel and the BSE concerning listing on the BSE, and (vi) as
to the incumbency of the officers of the Company. The documents referred to in
such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the condition
or prospects or the business activities, financial or otherwise, of the
Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company from the latest date as of which the financial condition of the
Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company, taken as a whole, (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness which default would have a material adverse effect on
the Company, (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus, (v) no action suit or proceeding, at law or in equity, shall
have been pending or threatened against the Company or affecting any of its
property or business before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling
or finding may materially adversely affect the business, operations, prospects
or financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (vi) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission, and (vii) the Registration Statement and the
Prospectus and any amendments or supplements thereto contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and conform in all material respects to the requirements
of the Act and the Regulations, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 Delivery of Agreements. The Company has delivered to the
Representatives an executed copy of the Representatives' Purchase Option dated
the Effective Date.
4.7 Opinion of Counsel for Representatives. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Xxxxxxxx Xxxxxx & Xxxxxx, counsel to the Representatives, and you
shall have received from such counsel a favorable opinion, dated the Closing
Date and the Option Closing Date, if any, with respect to such of these
proceedings as you may reasonably require. On or prior to the Effective Date,
the Closing Date and the Option Closing Date, as the case may be, counsel for
the Representatives shall have been furnished such
26
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 4.7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
5. Indemnification.
5.1 Indemnification of Underwriters.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, its
directors, officers, agents and employees and each person, if any, who
controls any Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, or any claims whatsoever
commenced or threatened, whether arising out of any action between any of the
Underwriters and the Company or between any of the Underwriters and any
third-party or otherwise) to which they or any of them may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
in (i) any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time each may be amended and supplemented); (ii)
in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Representatives' Purchase Option; or (iii)
any application or other document or written communication (in this Section 5
collectively called "application") executed by the Company or based upon
written information furnished by the Company in any jurisdiction in order to
qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be. The Company agrees promptly to notify the Representatives of
the commencement of any litigation or proceedings against the Company or any
of its officers, directors or controlling persons in connection with the issue
and sale of the Securities or in connection with the Registration Statement or
Prospectus.
5.1.2 Procedure. If any action is brought against an
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 5.1.1, such Underwriter shall promptly
notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of such Underwriter) and payment of
actual expenses. Such
27
Underwriter or controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such Underwriter or such controlling person unless (i)
the employment of such counsel shall have been authorized in writing by the
Company in connection with the defense of such action, or (ii) the Company
shall not have employed counsel to have charge of the defense of such action,
or (iii) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys selected by the Underwriter
and/or controlling person shall be borne by the Company. Notwithstanding
anything to the contrary contained herein, if an Underwriter or controlling
person shall assume the defense of such action as provided above, the Company
shall have the right to approve the terms of any settlement of such action
which approval shall not be unreasonably withheld.
5.2 Indemnification of the Company. Each Underwriter, severally and
not jointly, agrees to indemnify and hold harmless the Company against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements
or omissions directly relating to the transactions effected by the
Underwriters in connection with this offering made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
such Underwriter by or on behalf of such Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based
on any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the several
Underwriters by the provisions of Section 5.1.2.
5.3 Contribution.
5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for
indemnification pursuant hereto 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 this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on
the part of any such person in circumstances for which indemnification is
provided under this Section 5, then, and in each such case, the Company and
the Underwriters shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement
28
incurred by the Company and the Underwriters, as incurred, in such proportions
that the Underwriters are responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the
Company is responsible for the balance; provided, that, 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 was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section
5.3, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Public Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
an Underwriter, and each person, if any, who controls an Underwriter within
the meaning of Section 15 of the Act shall have the same rights to
contribution as such Underwriter.
5.3.2 Contribution Procedure. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim
for contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding which was
effected by such party without the written consent of such contributing party.
The contribution provisions contained in this Section are intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the Exchange Act or otherwise available.
6. Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Securities. If any Underwriter
or Underwriters shall default in its or their obligations to purchase the Firm
Securities or the Option Securities if exercised, hereunder, and if the number
of the Firm Securities with respect to which such default relates does not
exceed in the aggregate 10% of the number of Firm Securities or Option
Securities which all Underwriters have agreed to purchase hereunder, then such
Firm Securities or Option Securities to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to their respective
commitments hereunder.
6.2 Default Exceeding 10% of Firm Securities. In the event that such
default relates to more than 10% of the Firm Securities or Option Securities,
you may in your discretion arrange for yourself or for another party or
parties to purchase such Firm Securities or Option Securities to which such
default relates on the terms contained herein. If within one business day
after such default relating to more than 10% of the Firm Securities or Option
Securities you do not arrange
29
for the purchase of such Firm Securities or Option Securities, then the
Company shall be entitled to a further period of one business day within which
to procure another party or parties satisfactory to you to purchase said Firm
Securities or Option Securities on such terms. In the event that neither you
nor the Company arrange for the purchase of the Firm Securities or Option
Securities to which a default relates as provided in this Section 6, this
Agreement may be terminated by you or the Company without liability on the
part of the Company (except as provided in Section 3.15 and Section 5.1
hereof) or the several Underwriters but nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default
hereunder.
6.3 Postponement of Closing Date. In the event that the Firm
Securities or Option Securities to which the default relates are to be
purchased by the non-defaulting Underwriters, or are to be purchased by
another party or parties as aforesaid, you or the Company shall have the right
to postpone the Closing Date or Option Closing Date for a reasonable period,
but not in any event exceeding five business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements, and the Company agrees
to file promptly any amendment to the Registration Statement or the Prospectus
which in the opinion of counsel for the Underwriters may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 6 with like effect as if it had
originally been a party to this Agreement with respect to such Securities.
7. Additional Covenants.
7.1 Board Designee. For a period of not less than three years from the
Effective Date, the Company will recommend and use its best efforts to elect a
designee of the Representatives, at the option of the Representatives, either
as a member of or a non-voting advisor to the Board of Directors of the
Company. Such designee, if elected or appointed, shall attend meetings of the
Board and receive no more or less compensation than is paid to other
non-management directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings,
including, but not limited to, food, lodging and transportation. To the extent
permitted by law, the Company will agree to indemnify the Representatives and
their designee for the actions of such designee as a director of the Company.
In the event the Company maintains a liability insurance policy affording
coverage for the acts of its officers and directors, it will, if possible,
include each of the Representatives and their designee as an insured under
such policy. If the Representatives do not exercise their option to designate
a member of the Company's Board of Directors, the Representatives shall
nevertheless have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give the Representatives written notice of
each such meeting and to provide the Representatives with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the other directors.
7.2 Reserved.
30
7.3 Rule 144 Sales. During the three year period following the
Effective Date, GKN shall have the right to purchase for GKN's account or to
sell for the account of the Insiders (other than the Excluded Insiders) any
securities sold on the open market other than in underwritten offerings where
the managing underwriter is a "larger bracket" firm than GKN and such managing
underwriter offers GKN the opportunity to participate in the syndicate at the
first or second level below the manager. Each of such Insiders ("Sellers")
will agree to consult with GKN with regard to any such sales and will offer
GKN the exclusive opportunity to purchase or sell such securities on terms at
least as favorable to the Sellers as they can secure elsewhere. If GKN fails
to accept in writing any such proposal for sale by the Sellers within five
business hours after receipt of a notice containing such proposal, then GKN
shall have no claim or right with respect to any such sales contained in any
such notice. If, thereafter, such proposal is modified in any material
respect, the Sellers shall adopt the same procedure as with respect to the
original proposal.
7.4 Press Releases. The Company will not issue a press release or
engage in any other publicity until 25 days after the Effective Date without
the Representatives' prior written consent.
7.5 Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period
of one year from the Effective Date without the Representatives' written
consent.
7.6 Transactional Bibles. The Company agrees that if its
representatives have not submitted to a bindery acceptable to the
Representatives all of the closing and other documents material to the
offering within 30 days of the Effective Date, then the Company shall pay the
fees and costs of the Representatives' agents to prepare the transactional
bibles and have them bound.
7.7 Compensation and Other Arrangements. The Company hereby agrees
that for a period of three years from the Effective Date, all compensation and
other arrangements between the Company and its officers, directors and
affiliates shall be approved by the Compensation Committee of the Company's
Board of Directors, a majority of the members of which shall have no
affiliation or other relationship with the Company other than as directors.
8. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained
in this Agreement shall be deemed to be representations, warranties and
agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities
to the several Underwriters until the earlier of the expiration of any
applicable statute of limitations and the seventh anniversary of the later of
the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no
further force and effect.
31
9. Effective Date of This Agreement and Termination Thereof.
9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.
9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will
in the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the American
Stock Exchange, the Boston Stock Exchange or in the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a war or major hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v)
if a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether
or not such loss shall have been insured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if Xxxx
X. Xxxxxxxxxxxxxx shall no longer serve the Company in his present capacity,
or (viii) if the Company has breached any of its representations, warranties
or obligations hereunder, or (ix) if any Underwriter shall have become aware
after the date hereof of such a material adverse change in the condition
(financial or otherwise), business, or prospects of the Company, or such
adverse material change in general market conditions as in the
Representatives' judgment would make it impracticable to proceed with the
offering, sale and/or delivery of the Securities or to enforce contracts made
by the Representatives for the sale of the Securities.
9.3 Notice. If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 9, the
Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
9.4 Expenses. In the event that this Agreement shall not be carried
out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the obligations of the
Company to pay the expenses related to the transactions contemplated herein
shall be governed by Section 3.15 hereof.
9.5 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
10. Miscellaneous.
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10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
If to the Representatives:
GKN Securities Corp.
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Barington Capital Group, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Copy to:
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
If to the Company:
CrossZ Software Corporation
00 Xxxxxxx Xxxxxxxxx Xxxx.
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxxxxxx
Copy to:
Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
10.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
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10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with
this Agreement) and the Agency Agreement dated July 10, 1997 between the
Representatives and the Company, constitute the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersede all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
10.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Representatives, the Underwriters the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
10.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New
York, without giving effect to conflicts of law. The Company hereby agrees
that any action, proceeding or claim against it arising out of, relating in
any way to this Agreement shall be brought and enforced in the courts of the
State of New York or the United States District Court for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company hereby waives any objection to
such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in
Section 10.1 hereof. Such mailing shall be deemed personal service and shall
be legal and binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
10.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any
of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver
of any other or subsequent breach, non-compliance or non-fulfillment.
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If the foregoing correctly sets forth the understanding between
the Representatives, for itself and as Representatives of the Underwriters
listed on Schedule I hereto, and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
CrossZ Software Corporation
By: __________________________________
Name: Xxxx X. Xxxxxxx
Title: President
Accepted as of the date first
above written.
New York, New York
GKN Securities Corp.
(for itself and as one of the Representatives
of the Underwriters listed on Schedule I hereto)
By: ________________________________
Name: Xxxxx Coventry
Title: Vice President
Barington Capital Group, L.P.
(for itself and as one of the Representatives
of the Underwriters listed on Schedule I hereto)
By: _________________________________
Name: Xxxx Xxxxxxxx
Title: Managing Director
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SCHEDULE I
CrossZ Software Corporation
2,500,000 Shares of Common Stock
Underwriter Number of Firm Securities
----------- to be Purchased
---------------
GKN Securities Corp.
Barington Capital Group, L.P.
Total =====================
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