WHO? VISION SYSTEMS, INC.
6,825,000 Shares of Common Stock
($.01 Par Value Per Share)
Standby Underwriting Agreement
[ ], 1998
Xxxxxx X. Xxxxx & Co. Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Xxxxxx Xxxxxxxxxx Xxxxx Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Ladies and Gentlemen:
Who? Vision Systems, Inc., a Delaware corporation (the "Company"),
Safeguard XL Capital, L.P., a Delaware limited partnership ("Safeguard XL
Capital"), Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard
(PA)" and together with Safeguard XL Capital, "Safeguard"), XL Vision, Inc., a
Delaware corporation ("XL Vision"), and Applewood Associates, L.P. ("Applewood"
together with Safeguard and XL Vision are collectively referred to herein as the
"Selling Stockholders") hereby confirm their respective agreements with you with
respect to:
(i) the proposed distribution by the Company to the Safeguard
Shareholders of up to an aggregate of 6,500,000 rights (the "Rights")
(which represent 6,500,000 shares of the Company's common stock, $.01 par
value per share (the "Common Stock"), to be sold by the Company upon the
exercise of 6,500,000 of such Rights) with (A) each Right entitling the
holder thereof to purchase at any time prior to the Expiration Date, at a
subscription price of $5.00 per share, one share of Common Stock of the
Company, and (B) Rights being distributed on the basis of one Right for
each five shares of Safeguard Stock held (with the holder of a number of
shares of Safeguard Stock not evenly divisible by five entitled to receive
the next higher whole number of Rights);
(ii) the proposed sale of all Unsubscribed Shares by the Company with:
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(A) the Other Purchasers Standby Shares being deemed to be
Company Unsubscribed Shares to be sold pursuant to the Other
Purchasers Standby Purchase Agreements; and
(B) all Excess Unsubscribed Shares to be sold to and purchased by
the Underwriters, severally and not jointly, in accordance with the
terms and conditions of this Agreement; and
(iii) the proposed sale by the Company to the Other Purchasers of the
Undistributed Shares; and
(iv) the grant by the Selling Stockholders to the Underwriters of an
option described in Section 3(b) hereof to purchase additional shares of
Common Stock for the purpose of covering over-allotments, if any.
The parties acknowledge that concurrently with the Offering of the Rights,
the Selling Stockholders intend to offer and sell the number of Direct Shares
set forth beside such Selling Stockholders' names on Schedule C to the Direct
Purchasers for purchase at a subscription price of $5.00 per share. The parties
also acknowledge that, except as set forth in Section 7, the Direct Shares shall
not be deemed to be Shares for purposes of this Agreement and are not otherwise
a part of this Agreement.
1. Certain Definitions. The following terms shall, when used in this
Agreement, have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Adverse Claim" means the term as used in Section 8-302 of the Delaware
Uniform Commercial Code.
"Application" means the application described in Section 9(a)(i)(B) hereof.
"Associated Person Lock-Ups" means the agreements, acceptable in form and
substance to Baird, pursuant to which each of the Company's officers, directors
and principal stockholders listed in Schedule A attached hereto has agreed not
to, without the prior written consent of Baird, transfer, sell, offer for sale,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities exercisable or exchangeable for or convertible into shares of Common
Stock owned by such person or with respect to which such person has the power of
disposition during a period commencing on the date the Registration Statement is
declared effective by the Commission and ending 180 days following the
Expiration Date, except as otherwise permitted in the Associated Person
Lock-Ups.
"Baird" means Xxxxxx X. Xxxxx & Co. Incorporated, one of the Underwriters.
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"Bona Fide Purchaser" means the term as defined in Section 8-302 of the
Delaware Uniform Commercial Code.
"Closing" means 10:00 a.m., New York City time on the sixth business day
after the Expiration Date (or the first business day thereafter), or at such
other time on the same or such other date, not later than [____________], 1998,
as shall be agreed to by the Company, the Selling Stockholders and the
Underwriters.
"Closing Date" means the time and date of payment for and delivery of the
Excess Unsubscribed Shares.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, $.01 par value per share,
of the Company.
"Company Unsubscribed Shares" means the shares of Common Stock which had
been offered by the Company pursuant to the Rights but which were not acquired
through the exercise of Rights on or prior to the Expiration Date.
"Controlling Person" means a person who controls the Underwriters, the
Company or the Selling Stockholders within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act.
"Custody Agreement" means the Custody Agreement and Power of Attorney dated
____________, 1998 by and among the Selling Stockholders, ________ as custodian
thereunder and ________ as attorney-in-fact thereunder.
"Direct Purchasers" means the certain persons selected by the Company to
whom the Direct Shares are being offered.
"Direct Shares" means the 325,000 shares of Common Stock of the Selling
Stockholders offered to the Direct Purchasers.
"Disagreement" means the term as used in Item 304 of Regulation S-K of the
Rules and Regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent named in the Rights Agent Agreement.
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"Excess Unsubscribed Shares" means all of the Unsubscribed Shares other
than the Other Purchasers Standby Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the subscription price of $5.00 per share.
"Expiration Date" means 5:00 p.m., New York City time, on
[_______________], 1998 or such later date as may be agreed upon by the
Underwriters and the Company.
"Intellectual Property" means all patents, trademarks, service marks, trade
names, copyrights, inventions, trade secrets, proprietary techniques, including,
without limitation, all software service codes, processes and substances,
technology and know-how necessary to conduct (or used to conduct) the business
now operated or proposed to be operated by the Company as described in the
Prospectus.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"KPMG" means KPMG Peat Marwick LLP.
"Material Adverse Effect" means a material adverse effect on the condition,
financial or otherwise, or on the earnings, business affairs, financial
position, value, operations, properties, results of operation or business of the
Company.
"Xxxxxx Group" means Xxxxxx X. Xxxxxx and/or his assignees.
"Xxxxxx Lock-Up" means the agreement of the Xxxxxx Group not to, without
the prior written consent of Baird, transfer, sell, offer for sale, contract to
sell or otherwise dispose of any shares of Common Stock acquired by the Xxxxxx
Group upon exercise of the Xxxxxx Rights or any securities exercisable or
exchangeable for or convertible into Common Stock (including the Xxxxxx Rights)
owned on the date hereof or acquired through the rights offering or with respect
to which the Xxxxxx Group has the power of disposition during a period
commencing on the date the Registration Statement is declared effective and
ending 180 days after the Expiration Date; provided, however, that the Xxxxxx
Group may transfer, sell, offer for sale, contract to sell or otherwise dispose
of up to 280,000 shares of Common Stock without the prior written consent of
Baird so long as the Xxxxxx Group notifies Baird of any such transaction at
least one business day before such transfer, sale, offer or disposition.
"Xxxxxx Rights" means all Rights granted to the Xxxxxx Group as a
shareholder of Safeguard (PA).
"NASD" means the National Association of Securities Dealers, Inc.
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"Offering" means the public offering of the Excess Unsubscribed Shares as
set forth in the Prospectus; provided that the Offering shall also include the
Other Purchasers Standby Shares purchased by the Underwriters, if any.
"Option Closing Date" means the time of delivery of any of the Option
Shares.
"Option Shares" means any and all shares of Common Stock to be purchased by
the Underwriters pursuant to the option described in Section 3(b) of this
Agreement.
"Other Purchasers" means certain persons selected by the Company.
"Other Purchasers Standby Purchase Agreement" means the agreements between
the Company and the Other Purchasers to be entered into after the date hereof
and obligating the Other Purchasers to purchase from the Company up to 300,000
Other Purchasers Standby Shares on the Closing Date at a price of $5.00 per
share.
"Other Purchasers Standby Shares" means that number of Unsubscribed Shares
purchased by the Other Purchasers pursuant to the Other Purchasers Standby
Purchase Agreement.
"Preliminary Prospectus" means each prospectus subject to completion filed
with the Registration Statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
or any amendment thereto at the time of the Registration Statement was or is
declared effective).
"Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), the prospectus included in the Registration
Statement. For purposes of Sections 2 and 8(d)(v) hereof, all references to the
"Prospectus" are deemed to include, in the alternative, the most recent
Preliminary Prospectus if the Prospectus is not in existence.
"Provided Information" means the statements made in the [third] paragraph
preceding the stabilization legend on the inside of the front cover page, the
stabilization legend on the inside of the front cover page and the [third] and
[sixth] paragraphs under the heading "UNDERWRITING" in the Prospectus (and the
same paragraphs and stabilization legend in any Preliminary Prospectus).
"Registration Statement" means the registration statement described in
Section 2(a)(i) hereof.
"Reportable Event" means the term as used in Item 304 of Regulation S-K of
the Rules and Regulations.
"Rights Agent" means ChaseMellon Shareholder Services, L.L.C.
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"Rights Agent Agreement" means the agreement in the form previously
approved by the Underwriters, dated the date hereof, by and among the Company,
the Escrow Agent and the Rights Agent.
"Rules and Regulations" means the rules and regulations adopted by the
Commission under either the Act or the Exchange Act.
"Safeguard Shareholders" means the holders of record of Safeguard Stock as
of [_________________], 1998.
"Safeguard Stock" means the common shares, $.10 par value per share, of
Safeguard (PA).
"Shares" means the Option Shares, the Excess Unsubscribed Shares to be
purchased by the Underwriters and the Other Purchasers Standby Shares purchased
by the Underwriters, if any, pursuant to Section 3.
["Significant Subsidiary" means the term as defined in Rule 405 of the
Rules and Regulations.]
"Transfer Agent and Registrar" means the transfer agent and registrar
described in Section 6(a)(ix) hereof.
"Underwriters" means Xxxxxx X. Xxxxx & Co. Incorporated and Xxxxxx
Xxxxxxxxxx Xxxxx Inc.
"Underwriters' Counsel" means Drinker Xxxxxx & Xxxxx LLP.
"Undistributed Shares" means 6,500,000 shares of Common Stock less those
shares of Common Stock that had been offered by the Company pursuant to the
Rights if Rights to purchase fewer than 6,500,000 shares of Common Stock are
granted to holders of the Safeguard Stock.
"Unsubscribed Shares" means the Company Unsubscribed Shares and the
Undistributed Shares.
2. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to, and agrees with, the
Underwriters as follows:
(i) The Company has filed with the Commission a registration
statement on Form S-1 (No. 333-59219), including a prospectus subject
to completion, for the registration of the Rights, the shares of
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Common Stock subject to the Rights, the Direct Shares and the Option
Shares under the Act, and have filed with the Commission one or more
amendments thereto. After the execution of this Agreement, the Company
will file with the Commission either (A) if such registration
statement, as it may have been amended, has been declared by the
Commission to be effective under the Act as of the time of
effectiveness of this Agreement, a prospectus in the form most
recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act and as
have been provided to and approved by the Underwriters prior to the
execution of this Agreement, or (B) if such registration statement, as
it may have been amended, has not been declared by the Commission to
be effective under the Act as of the time of effectiveness of this
Agreement, an amendment to such registration statement, including a
form of prospectus, a copy of which amendment has been furnished to
and approved by the Underwriters prior to the execution of this
Agreement;
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or any part thereof
and, to the best knowledge of the Company, no proceedings for a stop
order have been instituted or are pending or threatened. When any
Preliminary Prospectus was filed with the Commission, it contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act
and the Rules and Regulations except to the extent that such
Preliminary Prospectus did not contain any such required statements,
or did not so comply, in a manner corrected in the Prospectus. When
the Registration Statement or any amendment thereto was (or is)
declared effective, it (A) contained (or will contain) all statements
required to be stated therein in accordance with, and complied in all
material respects (or will comply in all material respects) with the
requirements of, the Act and the Rules and Regulations and (B) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading. When the Prospectus or any amendment or supplement thereto
is filed pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared
effective) and on the Closing Date and any Option Closing Date, the
Prospectus, as amended or supplemented at any such time, (A) contained
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Act and the Rules and Regulations and
(B) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph
(ii) do not apply to the Provided Information;
(iii) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or
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leasing of any properties or the character or conduct of its
operations requires such qualification, except where failures to be so
qualified, individually or in the aggregate, would not result in a
Material Adverse Effect. The Company does not own any stock of or
other equity in, or otherwise control directly or indirectly, any
corporation, firm, partnership, trust, joint venture or other business
entity;
(iv) The Company has all requisite power and authority (corporate
and other), and has obtained and currently maintains in full force and
effect and is operating in compliance with any and all authorizations,
approvals, orders, licenses, certificates, franchises and permits of
and from all governmental or regulatory officials and bodies
(including those having jurisdiction over environmental or similar
matters) necessary or required to own or lease its properties and
conduct its business as described in the Registration Statement, the
Prospectus and any amendment or supplement thereto, except where the
failure to so maintain or operate would not result in a Material
Adverse Effect. The Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations (including without limitation
those relating to employment matters and the payment of taxes) except
as disclosed in the Prospectus and except where failures to be in
compliance, individually or in the aggregate, would not result in a
Material Adverse Effect. The Company has not received any notice or
notices of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate,
franchise or permit that if the subject of unfavorable decisions,
rulings or findings, would, individually or in the aggregate, result
in a Material Adverse Effect;
(v) The Company has duly executed and delivered the Rights Agent
Agreement. The shares of Common Stock to be sold by the Company
hereunder and upon the exercise of the Rights are subject to the
rights and interests of the Underwriters and the Rights Agent
hereunder and under the Rights Agent Agreement. Except to the extent
otherwise provided therein, the arrangements for custody or
reservation and delivery of the certificates for such shares, made by
the Company hereunder and under the Rights Agent Agreement, are
irrevocable, and are not subject to termination by any acts of the
Company or by operation of law;
(vi) The Company has all requisite power and authority (corporate
and other) to enter into this Agreement, the Other Purchasers Standby
Purchase Agreements and the Rights Agent Agreement, and to consummate
the transactions provided for herein and therein; and this Agreement,
the Other Purchasers Standby Purchase Agreements and the Rights Agent
Agreement have each been duly authorized by the Company. Each of this
Agreement and the Rights Agent Agreement have been and the Other
Purchasers Standby Purchase Agreements will be prior to the Closing
Date duly executed and delivered by the Company. Each of this
Agreement and the Rights Agent Agreement constitutes and the Other
Purchasers Standby Purchase Agreements will constitute prior to the
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Closing Date, assuming due authorization, execution and delivery by
the other parties to such agreements, the legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with their respective terms, subject to the effect of
general principles of equity (including standards of materiality, good
faith, fair dealing and reasonableness) whether applied by a court of
law or equity, and except as rights to indemnity and contribution
hereunder may be limited by applicable law, statutory duties or public
policy. The Company's execution and delivery of this Agreement, the
Other Purchasers Standby Purchase Agreements and the Rights Agent
Agreement, its performance of its obligations hereunder and
thereunder, the consummation of the transactions contemplated hereby
and thereby by it, and its conduct of its business as described in the
Registration Statement, the Prospectus and any amendment or supplement
thereto, will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any material liens, charges,
claims, encumbrances, pledges, security interests, defects or other
like restrictions or material equities of any kind whatsoever upon,
any right, property or assets (tangible or intangible) of the Company
pursuant to the terms of (A) the Certificate of Incorporation or
bylaws, each as amended to date, of the Company, (B) any lease,
license, permit, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit
agreement (including any related to indebtedness) or any other
agreement or instrument to which the Company is a party or by which
the Company is or may be bound or to which any of its properties or
assets (tangible or intangible) is or may be subject, except to the
extent that any such conflict, breach, violation or default,
individually or in the aggregate, does not and would not result in a
Material Adverse Effect and does not and would not interfere with the
Offering or (C) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of its activities or
properties adopted or issued by an arbitrator, court, regulatory body
or administrative agency or other governmental agency or body
(including those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties (other than such as may be
required under state securities or "Blue Sky" laws and such as may be
required by the by-laws and rules of the NASD in connection with the
purchase and distribution of the Shares by the Underwriters);
(vii) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required in
connection with the offer, issuance and sale of the shares of Common
Stock to be sold by the Company hereunder or upon exercise of the
Rights, the Company's performance of its obligations hereunder, or the
consummation by the Company of the other transactions contemplated
hereby, except (A) such as may be required under the state securities
or "Blue Sky" laws of any jurisdiction or as may be required by the
by-laws and rules of the NASD in connection with the purchase and
distribution of the Shares by the Underwriters, (B) any filing of the
Prospectus pursuant to Rule 424(b) or 430A of the Rules and
Regulations and, if the Registration Statement has not been declared
effective, an order of the Commission declaring the Registration
Statement effective under the Act, and (C) such other approvals as
have been obtained and remain in full force and effect;
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(viii) Upon consummation of the Offering, the authorized, issued
and outstanding capital stock of the Company is set forth, and
conforms to the description thereof contained, in the Registration
Statement, the Prospectus, and any amendment or supplement thereto.
All of the issued shares of capital stock of the Company, including
the shares to be sold by the Selling Stockholders, have been duly
authorized and validly issued, and are fully paid and nonassessable;
the holders thereof have no rights of rescission against the Company
with respect thereto and are not subject to personal liabilities
solely by reason of being such holders (except to the extent that as a
result of acquiring a substantial number of shares of Common Stock a
holder may be subject to claims of personal liability as an affiliate
or control person of the Company, as to which no representation is
made hereby); and none of such shares have been issued in violation of
the preemptive rights of any security holders of the Company arising
as a matter of law or under or pursuant to the Company's Certificate
of Incorporation, as amended, the Company's By-Laws, as amended, or
any agreement or instrument to which the Company is a party or by
which it is bound. The shares of Common Stock offered by the Company
and to be sold upon the exercise of the Rights or pursuant to this
Agreement and the Other Purchasers Standby Purchase Agreements have
been duly authorized and at the Closing Date, after payment therefor
in accordance herewith or in accordance with the terms and conditions
of the Rights (as the case may be), will be validly issued, fully paid
and nonassessable and not subject to any Adverse Claim, with no
personal liability attaching to the holder solely as a result of the
ownership thereof (except to the extent that as a result of acquiring
a substantial number of shares of Common Stock a holder may be subject
to claims of personal liability as an affiliate or control person of
the Company, as to which no representation is made hereby). Upon the
issuance and delivery pursuant to this Agreement and the Rights Agent
Agreement of the Shares to be sold by the Company, assuming that each
of the Underwriters is a Bona Fide Purchaser, the Underwriters will
acquire good and marketable title to the Shares free and clear of any
liens, charges, claims, preemptive rights, encumbrances, pledges,
security interests, defects or other like restrictions or like
material equity of any kind whatsoever. The shares of Common Stock
offered by the Company and to be sold upon the exercise of the Rights
or pursuant to this Agreement or the Other Purchasers Standby Purchase
Agreements will conform to the description thereof contained in the
Prospectus. There are no preemptive or other rights to subscribe for
or to purchase nor any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's Certificate of
Incorporation or By-Laws, each as amended to date, or pursuant to any
agreement among stockholders to which the Company is a party, by which
it is bound or of which it has knowledge, and the Shares to be sold by
the Company are not otherwise subject to any preemptive or other
similar rights of any security holder. The Company is not a party to
or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the
Prospectus. Except as described in the Prospectus with respect to
Common Stock that may be registered by the Company in a registration
statement on Form S-8, no holder of any securities of the Company has
the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by
the Company during a period commencing on the date the Registration
Statement is declared effective by the Commission and ending 180 days
following the Expiration Date or to require the Company to file a
registration statement under the Act during such period. All of the
(i) Rights and (ii) outstanding shares of Common Stock and all of the
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shares of Common Stock to be issued by the Company as contemplated
herein have been approved for quotation upon notice of issuance on the
Nasdaq National Market of the Nasdaq Stock Market;
(ix) The financial statements and schedules of the Company
included in the Registration Statement, the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and any amendment or supplement thereto fairly present the
financial position and results of operations of the Company as of the
dates and for the periods therein specified. Such financial statements
and schedules have been prepared in accordance with generally accepted
accounting principles as in effect in the United States and as
consistently applied throughout the periods involved and in accordance
with the Rules and Regulations. The selected financial data set forth
under the caption "SELECTED FINANCIAL DATA" in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, on the basis stated therein, the
information included therein. The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (C) access to assets is permitted only
in accordance with management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company's internal
accounting controls are designed to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as
amended. KPMG, whose reports are filed with the Commission as a part
of the Registration Statement, are independent auditors as required by
the Act and the Rules and Regulations. Since [May 1, 1997], KPMG has
been the only public accountants engaged by the Company, and the
Company has not had any Disagreement with KPMG, and has not
experienced any Reportable Event since that date;
(x) The Company has filed all federal, state, local and foreign
tax returns that are required to be filed by it or has duly requested
extensions thereof, except in any case in which the failure so to
file, individually or in the aggregate, would not have a Material
Adverse Effect. The Company has paid all taxes required to be paid by
it and all other assessments, fines or penalties, if any, levied
against it, to the extent that any of the foregoing are due and
payable, except for (A) any such assessment, fine or penalty that is
currently being contested in good faith or (B) any case in which the
failure so to pay, individually or in the aggregate, would not have a
Material Adverse Effect;
(xi) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters in connection with the issuance by
the Company, or the purchase by the Underwriters, of the Shares to be
sold by the Company or any resales of such Shares by the Underwriters;
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(xii) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free
and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other like restrictions or like
equities of any kind whatsoever, other than (A) liens for taxes not
yet due and payable, (B) liens as described or referred to in the
Prospectus, and (C) liens that are not material in amount in relation
to the business of the Company and which do not interfere with the
Offering;
(xiii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), the Company owns or possesses adequate licenses or other
rights, in each case free of fees, charges or royalties payable after
the date hereof, to use the Intellectual Property, except where the
lack thereof would not result in a Material Adverse Effect. Except as
disclosed in the Prospectus, the Company has not received any notice
of infringement of or conflict with (and does not know of any such
infringement of or conflict with) rights or claims of others with
respect to the Intellectual Property, any of the activities engaged
in, or proposed to be engaged in, by the Company or any challenge to
the ownership or right of the Company with respect to the Intellectual
Property which could result in a Material Adverse Effect or which
could have a material adverse effect on the development, marketing or
sale of any of the Company's existing or contemplated products,
services or processes as described in the Prospectus. None of the
products, services or processes of the Company referred to in such
Prospectus and relating to the business of the Company now operated or
proposed to be operated by it as described in such Prospectus
infringes or conflicts with any right or patent, or with any
discovery, invention, product or process which is the subject of any
patent application known to the Company, in a manner which would
result in a Material Adverse Effect;
(xiv) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the business in which they are engaged,
and the Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not result in
a Material Adverse Effect;
(xv) The Company is not in breach of, or in default under, any
term, covenant or provision of any license, permit, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit
agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which it is a party or by which it may be bound or to which any of its
property or assets (tangible or intangible) is subject or affected,
except as disclosed in the Registration Statement and Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and except as to defaults that (A) individually or in the
-12-
aggregate would not have a Material Adverse Effect and (B) would not
interfere with the Offering. The Company is not in violation of any
term or provision of its charter or bylaws, each as amended to date;
(xvi) Other than as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there is not pending or, to the Company's knowledge,
threatened against the Company or involving the properties or business
of the Company (or, to the Company's knowledge, any circumstance that
may give rise to the same), any action, suit, proceeding,
investigation, litigation or governmental proceeding (including those
having jurisdiction over environmental or similar matters), domestic
or foreign, that (A) is required to be disclosed in the Registration
Statement and is not so disclosed, (B) questions the validity of the
capital stock of the Company or the validity or enforceability of this
Agreement, (C) questions the validity of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement,
or (D) could materially adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement
or result in a Material Adverse Effect. Any such proceedings
summarized in the Prospectus are accurately summarized in all material
respects;
(xvii) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (A) issued any securities other
than the Rights, the shares of Common Stock to be sold by the Company
upon the exercise of the Rights, the Shares to be sold by the Company
pursuant to this Agreement and shares of Common Stock issuable upon
the exercise of stock options disclosed in the Prospectus as
outstanding as of the date hereof, (B) incurred any liability or
obligation, direct or contingent, for borrowed money, (C) entered into
any transaction other than in the ordinary course of business, (D)
declared or paid any dividend or made any other distribution on or in
respect of its capital stock, or (E) entered into any transactions
with any affiliate, including, without limitation, the Selling
Stockholders or their respective affiliates;
(xviii) The Company has satisfactory employer-employee
relationships with its employees. No labor or other dispute with the
employees of the Company exists, or, to the best knowledge of the
Company, is imminent;
(xix) Except as disclosed in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), each employee benefit plan, within the
meaning of Section 3(3) of ERISA that is maintained, administered or
contributed to by the Company or any of its affiliates for employees
or former employees of the Company and its affiliates has been
maintained in compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code; no prohibited transaction, within the
-13-
meaning of Section 406 of ERISA or Section 4975 of the Code has
occurred with respect to any such plan excluding transactions effected
pursuant to a statutory or administrative exemption; and for each such
plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA no "accumulated funding deficiency" as defined
in Section 412 of the Code has been incurred, whether or not waived,
and the fair market value of the assets of each such plan (excluding
for these purposes accrued but unpaid contributions) exceeded the
present value of all benefits accrued under such plan determined using
reasonable actuarial assumptions;
(xx) The minute books of the Company made available to
Underwriters' Counsel, (A) contain minutes and consents from all
meetings and actions of the Company's stockholders, board of
directors, and the committees of such board since the respective dates
of organization of the Company and (B) reflect all transactions
referred to in such minutes accurately in all material respects;
(xxi) All agreements filed as exhibits to the Registration
Statement to which the Company is a party or by which the Company may
be bound or to which any of its assets, properties or businesses may
be subject have been duly and validly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
agreements of the Company enforceable against it in accordance with
their respective terms, subject in each case to the effect of general
principles of equity (including standards of materiality, good faith,
fair dealing and reasonableness) whether applied by a court of law or
equity and except as rights to indemnity and contribution under this
Agreement may be limited by applicable law, statutory duties or public
policy. The descriptions in the Registration Statement, the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and any amendment or supplement thereto, of
agreements, whether written or oral, and of other documents are
accurate and fairly present the information required to be shown with
respect thereto by Form S-1 under the Act. There are no agreements,
whether written or oral, or other documents that are required by the
Act or the Rules and Regulations to be described in the Registration
Statement or filed as exhibits to the Registration Statement that are
not described or filed as required;
(xxii) Neither the Company nor any of its officers, directors, or
affiliates (within the meaning of the Rules and Regulations) has taken
or will take, directly or indirectly, any action designed to or that
has constituted or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common
Stock or the Rights in violation of Regulation M under the Exchange
Act;
(xxiii) There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's, advisory or
origination fee or otherwise, either with respect to the sale of the
shares of Common Stock to be sold by the Company upon exercise of the
Rights, the sale of the Shares hereunder or with respect to the
proceeds received by the Company from such sales. Other than as
reflected in this Agreement, there are no other arrangements,
agreements, understandings, payments or issuances with respect to the
-14-
Company or, to the Company's knowledge, any of its officers,
directors, or affiliates that may constitute "underwriter's
compensation," as determined by the NASD;
(xxiv) The Company has delivered or caused to be delivered to the
Underwriters the Associated Person Lock-Ups;
(xxv) All of the Rights have been duly authorized, and, when
issued and distributed as set forth in the Prospectus, will be legally
issued and valid and binding obligations of the Company having the
rights summarized in the Prospectus; and none of such Rights will have
been issued in violation of the preemptive rights of any security
holders of the Company arising as a matter of law or under or pursuant
to the Company's Certificate of Incorporation, as amended, the
Company's By-Laws, as amended, or any agreement or instrument to which
the Company is a party or by which it is bound;
(xxvi) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there has not been any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of
the Company otherwise than as set forth or contemplated in the
Prospectus;
(xxvii) No relationship, direct or indirect, exists between or
among the Company, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company, Safeguard ,
Integrated Visions, Inc. or XL Vision, on the other hand, which is
required by the Act to be described in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) which is not so described;
(xxviii) The Company is not and, after giving effect to the
Offering, will not be an "investment company" or entity "controlled"
by an "investment company," as such terms are defined in the
Investment Company Act;
(xxix) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida), relating
to doing business with the Government of Cuba or with any person or
affiliate located in Cuba; and
(xxx) To the best of the Company's knowledge, no Unsubscribed
Shares or Direct Shares have been sold to any person listed in Section
IM-2110-1(b)(3)-(8) of the NASD's Conduct Rules, except in compliance
with the proviso set forth in subsection (b)(5) thereof.
-15-
(b) Each Selling Stockholder severally represents and warrants to, and
agrees with, the Underwriters as follows:
(i) The Selling Stockholder has delivered certificates in negotiable
form for the shares of Common Stock to be sold by it pursuant to this
Agreement and has placed such shares in custody for delivery pursuant to
the terms of the Custody Agreement and this Agreement. The shares
represented by the certificates so held in custody for the Selling
Stockholder are subject to the interests hereunder of the Underwriters and
the Company. The arrangements for custody and delivery of such certificates
are, to the extent provided hereunder, irrevocable, and are not subject to
termination by any act of the Selling Stockholder, or by operation of law;
(ii) The Selling Stockholder has the legal right and power to enter
into this Agreement and the Custody Agreement and to sell, transfer and
deliver the Shares proposed to be sold by it hereunder. This Agreement and
the Custody Agreement have been duly authorized, executed and delivered by
the Selling Stockholder and, assuming due authorization, execution and
delivery by the other respective parties hereto and thereto, constitutes
the legal, valid and binding obligation of the Selling Stockholder
enforceable against the Selling Stockholder in accordance with their
respective terms, subject to the effect of general principles of equity
(including standards of materiality, good faith, fair dealing and
reasonableness) whether applied by a court of law or equity, and except as
rights of indemnity and contribution hereunder may be limited by applicable
law, statutory duties or public policy;
(iii) The execution and delivery of this Agreement and the Custody
Agreement and the performance by the Selling Stockholder of its obligations
hereunder and thereunder will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default
under (A) any charter documents, including articles or certificates of
incorporation, partnership agreements or by-laws, of the Selling
Stockholder, as amended to date, (B) any lease, permit, license, contract,
indenture, mortgage, deed of trust, voting trust agreement, shareholders
agreement, note, loan or credit agreement or any other agreement or
instrument to which the Selling Stockholder is a party or by which it is or
may be bound or to which any of its properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, except to the extent
that any such conflict, breach, violation or default, individually or in
the aggregate, does not and would not result in a material adverse effect
on the condition, financial or otherwise, or on the earnings, business
affairs, financial position, prospects, value, operation, properties,
results of operation or business of the Selling Stockholder and does not
and would not interfere with the Offering or (C) any statute, judgment,
decree, order, rule or regulation applicable to the Selling Stockholder or
any of its activities or properties adopted or issued by any arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body (including those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Selling
Stockholder or any of its
-16-
activities or properties. No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required
for the consummation by the Selling Stockholder of the transactions
contemplated herein, except (A) such as may be required under the state
securities or "Blue Sky" laws of any jurisdiction or as may be required by
the by-laws of the NASD in connection with the purchase and distribution of
the Shares by the Underwriters, (B) any filing of the Prospectus pursuant
to Rule 424(b) or 430A of the Rules and Regulations and, if the
Registration Statement has not been declared effective, an order of the
Commission declaring the Registration Statement effective under the Act,
and (C) such other approvals as have been obtained and remain in full force
and effect;
(iv) The Selling Stockholder has, and on the Closing Date will have,
good and marketable title to the Shares proposed to be sold by the Selling
Stockholder hereunder and the shares of Common Stock to be sold upon the
exercise of the Rights, and none of such shares will be subject to any
Adverse Claim. Upon delivery of and payment for the Shares to be sold by
the Selling Stockholder hereunder, assuming that each of the Underwriters
is a Bona Fide Purchaser, the Underwriters will acquire good and marketable
title thereto free and clear of any liens, charges, claims, preemptive
rights, encumbrances, pledges, security interests, voting trusts, defects
or other like restrictions or other like material equity of any kind
whatsoever;
(v) To the best knowledge of the Selling Stockholder, the Commission
has not issued any order preventing or suspending the use of any
Preliminary Prospectus or any part thereof and, to the best knowledge of
the Selling Stockholder, no proceedings for a stop order have been
instituted or are pending or threatened;
(vi) The Selling Stockholder has not (a) made or caused to be effected
any transaction, directly or indirectly, designed to or that has
constituted or that might reasonably be expected to cause or result in
stabilization of the price of the Common Stock or the Rights, (b) taken or
will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in
manipulation of the price of the Common Stock or the Rights in violation of
Regulation M under the Exchange Act, or (c) failed to comply with the Act
or the Rules and Regulations in order to effect the transactions
contemplated hereby; and
(vii) No facts have come to the Selling Stockholder's attention that
cause such Selling Stockholder to believe that (a) the Registration
Statement, at the time it was declared effective by the Commission,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (b) the Prospectus, as of its date or
the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
-17-
(c) Safeguard represents and warrants to, and agrees with, the Underwriters
as follows:
(i) To the best knowledge of Safeguard, the Commission has not issued
any order preventing or suspending the use of any Preliminary Prospectus or
any part thereof and, to the best knowledge of Safeguard, no proceedings
for a stop order have been instituted or are pending or threatened. When
any Preliminary Prospectus was filed with the Commission, it contained all
statements required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and the Rules
and Regulations except to the extent that such Preliminary Prospectus did
not contain any such required statements, or did not so comply, in a manner
corrected in the Prospectus. To the best knowledge of Safeguard, when the
Registration Statement (or any amendment thereto) was (or is) declared
effective, it (A) contained (or will contain) all statements required to be
stated therein in accordance with, and complied in all material respects
(or will comply in all material respects) with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. To the best
knowledge of Safeguard, when the Prospectus or any amendment or supplement
thereto is filed pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment
or supplement to the Prospectus was or is declared effective) and on the
Closing Date and any Option Closing Date, the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of, the Act and the
Rules and Regulations and (B) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing provisions of
this Section 2(c)(iii) do not apply to the Provided Information;
(ii) To the best knowledge of Safeguard, the descriptions in the
Registration Statement, the Prospectus and any amendment or supplement
thereto of agreements, whether written or oral, and of other documents are
accurate and fairly present the information required to be shown with
respect thereto by Form S-1 under the Act. To the best knowledge of
Safeguard, there are no agreements, whether written or oral, or other
documents that are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the
Registration Statement that are not described or filed as required;
(iii) To the best of Safeguard's knowledge, no Unsubscribed Shares or
Direct Shares have been sold to any person listed in Section
IM-2110-1(b)(3)-(8) of the NASD's Conduct Rules, except in compliance with
the proviso set forth in subsection (b)(5) thereof.
-18-
3. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to issue and the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
in the percentages set forth in Schedule B hereto, all of the Excess
Unsubscribed Shares and any Other Purchasers Standby Shares not purchased by the
Other Purchasers pursuant to the Other Purchasers Standby Purchase Agreements at
a price of $5.00 per share.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements herein contained and upon not less than two business days' notice
from the Underwriters, for a period of 20 days after the Expiration Date, each
Selling Stockholder agrees to sell to the Underwriters all or part of up to the
number of shares of Common Stock set forth beside such Selling Stockholder's
name on Schedule C (an aggregate of 650,000 Option Shares) at a purchase price
of $5.00 per share for the sole purpose of covering over-allotments that may be
made in connection with the offering and distribution of the shares of Common
Stock. The Underwriters may exercise their option to purchase all or any portion
of the Option Shares from the Company up to two times, provided that the
aggregate number of Option Shares purchased by the Underwriters shall not exceed
650,000. Delivery of the Option Shares shall be made concurrently with payment
therefor. Option Shares may be purchased by the Underwriters only for the
purpose of covering over-allotments that may be made in connection with the
offering and distribution of the shares of Common Stock. No Option Shares shall
be delivered unless the Excess Unsubscribed Shares (if any are purchased by the
Underwriters) shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the respective aggregate purchase prices of the Excess
Unsubscribed Shares purchased from the Company shall be made by the Underwriters
on the Closing Date by wire transfer payable to or upon the order of the Company
at the offices of Xxxxxx X. Xxxxx & Co. Incorporated at 000 X. Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000-0000, or at such other place as shall be agreed upon
by the Underwriters and the Company, upon delivery of certificates (in form and
substance satisfactory to the Underwriters) representing the Excess Unsubscribed
Shares to the Underwriters. Delivery and payment for the Excess Unsubscribed
Shares shall be made at the Closing. In addition, in the event that any or all
of the Option Shares are purchased by the Underwriters, payment of the purchase
price for, and delivery of certificates for, such Option Shares shall be made at
the above mentioned office or at such other place as shall be agreed upon by the
Underwriters and the Company, on each Option Closing Date as specified in the
notice from the Underwriters to the Company. Certificates for the Excess
Unsubscribed Shares and the Option Shares, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two business days prior to the Closing Date or the relevant
Option Closing Date, as the case may
-19-
be. The certificates for the Excess Unsubscribed Shares and the Option Shares,
if any, shall be made available to the Underwriters at such office or such other
place as the Underwriters may designate for inspection, checking and packaging
not later than 9:30 a.m., New York City time, on the last business day prior to
the Closing Date or the relevant Option Closing Date, as the case may be.
(d) Delivery of certificates representing the shares of Common Stock to be
sold pursuant to the exercise of the Rights, and the payment of the subscription
price therefor to the Company shall be made at the Closing on the Closing Date
pursuant to the Rights Agent Agreement, irrespective of whether or not any
Excess Unsubscribed Shares are to be purchased by the Underwriters at such
Closing.
4. Public Offering of the Excess Unsubscribed Shares.
As soon after the Registration Statement becomes effective as the
Underwriters deem advisable, the Underwriters shall make the Offering.
5. Registration of Common Stock in Certain States.
(a) On the basis of the representations, warranties and covenants herein
contained, but subject to the terms and conditions herein set forth, the
Underwriters will act (or at their expense, will cause another broker-dealer
registered in such state to act) as the agent of the Company and the Selling
Stockholders to effect the offering of the Rights and the sale of the shares of
Common Stock upon exercise thereof or pursuant to the Other Purchasers Standby
Purchase Agreements in the [States of Arizona, Florida, Nebraska, New Hampshire,
New Jersey, New York, North Dakota and Texas], such states being those states in
which applicable state law requires that a registered broker-dealer effect the
offering of the Rights or the shares of Common Stock purchasable upon exercise
thereof or pursuant to the Other Purchasers Standby Purchase Agreements. The
Underwriters may delegate their obligations under the immediately preceding
sentence through another registered broker-dealer satisfactory to them in states
where the Underwriters are not registered as such. The Underwriters shall not be
liable under this Section 5(a), except for gross negligence, lack of good faith
and for their obligations expressly assumed hereunder.
(b) The Company will deliver to the Underwriters, on or before the day the
Registration Statement becomes effective, a "Blue Sky Memorandum" (herein so
called), prepared by Xxxxxx, Xxxxx & Xxxxxxx LLP relating to the securities or
Blue Sky laws of any jurisdictions in which the transfer of the Rights or the
offer and sale of the Common Stock is required to be qualified or registered,
which will set forth the circumstances under which said transfer or offers and
sales may be made and advising that the appropriate action, if any, will be
taken in each of such jurisdictions so as to permit the transfer of the Rights
and the offer and sale
-20-
of the Common Stock (whether upon or in connection with the exercise of Rights,
as part of the public offering of the Shares by the Underwriters or pursuant to
the Other Purchasers Standby Purchase Agreements) to the persons resident in the
jurisdictions indicated in such survey. Such Blue Sky Memorandum may be based
upon qualification of the Rights and the Common Stock as necessary with
appropriate persons in such jurisdictions and an examination of the statutes and
regulations, if any, of such jurisdictions as reported in standard compilations
and upon interpretive advice obtained from representatives of certain securities
commissions and such local counsel as may be necessary. Such Blue Sky Memorandum
will be furnished only for the Underwriters' general information and guidance
rather than as an opinion of counsel with regard to the laws of the
jurisdictions referred to therein.
6. Covenants of the Company and the Selling Stockholders.
(a) The Company covenants and agrees with the Underwriters as follows:
(i) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and
any amendments thereto, to become effective as promptly as possible. Unless
required by law, the Company will not file with the Commission the
prospectus or amendment referred to in the second sentence of Section
2(a)(i) hereof, any amendment or supplement to such prospectus, any
amendment to the Registration Statement, or any document under the Exchange
Act before termination of the offering of the Shares by the Underwriters of
which the Underwriters shall not previously have been advised and furnished
with a copy, or to which the Underwriters shall have reasonably objected by
notice to the Company in writing after having been provided a copy thereof,
or which is not in compliance with the Act, the Exchange Act or the Rules
and Regulations. During the time when a prospectus relating to the Shares
is required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act and the Rules and Regulations to
the extent necessary to permit the continuance of sales of or dealings in
the Shares in accordance with the provisions hereof and of the Prospectus,
as amended or supplemented. The Company will prepare and file with the
Commission, promptly upon the reasonable request by the Underwriters or
Underwriters' Counsel, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters, and will use its best efforts to cause the same to be filed
with the Commission as promptly as possible;
(ii) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriters, with a confirmation in writing,
of (A) the time when the Registration Statement or any amendment thereto
has been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed, (B) the issuance by the Commission of
any stop order, or of the initiation or threatening of any proceeding,
suspending the effectiveness of the Registration Statement or any amendment
thereto or any order preventing
-21-
or suspending the use of any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, (C) the issuance by any state
securities commission of any notice of any proceedings for the suspension
of the qualification of the Shares for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that
purpose, (D) the receipt of any comments from the Commission, and (E) any
request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional
information. The Company will use its best efforts to prevent the issuance
of any such order or the imposition of any such suspension and, if any such
order is issued or suspension is imposed, to obtain the withdrawal thereof
as promptly as possible;
(iii) If required, the Company will file the Prospectus and any
amendment or supplement thereto with the Commission in the manner and
within the time period required by Rule 424(b) and Rule 430A(a)(3) of the
Rules and Regulations;
(iv) The Company will arrange for the qualification of the shares of
Common Stock for offering and sale under the securities or "Blue Sky" laws
of such jurisdictions in which recipients of Rights and the Other
Purchasers are resident and such jurisdictions as the Underwriters may
reasonably designate, including any Canadian provinces, as appropriate, and
will continue such qualifications in effect for as long as may be necessary
to complete the distribution of the shares of Common Stock, provided,
however, that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction;
(v) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which, in the opinion of the Company or counsel for the Company, the
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it
is otherwise necessary at any time to amend or supplement the Prospectus to
comply with the Act or the Rules and Regulations, the Company will promptly
notify the Underwriters thereof and, subject to Section 6(a)(i) hereof,
prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance. If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which, in the opinion of the Underwriters or Underwriters' Counsel, the
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, the
Underwriters will promptly notify the Company thereof and the Company will,
subject to Section 6(a)(i) hereof, prepare and file with the Commission, at
the Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such
-22-
statement or omission or effects such compliance. The Company will furnish
to the Underwriters and dealers (whose names and addresses shall be
furnished to the Company by the Underwriters) to which Shares may have been
sold on behalf of the Underwriters and to any other dealers upon request, a
reasonable number of copies of any amendment or supplement prepared
pursuant to this paragraph (v);
(vi) The Company will furnish to each of the Underwriters and to
Underwriters' Counsel, without charge, a signed copy of the registration
statement originally filed with respect to the Shares and each amendment
thereto. So long as the Underwriters or any dealer is required by the Act
or the Rules and Regulations to deliver a prospectus, the Company will also
furnish as many copies of each Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto as the Underwriters may reasonably
request.
(vii) As soon as practicable after the effective date of the
Registration Statement, the Company will make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Underwriters an earnings statement that will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations;
(viii) For a period of five years following the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and will deliver to the Underwriters unaudited quarterly
reports of earnings (through delivery of the Company's quarterly reports
filed with the Commission on Form 10-Q or Form 10-QSB) and the following:
(A) concurrently with furnishing quarterly reports, if any, to
the stockholders, statements of income of the Company for each quarter
in the form furnished to the Company's stockholders;
(B) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
public accountants;
(C) as soon as they are available, copies of all reports
(financial or other) mailed to its stockholders;
(D) as soon as they are available, copies of all reports (other
than preliminary proxy materials) and financial statements furnished
to or filed with the Commission, the NASD or Nasdaq which are
available to the public;
-23-
(E) as soon as they are available every press release and every
material news item or article of interest to the financial community
in respect of the Company or its affairs that is released or prepared
by the Company; and
(F) any additional information of a public nature concerning the
Company that the Underwriters may reasonably request from time to
time;
(ix) The Company will maintain a Transfer Agent and Registrar for the
shares of Common Stock. Effective as of the Closing Date, the Company will
cause the Transfer Agent for the shares of Common Stock to make appropriate
"stop transfer" restrictions in its records relating to the certificates
representing all shares of Common Stock subject to restrictions under the
agreements described in Sections 2(a)(xxiv) and 6(b)(i) hereof;
(x) During the period commencing on the date the Registration
Statement is declared effective by the Commission and ending 180 days after
the Expiration Date, the Company, will not, without the prior written
consent of the Underwriters, (A) directly or indirectly, transfer, sell,
offer for sale, contract for sale, grant any option for the sale of, or
otherwise dispose of (or announce any transfer, sale, offer for sale,
contract for sale, grant of any option for sale of, or other disposition
of) any shares of Common Stock, or other securities convertible into, or
exercisable or exchangeable for, shares of Common Stock (except as
contemplated by this Agreement) or (B) file any registration statement
relating to any such securities with the Commission or any other authority
except as contemplated herein, provided, however, that (1) the Company may
grant or issue securities pursuant to any employee stock option plan or
stock purchase plan or outstanding stock options described in the
Prospectus and, commencing after the Closing Date, may file a registration
statement on Form S-8 with respect to such plans and (2) the Company may
issue shares of Common Stock, or other securities convertible into, or
exercisable or exchangeable for shares of Common Stock, as consideration
for any acquisition by the Company so long as the party being issued such
securities signs an agreement, acceptable in form and substance to the
Underwriters, that such party will not transfer, sell, offer for sale,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for shares of
Common Stock owned by such party or with respect to which such party has
the power of disposition during a period commencing on the date of issuance
of such securities and ending 180 days following the Expiration Date;
(xi) The Company will apply the net proceeds from the sale of the
Common Stock sold by it in the manner set forth under "USE OF PROCEEDS" in
the Prospectus. Except as described in the Prospectus, no portion of the
net proceeds will be used directly or indirectly to acquire any securities
issued by the Company;
(xii) The Company will furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if
-24-
any, but no later than two full business days prior thereto, a copy of the
latest available unaudited interim financial statements of the Company
(which in each case shall not be earlier than the last day of the preceding
month, unless such month-end shall be less than three business days prior
to the date such statements are to be delivered) that have been read by the
Company's independent public accountants, as stated in their letter to be
furnished pursuant to Section 8(h) hereof;
(xiii) The Company will cause the Shares and the Rights to be approved
for quotation on the Nasdaq National Market and will use its reasonable
commercial efforts to maintain such approvals;
(xiv) The Company will file and cause to become effective prior to the
Closing Date a registration statement with respect to the Common Stock
pursuant to Section 12(g) of the Exchange Act and will use its best efforts
to maintain such registration;
(xv) The Company will apply the net proceeds from the sale of the
shares of Common Stock sold by it and conduct its operations in a manner
that will not subject it to registration as an investment company under the
Investment Company Act of 1940, as amended; and
(xvi) The Company will furnish, without charge, to the Underwriters
and Underwriters' Counsel within four months of the Closing Date such
number of closing binders as the Underwriters and Underwriters' Counsel may
reasonably request.
(b) Each Selling Stockholder covenants and agrees with the Underwriters as
follows:
(i) During the period commencing on the date the Registration
Statement is declared effective by the Commission and ending 180 days after
the Expiration Date, the Selling Stockholder will not, without the prior
written consent of the Underwriters, directly or indirectly, transfer,
sell, offer for sale, contract for sale, grant any option for the sale of
or otherwise dispose of any shares of Common Stock or other securities
convertible into, or exercisable or exchangeable for, shares of Common
Stock except (A) as contemplated in this Agreement or (B) pursuant to
grants or sales of such shares to employees of the Selling Stockholder or
its subsidiaries, provided, that such transferees agree to be bound by the
restrictions contained in this paragraph; and
(ii) The Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the Underwriters of the Shares
to be purchased by the Underwriters from such Selling Stockholder.
-25-
7. Payment of Expenses; Fees.
(a) As compensation to the Underwriters for their services in connection
with the transactions contemplated by this Agreement and their commitment
hereunder, the Company and the Selling Stockholders hereby agree, jointly and
severally, to pay to the Underwriters, by wire transfer, on the sixth business
day following the Expiration Date, an amount equal to the sum of (i) 3% of the
Exercise Price for each share of Common Stock subject to Rights, (ii) 3% of the
subscription price for each Direct Share and each Undistributed Share sold to
the Direct Purchasers, and (iii) an additional fee of 4% of the Exercise Price
for each share (other than the Option Shares) purchased by the Underwriters
pursuant to Section 3(a) of this Agreement or upon the exercise of Rights by the
Underwriters if such Rights were purchased by the Underwriters at a time when
the Common Stock was trading (on a "when-issued" basis) at a per share price of
less than $6.00 or with the prior acknowledgement of Safeguard that the
Underwriters would be entitled to receive such compensation pursuant to the
exercise of such Rights. As compensation to the Underwriters for their
commitment hereunder, the Company hereby agrees to pay the Underwriters, by wire
transfer, on each Option Closing Date an amount equal to 7% of the Exercise
Price for each Option Share purchased on such date by the Underwriters. As
additional compensation to the Underwriters for their commitment hereunder, the
Company shall reimburse the Underwriters, by wire transfer on the sixth business
day following the Expiration Date, for a non-accountable expense allowance of
(i) $200,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued" basis) at a per share price of less than $7.25,
(ii) $100,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued basis) at a per share price equal to or greater
than $7.25 but less than or equal to $8.25 or (iii) no expense allowance if, on
the Expiration Date, the closing price for the Common Stock was trading (on a
"when-issued" basis) at a per share price greater than $8.25.
(b) The Company hereby agrees to pay all expenses and fees incident to the
performance of the obligations by the Company and the Selling Stockholders under
this Agreement, including all expenses and fees of the Company and the Selling
Stockholders incurred in connection with or by (i) the engagement of
accountants, counsel for the Company and the Selling Stockholders, the Rights
Agent and the Transfer Agent and Registrar for the Common Stock, (ii)
preparation, duplication, printing, filing and distribution of the registration
statement originally filed with respect to the Shares and any amendments
thereto, any Preliminary Prospectus and the Prospectus and any amendments and
supplements thereto and related documents used in connection with the Offering,
including in each case the cost of all copies supplied to the Underwriters in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of certificates representing the Rights and the Shares, (iv) the
qualification of the Shares under state securities or "Blue Sky" laws and the
laws of any Canadian provinces, as appropriate, including filing fees, costs of
printing and mailing of a "Preliminary Blue Sky Memorandum" and "Final Blue Sky
Memorandum" and disbursements
-26-
and fees of Underwriters' Counsel in connection with the review of such
materials (which shall be paid at the Closing), (v) the approval of the Common
Stock and Rights for quotation on the Nasdaq National Market, (vi) the filing
fees of the Underwriters in connection with any filings required to be made with
the NASD, (vii) travel and out of pocket expenses of the Company in connection
with meetings with prospective investors in the Shares (other than such expenses
as shall have been specifically approved in writing by the Underwriters to be
paid for by the Underwriters), and (viii) any expenses incurred by the Company
in connection with a "road show" presentation to potential investors.
(c) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 8, Sections 12[(a)(ii),] (a)(vii) or (a)(viii), or
Section 13, the Company and Safeguard agree, jointly and severally, to reimburse
and indemnify the Underwriters for all of their reasonable accountable
out-of-pocket expenses, including the reasonable fees and disbursements of
Underwriters' Counsel and any of the state securities, "Blue Sky" and NASD fees
and expenses identified in Sections 7(b)(iv) and 7(b)(vi) above, that shall have
been incurred by them in connection with the proposed purchase and sale of the
Shares.
8. Conditions of the Underwriters' Obligations.
The obligations of the Underwriters to purchase and pay for the Shares
shall be subject, in their sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
herein as of the date hereof and as of the Closing Date, as if they had been
made on and as of the Closing Date, to the accuracy on and as of the Closing
Date of the statements of the officers of the Company and the Selling
Stockholders made in certificates delivered pursuant to the provisions hereof,
to the performance by the Company and the Selling Stockholders on and as of the
Closing Date of their respective covenants and obligations hereunder, and to the
following further conditions:
(a) If the Registration Statement or any amendment thereto filed prior to
the Closing Date has not been declared effective as of the time of execution
hereof, the Registration Statement or such amendment shall have been declared
effective not later than the first full business day next following the date
hereof or such later date and time as shall have been consented to in writing by
the Underwriters. If required, the Prospectus shall have been timely filed with
the Commission in accordance with Rule 424(b) of the Rules and Regulations. If
required, any amendment or supplement to the Prospectus shall have been filed in
accordance with Rule 424(c) under the Act. No stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall have
been issued and no proceedings for that purpose shall have been instituted or,
to the knowledge of the Company, the Selling Stockholders or the Underwriters,
shall be contemplated by the Commission. The Company shall have complied, to the
reasonable satisfaction of the Underwriters and Underwriters' Counsel, with any
request of the Commission for additional information (to be included in the
Registration Statement, the Prospectus or otherwise).
-27-
(b) The Underwriters shall not have advised the Company or any Selling
Stockholder that, in the opinion of the Underwriters or Underwriters' Counsel,
(i) the Registration Statement, or any amendment thereto, includes an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) the Prospectus, or any amendment or supplement
thereto, includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(c) The Underwriters shall have received from Underwriters' Counsel an
opinion dated the Closing Date, with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus and such other related
matters as the Underwriters reasonably may request. Underwriters' Counsel shall
have received from the Company and the Selling Stockholders such papers and
information as they may request to enable them to review or pass upon such
matters or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties, or covenants of the Company or any
Selling Stockholder contained herein.
(d) The Underwriters shall have received from Xxxxxx, Xxxxx & Xxxxxxx LLP,
counsel to the Company and the Selling Stockholders, an opinion, on or prior to
the date Rights certificates and Prospectuses are first mailed to Safeguard
Shareholders and on the Closing Date, dated the respective dates thereof and in
form and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of organization and is duly
qualified to transact business as foreign corporations and is in good
standing in each jurisdiction in which the Company has represented to such
counsel that it conducts business;
(ii) The Company has all requisite corporate power and authority
necessary or required to own or lease its properties and conduct its
businesses as described in the Registration Statement and the Prospectus;
(iii) The Company has all requisite power and authority (corporate and
other) to enter into this Agreement, the Rights Agent Agreement and the
Other Purchasers Standby Purchase Agreements and to consummate the
transactions provided for herein and therein; and this Agreement, the Other
Purchasers Standby Purchase Agreements and the Rights Agent Agreement have
each been duly authorized, executed and delivered by the Company. Each of
this Agreement, assuming due authorization, execution and delivery by the
Underwriters, and each of the Other Purchasers Standby Purchase Agreements,
and the Rights
-28-
Agent Agreement, assuming due authorization, execution and delivery by the
parties thereto other than the Company, constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, arrangement or similar
laws affecting creditors' rights generally or by general principles of
equity (including standards of materiality, good faith, fair dealing and
reasonableness) whether applied by a court of law or equity, and except as
rights to indemnity and contribution hereunder may be limited by applicable
law, statutory duties or public policy (provided that as of the first date
of the opinion only, such opinion need not express any opinion set forth
above with respect to the Other Purchaser Standby Purchase Agreements that
have not theretofore been executed and delivered). The Company's execution
and delivery of this Agreement, the Other Purchasers Standby Purchase
Agreements and the Rights Agent Agreement, its performance of its
obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby do not and will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition
of any liens, charges, claims, encumbrances, pledges, security interests,
defects or other like restrictions or equities of any kind whatsoever upon,
any right, property or asset (tangible or intangible) of the Company
pursuant to the terms of (A) the charter or bylaws, each as amended through
the date of the opinion, of the Company, (B) any material lease, permit,
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument known to such counsel to which the Company is
a party or by which it is or may be bound or to which any of its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, except that such counsel need not express an opinion with
respect to any violation based upon any covenant of a financial or
numerical nature or that requires arithmetic computation and such counsel
has not otherwise known of or had reason to expect the occurrence of such
default, or (C) to the knowledge of Company counsel, any statute, rule,
regulation, judgment, decree or order applicable to the Company or any of
its activities or properties adopted or issued by an arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body (including those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any
of its respective activities or properties (other than such as may be
required under state securities or "Blue Sky" laws and such as may be
required by the by-laws and rules of the NASD in connection with the
purchase and distribution of the Shares by the Underwriters);
(iv) No consent, approval, authorization or order of, or filing with,
any governmental agency or body or, to such counsel's knowledge, any court
is required in connection with the issuance of the shares of Common Stock
to be sold by the Company, the Company's performance of its obligations
hereunder, the Offering, or the consummation by the Company of the other
transactions contemplated hereby, except such as may be required under the
state securities or "Blue Sky" laws of any jurisdiction or as may be
required by the by-laws and rules of the NASD in connection with the
purchase and distribution of the Shares by the Underwriters and except such
other approvals as have been obtained and remain in full force and effect.
Upon the effectiveness of the Registration Statement, the Common Stock will
be
-29-
registered pursuant to Section 12(g) of the Exchange Act, and will be
included in the Nasdaq National Market;
(v) At the date or dates indicated in the Prospectus, the authorized,
issued and outstanding capital stock of the Company was as set forth
therein, and conformed as to legal matters, to the extent that it
constitutes matters of law or legal conclusions, to the description thereof
contained therein under the captions "CAPITALIZATION" and "DESCRIPTION OF
CAPITAL STOCK." All of the issued shares of Common Stock of the Company
(including the Shares sold by the Selling Stockholders) have been duly
authorized and validly issued, and are fully paid and non-assessable; the
holders thereof are not subject to personal liabilities solely by reason of
holding such shares; and none of such shares have been issued in violation
of the preemptive rights of any security holders of the Company known to
Company counsel. The Shares to be sold by the Company have been duly
authorized and, when paid for in accordance herewith, will be validly
issued, fully paid and non-assessable, and with no personal liability
resulting solely from the ownership thereof. Upon the issuance and delivery
pursuant to this Agreement of the Shares to be sold by the Company to the
Underwriters, assuming the Underwriters do not have knowledge of any
Adverse Claim, the Underwriters will acquire good and marketable title to
such Shares free and clear of any liens, charges, claims, encumbrances,
pledges, security interests, defects or other like restrictions or like
equities of any kind whatsoever. Except as described in the Prospectus,
there are no preemptive or other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer of, any shares of Common
Stock pursuant to the Company's Certificate of Incorporation or By-Laws,
each as amended to date, or pursuant to any agreement among stockholders to
which the Company is a party or of which it has knowledge, and the Shares
to be sold by the Company are not subject to any preemptive or other
similar rights of any security holder. The Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities,
except for this Agreement and as described in the Prospectus. Except as
described in the Prospectus, no holder of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of
the Company which are exercisable for or convertible or exchangeable for
securities of the Company has any right (which has not been waived) to
include any securities issued by the Company in the Registration Statement
or any registration statement to be filed by the Company within the period
commencing on the date the Registration Statement is declared effective by
the Commission and ending 180 days after the Expiration Date or to require
the Company to file a registration statement under the Act during such
period. Based on the form of specimen certificate filed as an exhibit to
the Registration Statement, the certificates representing the Shares are in
due and proper form;
(vi) The Registration Statement has become effective under the Act.
Any required filing of the Prospectus pursuant to Rule 424(b) and
430A(a)(3) of the Rules and Regulations has been made in accordance with
the time period required thereby. To such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement
-30-
has been issued, and no proceedings for that purpose have been instituted
or are pending or threatened, by the Commission;
(vii) At the time the Registration Statement was declared effective by
the Commission, the Registration Statement and the Prospectus and any
amendment or supplement thereto (other than the financial statements, and
notes thereto, the financial schedules, and the other financial and
statistical data included in the Registration Statement or the Prospectus
or omitted therefrom, as to which such counsel need express no opinion)
complied as to form in all material respects with the requirements of the
Act and the Rules and Regulations;
(viii) Such counsel has reviewed all contracts and other documents
referred to in the Registration Statement and the Prospectus, and the
summaries of and other disclosures regarding such contracts and other
documents included in the Registration Statement and the Prospectus fairly
present the information required to be shown with respect thereto. To such
counsel's knowledge, there are no contracts or other documents of a
character required to be filed as exhibits to the Registration Statement or
required to be described in the Registration Statement or the Prospectus
that were not filed or disclosed as required;
(ix) Except as disclosed in the Prospectus, to such counsel's
knowledge, there is not pending or threatened or contemplated against the
Company, or involving the properties or business of the Company, any
action, suit, proceeding, inquiry, investigation, litigation or
governmental proceeding (including those having jurisdiction over
environmental or similar matters), domestic or foreign, that (A) is
required to be disclosed in the Registration Statement and is not so
disclosed, (B) questions the validity of the capital stock of the Company
or the validity or enforceability of this Agreement, (C) questions the
validity of any action taken or to be taken by the Company pursuant to or
in connection with this Agreement, or (D) could materially adversely effect
the present or prospective ability of the Company to perform its
obligations under this Agreement or result in a Material Adverse Effect;
(x) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act, nor, by receipt of the proceeds from its sale by it
of the Shares pursuant to this Agreement, will the Company become or be
deemed to be an "investment company" under such Act;
(xi) No transfer taxes are required to be paid in connection with the
sale and delivery of the Common Stock by the Company to the Underwriters
hereunder;
-31-
(xii) The certificates evidencing the Rights to be distributed to the
Safeguard Shareholders and the shares of Common Stock to be delivered
hereunder are in due and proper form under Delaware law;
(xiii) All of the Rights have been duly authorized and validly issued,
and, when issued and distributed as set forth in the Prospectus, will be
legally issued and valid and binding obligations of the Company having the
rights summarized in the Prospectus; and none of such Rights will have been
issued in violation of the preemptive rights of any security holders of the
Company arising as a matter of law or under or pursuant to the Company's
Certificate of Incorporation, as amended, the Company's By-Laws, as
amended, or any agreement or instrument to which the Company is a party or
by which it is bound;
(xiv) Each Selling Stockholder has the legal right and power to enter
into this Agreement and each Selling Stockholder has the requisite capacity
and legal right to sell, transfer and deliver hereunder the Shares proposed
to be sold hereunder. This Agreement has been executed and delivered by
each of the Selling Stockholders. This Agreement, assuming due
authorization, execution and delivery by the Underwriters constitutes the
legal, valid, and binding obligations of each Selling Stockholder
enforceable against each Selling Stockholder in accordance with its terms,
subject to the effect of general principles of equity (including standards
of materiality, good faith, fair dealing and reasonableness) whether
applied by a court of law or equity and except as rights to indemnity and
contribution hereunder or thereunder may be limited by applicable law,
statutory duties or public policy;
(xv) The execution and delivery of this Agreement, the performance by
each Selling Stockholder of its obligations hereunder will not conflict
with or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, or result in the creation or imposition
of any liens, charges, claims, encumbrances, pledges, security interests,
defects or other like restrictions or equities of any kind whatsoever upon,
any right, property or (tangible or intangible) of each of the Selling
Stockholders pursuant to the terms of (A) any material lease, permit,
license, contract, indenture, mortgage, deed of trust, voting trust
agreements, stockholders agreement, note, loan or credit agreement
(including any related to indebtedness) or any other agreement or
instrument to which any Selling Stockholder is a party or by which it is or
may be bound or to which any of its respective properties or assets
(tangible or intangible) is or may be subject, or (B) any statute,
judgment, decree, order, rule or regulation, known to such counsel,
applicable to any Selling Stockholder or any of its respective activities
or properties adopted or issued by any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including
those having jurisdiction over environmental or similar matters), having
jurisdiction over any Selling Stockholder or any of its respective
activities or properties, in each case except where such breach, violation
or default would not (i) affect the enforceability of this Agreement, or
(ii) affect the Offering or the sale of the Common Stock contemplated
hereby. To such counsel's knowledge, no consent, approval, authorization or
order of, or filing with, any governmental agency or body or any court is
required for the
-32-
consummation by any Selling Stockholder of the transactions contemplated
herein, except such as may be required under the state securities or "Blue
Sky" laws of any jurisdiction or as may be required by the by-laws and
rules of the NASD in connection with the purchase and distribution of the
Shares by the Underwriters and except such other approvals as have been
obtained and remain in full force and effect;
(xvi) To such counsel's knowledge, each Selling Stockholder has title
to the Shares proposed to be sold by such Selling Stockholder hereunder
free of any adverse claims and upon delivery of and payment for such Shares
hereunder, assuming that each Underwriter does not have any notice of an
adverse claim, such Underwriter will be a protected purchaser (as defined
in Section 8-303 of the Uniform Commercial Code as in effect in the State
of Delaware); and
(xvii) The descriptions in the Registration Statement, the Prospectus
and any amendment or supplement thereto of agreements, whether written or
oral, and of other documents to which each Selling Stockholder or any of
its affiliates (other than the Company) is a party are accurate and fairly
present the information required to be shown with respect thereto. To such
counsel's knowledge, there are no agreements, whether written or oral, or
other documents to which each Selling Stockholder or any of its affiliates
(other than the Company) is a party of a character that are required by the
Act or the Rules and Regulations to be described in the Registration
Statement or filed as exhibits to the Registration Statement that are not
described or filed as required.
In addition, such opinion shall contain statements substantially to
the following effect:
In the course of the preparation by the Company and its counsel of the
Registration Statement and the Prospectus, such counsel attended
conferences with certain of the officers of, and the independent
public accountants for, the Company, at which the Registration
Statement and the Prospectus were discussed (some of which were
attended by representatives of the Underwriters). Between the date of
effectiveness of the Registration Statement and the Closing Date, such
counsel attended (if applicable) additional conferences with certain
of the officers of, and the independent public accountants for, the
Company, at which the contents of the Registration Statement and the
Prospectus were discussed. Given the limitations inherent in the
independent verification of factual matters and the character of
determinations involved in the registration process, such counsel is
not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus (other than as set forth in
the first sentence of paragraph (v) and as set forth in paragraph
(viii) above).
-33-
Subject to the foregoing and on the basis of the information such
counsel gained in the performance of the services referred to above,
including information obtained from officers and other representatives
of the Company, no facts have come to such counsel's attention that
cause such counsel to believe (except that such counsel need not
express any opinion or belief with respect to the financial
statements, schedule and the notes thereto and other financial and
statistical data included therein) that (y) the Registration
Statement, at the time it was declared effective by the Commission,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (z) the Prospectus, as of its
date or the Closing Date, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, provided such counsel need not express any belief as
to the contents of the eighth paragraph under the heading
"UNDERWRITING" in the Prospectus.
In rendering such opinions, such counsel may rely as to matters of
fact, to the extent they deem proper, on the representations and warranties
of the Company and the Selling Stockholders contained in this Agreement and
on certificates and written statements of the Company or responsible
officers of the Company and certificates or other written statements of
officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall
be delivered to Underwriters' Counsel if requested.
The Underwriters are entitled to rely on the opinion of such firm, filed as
an exhibit to the Registration Statement, as to the matters discussed in the
Prospectus under the heading "FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus.
References to the Prospectus and the Registration Statement in this Section
8(d) shall include any amendment or supplement thereto at the date of such
opinion.
(e) The Underwriters shall have received a certificate, dated the Closing
Date and in form and substance satisfactory to the Underwriters, of the Company
signed by each of the Chief Executive Officer and Chief Financial Officer of the
Company to the effect that each of such officers has carefully examined the
Registration Statement, the Prospectus and this Agreement and, to his best
knowledge, that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date,
and the Company has complied in all material respects with all agreements
and covenants and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to the Closing Date;
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(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of such officers' knowledge, are
contemplated or threatened by the Commission; and
(iii) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A) there has been
no material adverse change, or development involving a prospective material
adverse change (including a change in management or control of the
Company), in the condition (financial or otherwise), business prospects,
net worth or results of operations of the Company, except in each case as
described in or contemplated by the Prospectus; (B) the Company has not
entered into any transactions not in the ordinary course of business; (C)
the Company has not incurred any material liabilities or obligations,
direct or contingent, other than as disclosed in the Registration Statement
and the Prospectus; (D) the Company has not sustained a loss material to
the Company by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not such loss shall
have been insured, or from any labor dispute or from any legal or
governmental proceeding; (E) no action, suit or proceeding, at law or in
equity, has been filed or, to the knowledge of such officer, is threatened
against the Company or affecting any of its properties or businesses before
or by any court or federal, state or foreign commission, board or other
administrative agency that (1) alleges that the conduct of such business as
currently conducted or as proposed to be conducted infringes on any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications or trade secrets currently held by any third party and
(2) has had as of the date of such certificate or, if pending and if
decided unfavorably, is likely to have a Material Adverse Effect; and (F)
there has not occurred any other event required to be set forth in the
Prospectus that has not been so set forth.
Except as otherwise provided in clause (iii)(A) above, references to the
Prospectus and Registration Statement in this Section 8(e) shall include any
amendment or supplement thereto at the date of such opinion.
(f) The Underwriters shall have received a certificate, dated the Closing
Date, of the Chairman and the Vice President and General Counsel of Safeguard
(PA) to the effect that such officers have carefully examined the Registration
Statement, the Prospectus and this Agreement and that the representations and
warranties of Safeguard in this Agreement are true and correct on and as of the
Closing Date, and that Safeguard has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Closing Date.
(g) The Underwriters shall have received a certificate, dated the Closing
Date, from each Selling Stockholder other than Safeguard to the effect that such
Selling Stockholder has carefully examined the Registration Statement, the
Prospectus and this Agreement and that the representations and warranties of the
Selling Stockholder in this Agreement are true and
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correct on and as of the Closing Date, and that the Selling Stockholder has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date.
(h) The Underwriters shall have received from KPMG a letter dated,
respectively, the date hereof and the Closing Date, in form and substance
satisfactory to the Underwriters and Underwriters' Counsel, with respect to
matters set forth below:
(i) confirming that they are and were independent public accountants
with respect to the Company within the meaning of the Act and the Rules and
Regulations;
(ii) stating that it is their opinion that the audited financial
statements and schedules examined by them and included in the Registration
Statement and the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations;
(iii) stating that, on the basis of certain procedures which included
a reading of the latest available unaudited interim financial statements of
the Company (with an indication of the date of the latest available
unaudited interim financial statements), a reading of the latest available
minutes of meetings and actions of the stockholders and board of directors
and the various committees of the board of directors of the Company,
inquiries of officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures and
inquiries, nothing came to their attention that caused them to believe that
(A) the unaudited financial statements, if any, and schedules of the
Company included in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement
and the Prospectus, (B) at a specified date not more than five days prior
to the date of such letter, there was any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity,
or net current assets of the Company, in each case, as compared with
amounts shown in the March 31, 1998 consolidated balance sheet included in
the Registration Statement and the Prospectus, except for changes set forth
in such letter, and (C) during the period from March 31, 1998 to such
specified date, there was any decrease in consolidated revenues, income
before income taxes, or net income, or any decrease in net income per
common share of the Company, except for changes set forth in such letter;
(iv) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
in each case to the extent that such
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amounts, numbers, percentages, statements and information may be derived
from the general accounting records, including work sheets, of the Company
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(v) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
In the event that the letter referred to above set forth any such changes,
decreases or increases, it shall be a further condition of the obligations of
the Underwriters that (A) such letter shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Underwriters deem such explanation unnecessary, and (B) such changes, decreases
or increases do not, in the sole judgment of the Underwriters, make it
impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the registration statement originally filed with
respect to the Shares, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this Section
8(h) with respect to the letter referred to above shall include any amendment or
supplement thereto at the date of such letter.
(i) The Associated Person Lock-Ups with respect to each person listed on
Schedule A annexed hereto and the Xxxxxx Lock-Up shall be in full force and
effect.
(j) The outstanding shares of Common Stock and the shares of Common Stock
to be issued by the Company as contemplated by this Agreement shall have been
approved for quotation on the Nasdaq National Market (upon notice of issuance in
the case of the latter shares).
(k) No order suspending the sale of the Shares in any jurisdiction
designated by the Underwriters pursuant to Section 6(a)(iv) hereof shall be in
effect on the Closing Date and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Underwriters, shall be
contemplated.
(l) The Underwriters shall have received from Xxxxxx, Xxxxxxx & Xxxxxx,
L.L.P., intellectual property counsel to the Company, an opinion, on or prior to
the date Rights certificates and Prospectuses are first mailed to Safeguard
Shareholders and on the Closing Date, dated the respective dates thereof and in
form and substance satisfactory to Underwriters' Counsel, to the effect that:
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(i) To such counsel's knowledge, except as disclosed in the
Prospectus, the Company has not received any notice of infringement of or
conflict with (and such counsel does not know of any such infringement of
or conflict with) any rights or claims of others with respect to the
TactileSense(TM) application, any of the activities engaged in, or proposed
to be engaged in, by the Company as described in the Prospectus, in any
such case which could reasonably be expected to result in a Material
Adverse Effect or could reasonably be expected to have a Material Adverse
Effect on the development, marketing or sale of any of the Company's
existing or contemplated products, services or processes as described in
the Prospectus.
(ii) To such counsel's knowledge, the factual representations
concerning the Company's patent applications contained in the Prospectus
under the captions: "RISK FACTORS - Dependence on Intellectual Property and
Proprietary Rights" and "BUSINESS--Patents and Proprietary Technology" are
accurate in all material respects.
(iii) The Company has filed a U.S. Patent Application and [expand to
cover patents filed] before the U.S. Patent and Trademark Office. [Describe
pending patent applications]. Such counsel has no knowledge or information
that would invalidate the claims of the Company's pending patent
applications as filed or that would render an issued patent containing
those claims unenforceable.
In rendering such opinions, such counsel may rely as to matters of fact, to
the extent they deem proper, on certificates and written statements of
responsible officers of the Company and each Selling Stockholder, as
appropriate, and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel if
requested.
References to the Prospectus and Registration Statement in this Section
shall include any amendment or supplement thereto at the date of such opinion.
(m) On or prior to the date that Rights certificates are first mailed to
Safeguard Shareholders and on the Closing Date, dated the respective dates
thereof and in form and substance satisfactory to Underwriters' Counsel, the
Company shall furnish to the Underwriters such information, certificates and
documents as either of the Underwriters may reasonably request.
If any condition of the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date is not so fulfilled, the Underwriters may
terminate this Agreement or, if the Underwriters so elect, they may waive any
such conditions that have not been fulfilled or extend the time for their
fulfillment. In the event the Underwriters so elect to terminate this
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Agreement, all Rights and the Other Purchasers Standby Purchase Agreements shall
become immediately null and void and the Company shall cause the Escrow Agent
under the Rights Agent Agreement to promptly return to the subscribers any
payments received by the Escrow Agent in respect of the exercise price relating
thereto. All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and
Underwriters' Counsel. The Company shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters and documents in such
quantities as the Underwriters and Underwriters' Counsel shall reasonably
request.
The obligations of the Underwriters to purchase and pay for any Option
Shares after having exercised an option set forth in Section 3(b) hereof shall
be subject, in their discretion, to each of the foregoing conditions of this
Section 8 to purchase the Excess Unsubscribed Shares, with all references to the
Excess Unsubscribed Shares and the Closing Date being deemed to refer to such
Option Shares and the related Option Closing Date, respectively.
9. Indemnification.
(a) The Company and the Selling Stockholders, jointly and severally, agree
to indemnify and hold harmless each of the Underwriters and each person, if any,
who is a Controlling Person with respect to either of the Underwriters against
any and all losses, claims, damages, expenses and liabilities, joint or several
(and actions in respect thereof), whatsoever (including any and all reasonable
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, (i) to which the Underwriters or such Controlling Person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(A) in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented) or (B) in any application or
other document or written communication (in this Section 9 collectively called
"Application") executed by the Company or the Selling Stockholders or based upon
written information furnished by the Company or the Selling Stockholders in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the Nasdaq National Market or any other securities exchange, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, unless such statement or omission was
made in reliance upon, and in strict conformity with, the Provided Information
or (ii) to which the Underwriters or such Controlling Person may become liable
to any party which relate to, or arise out of, the Underwriters' or such
Controlling Person's consummation of the transactions contemplated hereby or the
Underwriters' or such Controlling Person's role in connection herewith
(including without limitation as a result of any breach of any representation or
warranty made by the Company or the Selling Stockholders); provided, however,
that neither the Company nor the
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Selling Stockholders shall be responsible for any losses, claims, damages,
expenses or liabilities that are finally judicially determined to have resulted
primarily from the gross negligence or intentional or reckless misconduct of the
Underwriters or such Controlling Person. The indemnity agreement contained in
this Section 9(a) with respect to any Preliminary Prospectus shall not inure to
the benefit of the Underwriters and such Controlling Person with respect to a
person asserting any such losses, claims, damages, liabilities or expenses who
purchased the Shares if at or prior to the written confirmation of the sale of
such Shares a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue statement
contained in, or omission of a material fact from, such Preliminary Prospectus
was corrected in the Prospectus (or the Prospectus as amended or supplemented).
The indemnity agreements in this Section 9(a) shall be in addition to any
liability that the Company or the Selling Stockholders may have at common law or
otherwise.
(b) The Underwriters agree to indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the Registration
Statement, the Selling Stockholders and each other Controlling Person, if any,
who controls the Company or the Selling Stockholders, to the same extent as the
foregoing indemnity from the Company and the Selling Stockholders to the
Underwriters but only with respect to statements made in, or omissions from, any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any Application made in reliance
upon, and in strict conformity with, the Provided Information.
(c) Promptly after receipt by any indemnified party or parties under this
Section 9 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 9, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party or parties shall not relieve it
from any liability that it may have under this Section 9 except to the extent
that it has been prejudiced in any material respect by such failure or from any
liability that it may have otherwise). In case any such action is brought
against any indemnified party or parties, and it notifies the indemnifying party
or parties of the commencement thereof, the indemnifying party or parties will
be entitled to participate therein, and to the extent it may elect, by written
notice delivered to the indemnified party or parties promptly after receiving
the aforesaid notice from such indemnified party or parties, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party
or parties. Notwithstanding the foregoing, the indemnified party or parties
shall have the right to employ its or their own counsel in any such case but the
fees and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such action, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to such indemnified party or parties to have charge of
the defense of such action within a reasonable time after notice to the
indemnifying party or parties of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them that are
-40-
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 9 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 9, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 9 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or action in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Shares or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where either the Company and/or the
Selling Stockholders are the contributing parties and the Underwriters are the
indemnified parties, the relative benefits received by the Company and/or the
Selling Stockholders, on the one hand (treated collectively as one person for
this purpose), and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total proceeds from the offering of the Shares and the
shares of Common Stock sold upon exercise of the Rights (net of underwriting
discounts and other commissions paid to the Underwriters but before deducting
the other expenses incurred by the Company and the Selling Stockholders in
connection with the sale of the Shares) bear to the total underwriting discounts
and other commissions received by the Underwriters hereunder, in each case as
set forth in the table on the cover page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company and the Selling
Stockholders (treated collectively, as one person for this purpose) or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this Section 9(d) shall be deemed to include any
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legal or other expense reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9(d) the Underwriters shall not
be required to contribute any amount in excess of the underwriting discount and
other commissions applicable to the Shares purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 9, each person, if any, who controls the Company or any Selling
Stockholder within the meaning of the Act, each officer of the Company who has
signed the Registration Statement, and each director of the Company shall have
the same rights to contribution as the Company and the Selling Stockholders,
subject in each case to this Section 9(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this Section 9(d), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this Section 9(d), but only to the extent that such party
or parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
10. Representations and Agreements to Survive Delivery.
All representations, warranties, agreements and covenants contained in this
Agreement or contained in certificates of each of the officers of the Company or
of each Selling Stockholder submitted pursuant hereto, shall be deemed to be
representations, warranties, agreements and covenants at the Closing Date and
the Option Closing Date, as the case may be, and such representations,
warranties, agreements and covenants of the Underwriters, the Company and each
Selling Stockholder, and the indemnity agreements contained in Section 9 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriters, the Company and each
Selling Stockholder, or any Controlling Person, and shall survive termination of
this Agreement or the issuance and delivery of the Shares to the Underwriters,
provided that to the extent any such representations, warranties, agreements or
covenants are expressly waived in writing by the Underwriters, the survival of
the same shall be as set forth in such waiver, or, if not so set forth, as
provided in this Section 10.
11. Effective Date.
This Agreement shall become effective at 9:00 a.m., New York time, on the
next full business day following the date hereof or upon the commencement of the
Rights Offering, whichever is earlier; provided, however, that the provisions of
Sections 6, 7, 9, 10 and 12 of this Agreement shall at all times be effective.
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12. Termination.
(a) Subject to subsection (c) of this Section 12, the Underwriters shall
have the right to terminate this Agreement (i) if any calamitous domestic or
international event or act or occurrence has disrupted the general securities
market in the United States; (ii) if trading in the Common Stock (on a
when-issued basis) shall have been suspended by the Commission or the Nasdaq
National Market; (iii) if trading on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or in the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; (iv) if the United States shall
have become involved in a war or major hostilities which, in the Underwriters'
opinion, affects the general securities market in the United States; (v) if a
banking moratorium has been declared by any California, New York, Pennsylvania,
Wisconsin or federal authority; (vi) if a moratorium in foreign exchange trading
(with respect to a foreign exchange on which the Company's securities are
traded) has been declared; (vii) if the Company shall have sustained a loss
material to the Company by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act, whether or not such loss shall have
been insured, or from any labor dispute or any legal or governmental proceeding;
(viii) if, in the reasonable judgment of the Underwriters, there shall have been
such material adverse change, or any development involving a prospective
material adverse change in the financial condition, net worth or results of
operations of the Company since March 31, 1998 or in the business prospects or
conditions of the Company since the date of this Prospectus, or that materially
and adversely impacts this Agreement; or (ix) on any date commencing on the date
hereof and ending on the Closing Date, if there shall be such material adverse
market conditions (whether occurring suddenly or gradually between the date
hereof and the Closing Date) affecting the markets generally as in the
Underwriters' reasonable judgment would make it inadvisable to proceed with the
offering, sale or delivery of the Shares.
(b) If the Underwriters elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 12, they
shall so notify the Company on the same day as such election is made by
telephone or telegram, confirmed by letter.
(c) Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including pursuant to
Section 13 hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Section 7 and Section 9 shall not be in any way affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof.
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13. Default by the Company or the Selling Stockholders.
If the Company shall fail to sell and deliver to the Underwriters the
Excess Unsubscribed Shares to be sold and delivered by the Company at the
Closing Date or the Option Shares to be sold and delivered by the Selling
Stockholders at any Option Closing Date under the terms of this Agreement, then
the Underwriters may at their option, by written notice to the Company and
Selling Stockholders either (a) terminate this Agreement without any liability
on the part of any non-defaulting party other than pursuant to Section 12 or (b)
purchase the Shares which the Company and the Selling Stockholders have agreed
to sell and deliver in accordance with the terms hereof. In the event of a
failure of the Selling Stockholders to sell and deliver as referred to in this
Section, either the Underwriters or the Company shall have the right to postpone
the Closing Date or the Option Closing Date, as the case may be, for a period
not exceeding seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any other
arrangements, as may be effected. No action taken pursuant to this Section shall
relieve the Company or the Selling Stockholders from liability in respect of
such default.
14. Notices.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunication and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given when delivered to a notice party hereto at the address specified herein or
at the address subsequently communicated in writing by the notice parties.
Notices to the Underwriters shall be directed to the Underwriters in care of
Xxxxxx X. Xxxxx & Co. Incorporated, 000 X. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX
00000-0000, Attention: Xxxxxxxx X. Xxxxxxx, Xxxxxx Xxxxxxxxxx Xxxxx Inc., 0000
Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000-0000, Attention: Xxxxxxx X. Xxxxxx with a
copy to Drinker Xxxxxx & Xxxxx LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxxxx 00000, Attention: __________, Esq. Notices to the Company shall be
directed to the address of the Company as set forth on the facing page to the
Registration Statement, with a copy to Xxxxxx, Xxxxx and Bockius LLP, 0000 Xxx
Xxxxx Square, Philadelphia, Pennsylvania, Attention: N. Xxxxxxx Xxxxxxx, Esq.
Notices to Safeguard shall be directed to Safeguard Scientifics, Inc., 800 The
Safeguard Building, 000 Xxxxx Xxxx Xxxxx, Xxxxx, Xxxxxxxxxxxx 00000, Attention:
Xxxxx X. Xxxxxxxxx, Esq., with a copy to Xxxxxx, Xxxxx and Xxxxxxx LLP, 0000 Xxx
Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: N. Xxxxxxx Xxxxxxx,
Esq. In each case a party may change its address for notice hereunder by a
written communication to the other parties.
15. Parties.
This Agreement shall inure solely to the benefit of, and shall be binding
upon, the Underwriters, the Company and the Selling Stockholders and the
Controlling Persons, and their
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respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Shares from the Underwriters shall be deemed to be a
successor by reason merely of such purchase.
16. Construction.
This Agreement shall be governed by the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles
thereof. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described.
17. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to be one and the same instrument.
18. Entire Agreement.
This Agreement contains the entire agreement between the parties hereto in
connection with the subject matter hereof.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company, Safeguard and the Selling Stockholders, please so
indicate in the space provided below for that purpose, thereupon this letter
shall constitute a binding agreement among us.
Very truly yours,
WHO? VISION SYSTEMS, INC.
By:
---------------------------------------------
Name:
Title:
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SAFEGUARD SCIENTIFICS, INC.
By:
---------------------------------------------
Name:
Title:
SAFEGUARD XL CAPITAL, L.P.
By: Safeguard Delaware, Inc., its general partner
By:
---------------------------------------------
Name:
Title:
XL VISION, INC.
By:
---------------------------------------------
Name:
Title:
APPLEWOOD ASSOCIATES, L.P.
By:
---------------------------------------------
Name:
Title:
Confirmed and accepted
as of the date first
above written:
XXXXXX X. XXXXX & CO. INCORPORATED
By:
------------------------------
Name:
Title:
-00-
XXXXXX XXXXXXXXXX XXXXX INC.
By:
------------------------------
Name:
Title:
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Schedule A
Associated Person Lock-Ups
Safeguard Scientifics (Delaware), Inc.
Safeguard Scientifics, Inc.
Technology Leaders L.P.
Technology Leaders Offshore C.V.
Technology Leaders II L.P.
Technology Leaders II Offshore C.V.
XL Vision, Inc.
Applewood Associates, L.P.
Citicorp Venture Capital, Ltd.
Koninkluke Philips Electronics N.V.
Xxxxxx Xxxxxxxx
Xxxxx Xxxxxx
Xxxxxx X. Xxxxxxx, III
Xxxxxxxxx X. Xxxxxxxxx
Xxxxxxxxx X. Xxxx
Xxx-Xxxxxx Xxxxx
Xxxxx Ionson
Xxxxx X. Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxx
Xxxxxxx X. Root
Xxxx X. Xxxxx
-48-
Schedule B
Name of Underwiters % of Underwriter Shares
------------------- -----------------------
Xxxxxx X. Xxxxx & Co. Incorporated [__]
Xxxxxx Xxxxxxxxxx Xxxxx Inc. [__]
-49-
Schedule C
============================================================================================
Total Number of
Name of Number of Number of Shares Sold by
Selling Stockholder Direct Shares Option Shares Selling Stockholder
--------------------------------------------------------------------------------------------
Safeguard Scientifics (DE), Inc. 116,667 233,334 350,001
--------------------------------------------------------------------------------------------
XL Vision, Inc. 200,000 400,000 600,000
--------------------------------------------------------------------------------------------
Applewood Associates, L.P. 8,333 16,666 24,999
--------------------------------------------------------------------------------------------
TOTAL 325,000 650,000 975,000
============================================================================================
-50-
