DRAFT 062397 EXHIBIT 1.1
CHROMAVISION MEDICAL SYSTEMS, INC.
6,720,000 Shares of Common Stock
(Par Value $.01 Per Share)
Standby Underwriting Agreement
_________ ___, 1997
Xxxxxx X. Xxxxx & Co. Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Xxxxx, Xxxxxxxx & Xxxx, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Ladies and Gentlemen:
ChromaVision Medical Systems, Inc., a Delaware corporation (the
"Company"), Safeguard Scientifics (Delaware), Inc., a Delaware corporation
("Safeguard (DE)"), XL Vision, Inc., a Delaware corporation ("XL Vision"),
Technology Leaders, L.P., a Delaware limited partnership ("TL"), Technology
Leaders Offshore, C.V., a Netherlands Antilles limited partnership ("TL CV"
and, together with TL, "Technology Leaders I"), Technology Leaders II, L.P.,
a Delaware limited partnership ("XX XX"), Technology Leaders II Offshore,
C.V., a Netherlands Antilles limited partnership ("XX XX CV" and, together
with XX XX, "Technology Leaders II"), and Safeguard Scientifics, Inc., a
Pennsylvania corporation ("SSI" and, together with Safeguard (DE),
"Safeguard" and, together with Safeguard (DE), XL Vision, Technology Leaders
I and Technology Leaders II, 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 6,400,000 rights (the "Rights") (which
represent 6,020,000 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), to be sold by the Company upon the exercise of
6,020,000 of such Rights and an aggregate of 380,000 shares of Common Stock
being sold by the Selling Stockholders upon exercise of 380,000 Rights with
207,252, 86,602, 44,460 and 41,686 shares of Common Stock being sold by
Safeguard, XL Vision, Technology Leaders II and Technology Leaders I,
respectively), with (A) each Right entitling the holder thereof to purchase
at any time prior to the Expiration Date, at a subscription price of $5.00
per share, one share of Common Stock of the Company, and (B) Rights being
distributed on the basis of one Right for each five shares of Safeguard Stock
held (with the holder of a number of shares of Safeguard Stock not evenly
divisible by five entitled to receive the next higher whole number of Rights);
(ii) the proposed sale of all Unsubscribed Shares by the Company
and the Selling Stockholders, acting severally and not jointly, with:
(A) the Other Purchasers Standby Shares being deemed to be
Company Unsubscribed Shares to be sold pursuant to the Other
Purchasers Standby Purchase Agreements; and
(B) all Excess Unsubscribed Shares to be sold to and purchased
by the Underwriters, severally and not jointly, in accordance with the
terms and conditions of this Agreement; and
(iii) the proposed sale by the Company to the Other Purchasers of the
Undistributed Shares; and
(iv) the grant by the Selling Stockholders to the Underwriters of an
option described in Section 3(b) hereof to purchase additional shares of Common
Stock for the purpose of covering over-allotments, if any.
The parties acknowledge that concurrently with the Offering of the
Rights, the Selling Stockholders intend to offer and sell to the Direct
Purchasers the Direct Shares for purchase at a subscription price of $5.00
per share. The parties also acknowledge that, except as set forth in Section
7, the Direct Shares shall not be deemed to be Shares for purposes of this
Agreement and are not otherwise a part of this Agreement.
-2-
1. Certain Definitions. The following terms shall, when used in this
agreement, have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Adverse Claim" means the term as used in Section 8-302 of the Delaware
Uniform Commercial Code.
"Application" means the application described in Section 9(a)(i)(B)
hereof.
"Associated Person Lock-Ups" means the agreements, acceptable in form and
substance to the Underwriters, pursuant to which each of the Company's
officers, directors and principal stockholders listed in Schedule A attached
hereto has agreed not to, without the prior written consent of the
Underwriters, transfer, sell, offer for sale, contract to sell or otherwise
dispose of any shares of Common Stock or any securities exercisable or
exchangeable for or convertible into shares of Common Stock owned by such
person or with respect to which such person has the power of disposition
during a period commencing on the date the Registration Statement is declared
effective by the Commission and ending 180 days following the Expiration
Date, except as otherwise permitted in the Associated Person Lock-Ups.
"Bona Fide Purchaser" means the term as defined in Section 8-302 of the
Delaware Uniform Commercial Code.
"Closing" means 10:00 a.m., New York City time on the sixth business day
after the Expiration Date (or the first business day thereafter), or at such
other time on the same or such other date, not later than ________, 1997, as
shall be agreed to by the Selling Stockholders, the Company and the
Underwriters.
"Closing Date" means the time and date of payment for and delivery of the
Excess Unsubscribed Shares.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, par value $.01 per
share, of the Company.
"Company Unsubscribed Shares" means the shares of Common Stock which had
been offered by the Company pursuant to the Rights but which were not
acquired through the exercise of Rights on or prior to the Expiration Date
(after taking into account the agreement of the Company and the Selling
Stockholders that the 560,000 shares of Common Stock that are expected to be
sold to Xxxxxx X. Xxxxxx upon exercise of the Xxxxxx Rights shall be deemed
to be sold by the Company).
-3-
"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.
"Direct Purchasers" means the certain persons selected by the Company to
whom the Direct Shares are being offered.
"Direct Shares" means the 320,000 shares of Common Stock offered to the
Direct Purchasers.
"Disagreement" means the term as used in Item 304 of Regulation S-K of the
Rules and Regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent named in the Rights Agent Agreement.
"Excess Unsubscribed Shares" means all of the Unsubscribed Shares other
than the Other Purchasers Standby Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the subscription price of $5.00 per share.
"Expiration Date" means 5:00 p.m., New York City time, on ____________,
1997 or such later date as may be agreed upon by the Underwriters and the
Company.
"Intellectual Property" means all patents, trademarks, service marks,
trade names, copyrights, inventions, trade secrets, proprietary techniques,
including, without limitation, all software service codes, processes and
substances, technology and know-how necessary to conduct (or used to conduct)
the business now operated or proposed to be operated by the Company as
described in the Prospectus.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"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.
-4-
"Xxxxxx Lock-Up" means the agreement of the Xxxxxx Group not to, without
the prior written consent of the Underwriters, transfer, sell, offer for
sale, contract to sell or otherwise dispose of any shares of Common Stock
acquired by the 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 the Underwriters so long as the
Xxxxxx Group notifies the Underwriters 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.
"NASD" means the National Association of Securities Dealers, Inc.
"Offering" means the public offering of the Excess Unsubscribed Shares as
set forth in the Prospectus; provided that the Offering shall also include the
Other Purchasers Standby Shares purchased by the Underwriters, if any.
"Option Closing Date" means the time of delivery of any of the Option
Shares."
"Option Shares" means any and all shares of Common Stock to be purchased by
the Underwriters pursuant to the option described in Section 3(b) of this
Agreement.
"Other Purchasers" means certain persons selected by the Company.
"Other Purchasers Standby Purchase Agreement" means the agreements between
the Company and the Other Purchasers to be entered into after the date hereof
and obligating the Other Purchasers to purchase from the Company up to 300,000
Other Purchasers Standby Shares on the Closing Date at a price of $5.00 per
share.
"Other Purchasers Standby Shares" means that number of Unsubscribed Shares
purchased by the Other Purchasers pursuant to the Other Purchasers Standby
Purchase Agreement.
"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),
-5-
the prospectus included in the Registration Statement. For purposes of
Sections 2 and 8(d)(v) hereof, all references to the "Prospectus" are deemed
to include, in the alternative, the most recent Preliminary Prospectus if the
Prospectus is not in existence.
"Provided Information" means the statements made in the second paragraph
preceding the stabilization legend on the inside of the front cover page, the
stabilization legend on the inside of the front cover page and the third and
sixth paragraph under the heading "UNDERWRITING" in the Prospectus (and the same
paragraphs and stabilization legend in any Preliminary Prospectus).
"Registration Statement" means the registration statement described in
Section 2(a)(i) hereof.
"Reportable Event" means the term as used in Item 304 of Regulation S-K of
the Rules and Regulations.
"Rights Agent" means ChaseMellon Shareholder Services, L.L.C.
"Rights Agent Agreement" means the agreement in the form previously
approved by the Underwriters, dated the date hereof, by and among the Company,
the Escrow Agent and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
"Rules and Regulations" means the rules and regulations adopted by the
Commission under either the Act or the Exchange Act.
"Safeguard Shareholders" means the holders of record of Safeguard Stock as
of __________, 1997.
"Safeguard Stock" means the common shares, $.10 par value per share, of
Safeguard.
"Selling Stockholders Unsubscribed Shares" means the shares of Common Stock
which had been offered by the Selling Stockholders pursuant to the Rights but
which were not acquired through exercise of the Rights on or prior to the
Expiration Date (after taking into account the agreement of the Company and the
Selling Stockholders that the 560,000 shares of Common Stock that are expected
to be sold to Xxxxxx X. Xxxxxx upon exercise of the Xxxxxx Rights shall be
deemed to be sold by the Company).
"Shares" means the Option Shares, the Excess Unsubscribed Shares to be
purchased by the Underwriters and the Other Purchasers Standby Shares purchased
by the Underwriters, if any, pursuant to Section 3.
"Significant Subsidiary" means the term as defined in Rule 405 of the Rules
and Regulations.
-6-
"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 Xxxxx, Xxxxxxxx
& Xxxx, Inc.
"Underwriters' Counsel" means Drinker Xxxxxx & Xxxxx LLP.
"Undistributed Shares" means 6,400,000 shares of Common Stock less those
shares of Common Stock that had been offered by the Company and the Selling
Stockholders pursuant to the Rights if Rights to purchase fewer than 6,400,000
shares of Common Stock are granted to holders of the Safeguard Stock.
"Unsubscribed Shares" means the Selling Stockholders Unsubscribed Shares,
the Company Unsubscribed Shares and the Undistributed Shares.
2. Representations and Warranties of the Company and the 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. 333-26129), including a prospectus subject to
completion, for the registration of the Rights, the shares of Common Stock
subject to the Rights, the Direct Shares and the Option Shares under the
Act, and have filed with the Commission one or more amendments thereto.
After the execution of this Agreement, the Company will file with the
Commission either (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act
as of the time of effectiveness of this Agreement, a prospectus in the form
most recently included in an amendment to such registration statement (or,
if no such amendment shall 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,
-7-
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 foreign
corporations in each jurisdiction in which its ownership or 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, except as disclosed in the Prospectus. The Company
does not own capital stock in any other corporation;
(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
-8-
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 and the
Selling Stockholders hereunder and upon the exercise of the Rights are
subject to the rights and interests of the Underwriters and the Rights
Agent hereunder and under the Rights Agent Agreement. Except to the extent
otherwise provided therein, the arrangements for custody or reservation and
delivery of the certificates for such shares, made by the Company hereunder
and under the Rights Agent Agreement, are irrevocable, and are not subject
to termination by any acts of the Company, the Selling Stockholders or by
operation of law;
(vi) The Company has all requisite power and authority (corporate
and other) to enter into this Agreement, the Other Purchasers Standby
Purchase Agreements and the Rights Agent Agreement, and to consummate the
transactions provided for herein and therein; and this Agreement, the Other
Purchasers Standby Purchase Agreements and the Rights Agent Agreement have
each been duly authorized by the Company. Each of this Agreement and the
Rights Agent Agreement have been and the Other Purchasers Standby Purchase
Agreements will be prior to the Closing Date duly executed and delivered by
the Company. Each of this Agreement and the Rights Agent Agreement
constitutes and the Other Purchasers Standby Purchase Agreements will
constitute prior to the Closing Date, assuming due authorization, execution
and delivery by the other parties to such agreements, the legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with their respective terms, subject to the effect of general
principles of equity (including standards of materiality, good faith, fair
dealing and reasonableness) whether applied by a court of law or equity,
and except as rights to indemnity and contribution hereunder may be limited
by applicable law, statutory duties or public policy. The Company's
execution and delivery of this Agreement, the Other Purchasers Standby
Purchase Agreements and the Rights Agent Agreement, its performance of its
obligations hereunder and thereunder, the consummation of the transactions
contemplated hereby and thereby by it, and its conduct of its business as
described in the Registration Statement, the Prospectus and any amendment
or supplement thereto, will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any material liens,
charges, claims, encumbrances, pledges, security interests, defects or
other like restrictions or material equities of any kind whatsoever upon,
any right, property or assets (tangible or intangible) of the Company
pursuant to the terms of (A) the Certificate of Incorporation or bylaws,
each as amended
-9-
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;
(viii) The authorized, issued and outstanding capital stock of
the Company is set forth, and conforms to the description thereof
contained, in the Registration Statement, the Prospectus, and any amendment
or supplement thereto. All of the issued shares of capital stock of the
Company, including the shares to be sold by the Selling Stockholders, have
been duly authorized and validly issued, and are fully paid and
nonassessable; the holders thereof have no rights of rescission against the
Company with respect thereto and are not subject to personal liabilities
solely by reason of being such holders (except to the extent that as a
result of acquiring a substantial number of shares of Common Stock a holder
may be subject to claims of personal liability as an affiliate or control
person of the Company, as to which no representation is made hereby); and
none of such shares have been issued in violation of the preemptive rights
of any security holders of the Company arising as a matter of law or under
or pursuant to the Company's Certificate of Incorporation, as amended, the
Company's By-Laws, as amended, or any agreement or instrument to which the
Company is a party or by which it is bound. The shares of Common Stock
offered by the Company and to be sold upon
-10-
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, as each amended to date,
or pursuant to any agreement among stockholders to which the Company is a
party, by which it is bound or of which it has knowledge, and the Shares to
be sold by the Company are not otherwise subject to any preemptive or other
similar rights of any security holder. The Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities,
except for this Agreement and as described in the Prospectus. Except as
described in the Prospectus with respect to Common Stock that may be
registered by the Company in a registration statement on Form S-8, no
holder of any securities of the Company has the right to include any
securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company during a period
commencing on the date the Registration Statement is declared effective by
the Commission and ending 180 days following the Expiration Date or to
require the Company to file a registration statement under the Act during
such period. All of the (i) Rights and (ii) outstanding shares of Common
Stock and all of the shares of Common Stock to be issued by the Company as
contemplated herein have been approved for quotation upon notice of
issuance on the Nasdaq National Market of the Nasdaq Stock Market;
(ix) The financial statements and schedules of the Company
included in the Registration Statement, the 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
-11-
the caption "SELECTED FINANCIAL DATA" in the 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 April 1, 1993, 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;
(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, 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
-12-
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 and except as to defaults that (A) individually or
in the aggregate would not have a Material Adverse Effect and (B) would not
interfere with the Offering. 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, 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
-13-
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, 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, each employee benefit plan, within the meaning of Section
3(3) of ERISA that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance with its terms
and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code; no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of
the Code has occurred with respect to any such plan excluding transactions
effected pursuant to a statutory or administrative exemption; and for each
such plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA no "accumulated funding deficiency" as defined in
Section 412 of the Code has been incurred, whether or not waived, and the
fair market value of the assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeded the present value of
all benefits accrued under such plan determined using reasonable actuarial
assumptions;
(xx) The minutes books of the Company 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
-14-
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 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
and any amendment or supplement thereto of agreements, whether written or
oral, and of other documents are accurate and fairly present the
information required to be shown with respect thereto by Form S-1 under the
Act. There are no agreements, whether written or oral, or other documents
that are required by the Act or the Rules and Regulations to be described
in the Registration Statement or filed as exhibits to the Registration
Statement that are not described or filed as required;
(xxii) Neither the Company nor any of its officers, directors,
or affiliates (within the meaning of the Rules and Regulations) has taken
or will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock or the
Rights in violation of Regulation M under the Exchange Act;
(xxiii) There are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's, advisory or
origination fee or otherwise, either with respect to the sale of the shares
of Common Stock to be sold by the Company upon exercise of the Rights, the
sale of the Shares hereunder or with respect to the proceeds received by
the Company from such sales. Other than as reflected in this Agreement,
there are no other arrangements, agreements, understandings, payments or
issuances with respect to the Company or, to the Company's knowledge, any
of its officers, directors, or affiliates that may constitute
"underwriter's compensation," as determined by the NASD;
(xxiv) The Company has delivered or caused to be delivered to
the Underwriters the Associated Person Lock-Ups;
(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.
-15-
(xxvi) Since the respective dates as of which information is
given in the Registration Statement and the 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 or XL
Vision, on the other hand, which is required by the Act to be described in
the Registration Statement and the Prospectus which is not so described;
(xxviii) The Company is not and, after giving effect to the
Offering, will not be an "investment company" or entity "controlled" by an
"investment company," as such terms are defined in the Investment Company
Act; and
(xxix) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida), relating to
doing business with the Government of Cuba or with any person or affiliate
located in Cuba;
(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 upon the
exercise of the Rights and pursuant to this Agreement to the Company to be
placed in custody for delivery pursuant to the terms of the Rights Agent
Agreement and this Agreement. The shares represented by the certificates
so held in custody for the Selling Stockholder are subject to the interests
hereunder of the Underwriters, the Company and the Rights Agent under the
Rights Agent Agreement. The arrangements for custody and delivery of such
certificates are, to the extent provided hereunder, irrevocable, and are
not subject to termination by any acts of the Selling Stockholder, or by
operation of law;
(ii) The Selling Stockholder has the legal right and power to
enter into this Agreement and to sell, transfer and deliver the Shares
proposed to be sold by it hereunder and the shares of Common Stock to be
sold by it upon the exercise of the Rights. This Agreement has been duly
authorized, executed and delivered by the Selling Stockholder and, assuming
due authorization, execution and delivery by the other respective parties
hereto, constitutes the legal, valid and binding obligation of the Selling
Stockholder enforceable against the Selling Stockholder in accordance with
its terms, subject to the effect of general principles of equity (including
standards of materiality, good faith, fair dealing and reasonableness)
whether applied by a court of law or equity,
-16-
and except as rights of indemnity and contribution hereunder may be limited
by applicable law, statutory duties or public policy;
(iii) The execution and delivery of this Agreement and the
performance by the Selling Stockholder of its obligations hereunder will
not conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under (A) any 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 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;
-17-
(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. 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 the Selling Stockholder, when the
Registration Statement (or any amendment thereto) was (or is) declared
effective, it (A) contained (or will contain) all statements required to be
stated therein in accordance with, and complied in all material respects
(or will comply in all material respects) with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. To the best
knowledge of the Selling Stockholder, when the Prospectus or any amendment
or supplement thereto is filed pursuant to Rule 424(b) (or, if the
Prospectus or such amendment or supplement is not required to be so filed,
when the Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective) and
on the Closing Date and any Option Closing Date, the Prospectus, as amended
or supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements of, the Act
and the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (v) do not apply to the Provided Information;
(vi) To the best knowledge of the Selling Stockholder, the
descriptions in the Registration Statement, the Prospectus and any
amendment or supplement thereto of agreements, whether written or oral, and
of other documents are accurate and fairly present the information required
to be shown with respect thereto by Form S-1 under the Act. To the best
knowledge of the Selling Stockholder, there are no agreements, whether
written or oral, or other documents that are required by the Act or the
Rules and Regulations to be described in the Registration Statement or
filed as exhibits to the Registration Statement that are not described or
filed as required;
(vii) Neither the Selling Stockholder nor any of its
officers, directors, or affiliates (within the meaning of the Rules and
Regulations) has (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
-18-
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.
3. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to issue and the Company and the Selling Stockholders
agree, severally and not jointly, to sell to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase in the percentages
set forth in Schedule B hereto, all of the Excess Unsubscribed Shares at a price
of $5.00 per share.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained and upon not less than two business
days' notice from the Underwriters, for a period of 20 days after the Expiration
Date, the Selling Stockholders agree to sell to the Underwriters all or part of
up to 640,000 Option Shares at a purchase price of $5.00 per share for the sole
purpose of covering over-allotments that may be made in connection with the
offering and distribution of the shares of Common Stock. The Underwriters may
exercise their option to purchase all or any portion of the Option Shares from
the Company up to two times, provided that the aggregate number of Option Shares
purchased by the Underwriters shall not exceed 640,000. Delivery of the Option
Shares shall be made concurrently with payment therefor. Option Shares may be
purchased by the Underwriters only for the purpose of covering over-allotments
that may be made in connection with the offering and distribution of the shares
of Common Stock. No Option Shares shall be delivered unless the Excess
Unsubscribed Shares (if any are purchased by the Underwriters) shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the respective aggregate purchase prices of the Excess
Unsubscribed Shares purchased from the Company and the Selling Stockholders
shall be made by the Underwriters on the Closing Date by wire transfer in same
day funds, payable to or upon the order of the Company and the Selling
Stockholders at the offices of 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
-19-
Date or the relevant Option Closing Date, as the case may be. The
certificates for the Excess Unsubscribed Shares and the Option Shares, if
any, shall be made available to the Underwriters at such office or such other
place as the Underwriters may designate for inspection, checking and
packaging not later than 9:30 a.m., New York City time, on the last business
day prior to the Closing Date or the relevant Option Closing Date, as the
case may be.
(d) Delivery of certificates representing the shares of Common Stock
to be sold pursuant to the exercise of the Rights, and the payment of the
subscription price therefor to the Company and the Selling Stockholders shall be
made at the Closing on the Closing Date pursuant to the Rights Agent Agreement,
irrespective of whether or not any Excess Unsubscribed Shares are to be
purchased by the Underwriters at such Closing.
4. Public Offering of the Excess Unsubscribed Shares.
As soon after the Registration Statement becomes effective as the
Underwriters deem advisable, the Underwriters shall make the Offering.
5. Registration of Common Stock in Certain States.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, the
Underwriters will act (or at their expense, will cause another broker-dealer
registered in such state to act) as the agent of the Company and the Selling
Stockholders to effect the offering of the Rights and the sale of the shares of
Common Stock upon exercise thereof or pursuant to the Other Purchasers Standby
Purchase Agreements in the States of Connecticut, Florida, Nebraska, Nevada, New
Hampshire and New York, such states being those states in which applicable state
law requires that a registered broker-dealer effect the offering of the Rights
or the shares of Common Stock purchasable upon exercise thereof or pursuant to
the Other Purchasers Standby Purchase Agreements. The Underwriters may delegate
their obligations under the immediately preceding sentence through another
registered broker-dealer satisfactory to them in states where the Underwriters
are not registered as such. The Underwriters shall not be liable under this
Section 5(a), except for gross negligence, lack of good faith and for their
obligations expressly assumed hereunder.
(b) The Company will deliver to the Underwriters, on or before the
day the Registration Statement becomes effective, a "Blue Sky Memorandum"
(herein so called), prepared by 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 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
-20-
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 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
-21-
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 and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the shares of
Common Stock, provided, however, that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction;
(v) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which, in the opinion of the Company or counsel for the Company, the
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it
is otherwise necessary at any time to amend or supplement the Prospectus to
comply with the Act or the Rules and Regulations, the Company will promptly
notify the Underwriters thereof and, subject to Section 6(a)(i) hereof,
prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance. If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which, in the opinion of the Underwriters or Underwriters' Counsel, the
Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, the
Underwriters will promptly notify the Company thereof and the Company will,
subject to Section 6(a)(i) hereof, prepare and file with the Commission, at
the Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance. The Company will furnish to the
Underwriters and dealers (whose names and addresses shall be furnished to
the Company by the Underwriters) to which Shares may have been
-22-
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. The Company will provide to the Underwriters a copy of the report
on Form SR filed by the Company pursuant to Rule 463 of the Rules and
Regulations;
(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), 2(b)(i)
and 6(b)(i) hereof;
(x) During the period commencing on the date the Registration
Statement is declared effective by the Commission and ending 180 days after
the Expiration Date, the Company, will not, without the prior written
consent of the Underwriters, (A) directly or indirectly, transfer, sell,
offer for sale, contract for sale, grant any option for the sale of, or
otherwise dispose of (or announce any transfer, sale, offer for sale,
contract for sale, grant of any option for sale of, or other disposition
of) any shares of Common Stock, or other securities convertible into, or
exercisable or exchangeable for, shares of Common Stock (except as
contemplated by this Agreement) or (B) file any registration statement
relating to any such securities with the Commission or any other authority
except as contemplated herein, provided, however, that (1) the Company may
grant or issue securities pursuant to any employee stock option plan or
stock purchase plan or outstanding stock options described in the
Prospectus and, commencing after the Closing Date, may file a registration
statement on Form S-8 with respect to such plans and (2) the Company may
issue shares of Common Stock, or other securities convertible into, or
exercisable or exchangeable for shares of Common Stock, as consideration
for any acquisition by the Company so long as the party being issued such
securities signs an agreement, acceptable in form and substance to the
Underwriters, that such party will not transfer, sell, offer for sale,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for shares of
Common Stock owned by such party or with respect to which such party has
the power of disposition during a period commencing on the date of issuance
of such securities and ending 180 days following the Expiration Date;
(xi) The Company will apply the net proceeds from the sale of the
Common Stock sold by it in the manner set forth under "USE OF PROCEEDS" in
the Prospectus. Except as described in the Prospectus, no portion of the
net proceeds will be used directly or indirectly to acquire any securities
issued by the Company;
(xii) The Company will furnish to the Underwriters as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing
-24-
Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in each case shall not be earlier than the
last day of the preceding month, unless such month-end shall be less than
three business days prior to the date such statements are to be delivered)
that have been read by the Company's independent public accountants, as
stated in their letters to be furnished pursuant to Section 8(h) hereof;
(xiii) The Company will cause the Shares and the Rights to be
approved for quotation on the Nasdaq National Market and will use its
reasonable 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.
(ii) The Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the Underwriters of the
Shares to be purchased by the Underwriters from such Selling Stockholder.
(iii) The Company and the Selling Stockholders covenant and
agree with each other and covenant and agree with the Underwriters that the
Other Purchasers
-25-
Standby Shares to be sold and the 560,000 shares of Common
Stock that are expected to be sold to the Xxxxxx Group upon exercise of the
Xxxxxx Rights shall be deemed to be sold by the Company.
7. Payment of Expenses; Fees.
(a) As compensation to the Underwriters for their services in
connection with the transactions contemplated by this Agreement and their
commitment hereunder, the Company and the Selling Stockholders hereby agree,
jointly and severally, to pay to the Underwriters, by wire transfer, on the
sixth business day following the Expiration Date, an amount equal to the sum of
(i) 3% of the Exercise Price for each share of Common Stock subject to Rights,
(ii) 3% of the subscription price for each Direct Share and each Undistributed
Share sold to the Direct Purchasers, and (iii) an additional fee of 4% of the
Exercise Price for each share (other than the Option Shares) purchased by the
Underwriters pursuant to Section 3(a) of this Agreement or upon the exercise of
Rights by the Underwriters if such Rights were purchased by the Underwriters at
a time when the Common Stock was trading (on a "when-issued" basis) at a per
share price of less than $6.00 or with the prior acknowledgement of Safeguard
that the Underwriters would be entitled to receive such compensation pursuant to
the exercise of such Rights. As compensation to the Underwriters for their
commitment hereunder, the Company hereby agrees to pay the Underwriters, by wire
transfer, on each Option Closing Date an amount equal to 7% of the Exercise
Price for each Option Share purchased on such date by the Underwriters. As
additional compensation to the Underwriters for their commitment hereunder, the
Company shall reimburse the Underwriters, by wire transfer on the sixth business
day following the Expiration Date, for a non-accountable expense allowance of
(i) $200,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued" basis) at a per share price of less than $7.25,
(ii) $100,000 if, on the Expiration Date, the closing price for the Common Stock
was trading (on a "when-issued basis) at a per share price between $7.25 and
$8.25 or (iii) no expense allowance if, on the Expiration Date, the closing
price for the Common Stock was trading (on a "when-issued" basis) at a per share
price greater than $8.25.
(b) The Company hereby agrees to pay all expenses and fees incident
to the performance of the obligations by the Company and the Selling
Stockholders under this Agreement, including all expenses and fees of the
Company and the Selling Stockholders incurred in connection with or by (i) the
engagement of accountants, counsel for the Company, counsel for Safeguard, the
Rights Agent and the Transfer Agent and Registrar for the Common Stock, (ii)
preparation, duplication, printing, filing and distribution of the registration
statement originally filed with respect to the Shares and any amendments
thereto, any Preliminary Prospectus and the Prospectus and any amendments and
supplements thereto and related documents used in connection with the Offering,
including in each case the cost of all copies supplied to the Underwriters in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of certificates representing the Rights and the Shares, (iv) the
qualification of the Shares under state securities or "Blue Sky" laws, including
filing fees, costs of printing and mailing of a "Preliminary Blue Sky
Memorandum" and "Final Blue Sky Memorandum" and
-26-
disbursements 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 and Safeguard in connection with meetings with prospective investors
in the Shares (other than such expenses as shall have been specifically
approved in writing by the Underwriters to be paid for by the Underwriters),
and (viii) any expenses incurred by the Company in connection with a "road
show" presentation to potential investors.
(c) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 8, Sections 12(a)(vii) or (a)(viii), or Section
13, the Company and Safeguard hereby 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 Stockholders that, in the opinion of the Underwriters or Underwriters'
Counsel, (i) the Registration Statement, or any amendment thereto, includes an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) the Prospectus, or any amendment or supplement
thereto, includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(c) The Underwriters shall have received from Underwriters' Counsel
an opinion dated the Closing Date, with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus and such other related
matters as the Underwriters reasonably may request. Underwriters' Counsel shall
have received from the Company and the 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, 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 they conduct business;
(ii) The Company has all requisite corporate power and authority
necessary or required to own or lease their respective properties and
conduct its businesses as described in the Registration Statement and the
Prospectus;
(iii) The Company has all requisite power and authority
(corporate and other) to enter into this Agreement, the Rights Agent
Agreement and the Other Purchasers Standby Purchase Agreements and to
consummate the transactions provided for herein and therein; and this
Agreement, the Other Purchasers Standby Purchase Agreements and the Rights
Agent Agreement have each been duly authorized, executed and delivered by
the Company. Each of this Agreement, assuming due authorization, execution
and delivery by the Underwriters, and each of the Other Purchasers Standby
Purchase Agreements, and the Rights Agent Agreement, assuming due
authorization, execution and delivery by the parties thereto other than the
Company, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy,
-28-
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 registered
-29-
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 with respect to stock options (and shares
issuable upon exercise thereof) that may be registered by the Company in a
registration statement on Form S-8, no holder of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company which are exercisable for or convertible or
exchangeable for securities of the Company has any right (which has not
been waived) to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the
Company within the period commencing on the date the Registration Statement
is declared effective by the Commission and ending 180 days after the
Expiration Date or to require the Company to file a registration statement
under the Act during such period. Based on the form of specimen
certificate 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
-30-
Rules and Regulations has been made in accordance with the time period
required thereby. To such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or are pending or
threatened, by the Commission;
(vii) At the time the Registration Statement was declared
effective by the Commission, the Registration Statement and the Prospectus
and any amendment or supplement thereto (other than the financial
statements, and notes thereto, the financial schedules, and the other
financial and statistical data included in the Registration Statement or
the Prospectus or omitted therefrom, as to which such counsel need express
no opinion) complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(viii) Such counsel has reviewed all contracts and other
documents referred to in the Registration Statement and the Prospectus, and
the summaries of and other disclosures regarding such contracts and other
documents included in the Registration Statement and the Prospectus fairly
present the information required to be shown with respect thereto. To such
counsel's knowledge, there are no contracts or other documents of a
character required to be filed as exhibits to the Registration 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; and
(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.
In addition, such opinion shall contain statements substantially
to the following effect:
In the course of the preparation by the Company and its
counsel of the Registration Statement and the Prospectus, such
counsel attended conferences with certain of the officers of, and
the independent public accountants for, the Company, at which the
Registration Statement and the Prospectus were discussed (some of
which were attended by representatives of the Underwriters).
Between the date of effectiveness of the Registration Statement
and the Closing Date, such counsel attended (if applicable)
additional conferences with certain of the officers of, and the
independent public accountants for, the Company, at which the
contents of the Registration Statement and the Prospectus were
discussed. Given the limitations inherent in the independent
verification of factual matters and the character of
determinations involved in the registration process, such counsel
is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (other
than as set forth in the first sentence of paragraph (v) and as
set forth in paragraph (viii) above). Subject to the foregoing
and on the basis of the information such counsel gained in the
performance of the services referred to above, including
information obtained from officers and other representatives of
the Company, no facts have come to such counsel's attention that
cause such counsel to believe (except that such counsel need not
express any opinion or belief with respect to the financial
statements, schedule and the notes thereto and other financial
and statistical data included therein) that (y) the Registration
Statement, at the time it was declared effective by the
Commission, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (z)
the Prospectus, as of its date or the Closing Date, contained or
contains
-32-
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.
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 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.
References to the Prospectus and Registration Statement in this
Section 8(d) shall include any amendment or supplement thereto at the date of
such opinion.
(e) The Underwriters shall have received from Xxxxxx, Xxxxx and
Xxxxxxx LLP, counsel to 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) Each Selling Stockholder has the legal right and power to
enter into this Agreement and to sell, transfer and deliver hereunder the
Shares proposed to be sold hereunder. This Agreement has been duly
authorized by each Selling Stockholder, has been duly executed and
delivered by or on behalf of each Selling Stockholder and constitutes, the
legal, valid, and binding obligations of each Selling Stockholder
enforceable against each Selling Stockholder in accordance with its
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 or thereunder may be limited
by applicable law, statutory duties or public policy;
(ii) 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 (A) the charter documents,
including articles and certificates of incorporation or by-laws, of any
Selling Stockholder, as amended through the date of the opinion, or (B) any
statute, judgment, decree, order, rule or regulation, known to such
counsel, applicable to any 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), having
jurisdiction over any Selling Stockholder or any of its activities or
properties, in each case except where such breach, violation or default
would not (i) affect the enforceability of this Agreement, (ii) affect the
Offering or the sale of the
-33-
Common Stock contemplated hereby, or (iii) have a material impact, financial
or otherwise, on any Selling Stockholder or any of its subsidiaries. To
such counsel's knowledge, no consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required
for the consummation by any 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;
(iii) 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 8303 of the Uniform Commercial Code as in effect in
the Commonwealth of Pennsylvania); and
(iv) 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 by Form S-1 under the Act. 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, which, to the
knowledge of such counsel, exist 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. Between the
date of effectiveness of the Registration Statement and the Closing
Date, such counsel attended 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. Subject to the foregoing and on the basis of the
information
-34-
such counsel gained in the performance of the services
referred to above, including information obtained from officers and
other representatives of the Company and each Selling Stockholder, no
facts have come to such counsel's attention that cause such counsel to
believe that (x) 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 relating to the
Selling Stockholders or any of their affiliates (other than the
Company) required to be stated therein or necessary to make the
statements therein not misleading or (y) 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 relating
to the Selling Stockholders or any of their affiliates (other than the
Company) 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.
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.
In rendering such opinion, 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 each Selling Stockholder, 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.
(f) 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;
-35-
(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 before or by any court or
federal, state or foreign commission, board or other administrative agency
that (1) alleges that the conduct of such business as currently conducted
or as proposed to be conducted infringes on any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications or
trade secrets currently held by any third party and (2) has had as of the
date of such certificate or, if pending and if decided unfavorably, is
likely to have a Material Adverse Effect; and (F) there has not occurred
any other event required to be set forth in the Prospectus that has not
been so set forth.
Except as otherwise provided in clause (iii)(A) above, references to
the Prospectus and Registration Statement in this Section 8(f) shall include any
amendment or supplement thereto at the date of such opinion.
(g) The Underwriters shall have received a certificate, dated the
Closing Date, of each of the Chairman and the Vice President and General Counsel
of each Selling Stockholder or other principal officer, as appropriate, to the
effect that such officers have carefully examined the Registration Statement,
the Prospectus and this Agreement and that the representations and warranties of
each Selling Stockholder in this Agreement are true and correct on and as of the
Closing Date, and that each 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 letters dated,
respectively, the date hereof and the Closing Date, in form and substance
satisfactory to the Underwriters and Underwriters' Counsel, with respect to
matters set forth below:
-36-
(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 December 31, 1996 balance sheet
included in the Registration Statement and the Prospectus, except for
changes set forth in such letter, and (C) during the period from
December 31, 1996 to such specified date, there was any decrease in
revenues, income before income taxes, or net income, or any decrease
in net income per common share of the Company, in each case as
compared with the corresponding period beginning January 1, 1996,
except for changes set forth in such letter;
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in
the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company with
the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
-37-
(v) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may reasonably
request.
In the event that either of the letters referred to above set forth
any such changes, decreases or increases, it shall be a further condition of the
obligations of the Underwriters that (A) such letter shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Underwriters deem such explanation unnecessary, and (B) such changes, decreases
or increases do not, in the sole judgment of the Underwriters, make it
impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the registration statement originally filed with
respect to the Shares, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
Section 8(h) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(i) The Associated Person Lock-Ups with respect to each person listed
on Schedule A annexed hereto and the 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) 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.
(m) 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:
(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
-38-
of others with respect to the ChromaVision Medical Digital Analyzer and its
Triple Plus-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 Intellectual Property contained in the Prospectus
under the captions: "RISK FACTORS - POTENTIAL PATENT DISPUTE" and "RISK
FACTORS - DEPENDENCE ON PATENTS, TRADE SECRETS AND PROPRIETARY TECHNOLOGY"
are accurate in all material respects.
(iii) To such counsel's knowledge, the factual
representations concerning the Company's Intellectual Property contained in
the Prospectus under the caption: "BUSINESS - PATENTS AND PROPRIETARY
TECHNOLOGY" are accurate in all material respects. Such counsel has issued
an opinion to the Company that the Company's Triple Plus-TM- application
does not infringe U.S. Patent No. 5,352,613 which is owned by Idea
Research.
(iv) The Company has filed a U.S. Patent Application and a
Continuation-In-Part Application and both applications are presently
pending before the PTO. The U.S. patent application is directed to the
aspects of the ChromaVision Medical Digital Analyzer for locating cellular
objects of interest on a slide and the Continuation-In-Part application is
directed to the Triple Plus-TM- application. 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.
(n) The Underwriters shall have received from the counsel of
Safeguard Scientifics, Inc. as special counsel to 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
-39-
Underwriters' Counsel, to the effect that 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 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, known to such counsel, to which any 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
any Selling Stockholder and does not and would not interfere with the
Offering, except where such breach, violation or default would not (A) affect
the enforceability of this Agreement, (B) affect the Offering or the sale of
the Common Stock contemplated hereby, or (C) have a material impact,
financial or otherwise, on any Selling Stockholder or any of its subsidiaries.
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. Between the date of effectiveness of
the Registration Statement and the Closing Date, such counsel attended
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. 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 and each Selling Stockholder, no
facts have come to such counsel's attention that cause such counsel to
believe that (x) 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 relating to the
Selling Stockholders or any of their affiliates (other than the
Company) required to be stated therein or necessary to make the
statements therein not misleading or (y) 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 relating
to the Selling Stockholders or any of their affiliates (other than the
Company) required to be stated therein or necessary in order to make
the
-40-
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 opinion, 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 each Selling Stockholder, 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.
If any condition of the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, the Underwriters
may terminate this Agreement or, if the Underwriters so elect, they may waive
any such conditions that have not been fulfilled or extend the time for their
fulfillment. In the event the Underwriters so elect to terminate this
Agreement, all Rights and the Other Purchasers Standby Purchase Agreements shall
become immediately null and void and the Company shall cause the Escrow Agent
under the Rights Agent Agreement to promptly return to the subscribers any
payments received by the Escrow Agent in respect of the exercise price relating
thereto. All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and
Underwriters' Counsel. The Company shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters and documents in such
quantities as the Underwriters and Underwriters' Counsel shall reasonably
request.
The obligations of the Underwriters to purchase and pay for any Option
Shares after having exercised an option set forth in Section 3(b) hereof shall
be subject, in its discretion, to each of the foregoing conditions of this
Section 8 to purchase the Excess Unsubscribed Shares, with all references to the
Excess Unsubscribed Shares and the Closing Date being deemed to refer to such
Option Shares and the related Option Closing Date, respectively.
9. Indemnification.
(a) The Company and each Selling Stockholder, jointly and severally,
agree to indemnify and hold harmless each of the Underwriters and each person,
if any, who is a Controlling Person with respect to either of the Underwriters
against any and all losses, claims, damages, expenses and liabilities, joint or
several (and actions in respect thereof), whatsoever (including any and all
reasonable expenses incurred in investigating, preparing or defending
-41-
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 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 subsection (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of
the Underwriters and such Controlling Person with respect to a person
asserting any such losses, claims, damages, liabilities or expenses who
purchased the Shares if at or prior to the written confirmation of the sale
of such Shares a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue
statement contained in, or omission of a material fact from, such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented). The indemnity agreements in this subsection (a) shall be in
addition to any liability that the Company or the 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
-42-
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 9, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party or parties shall not relieve
it from any liability that it may have under this Section 9 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability that it may have otherwise). In case any such action is
brought against any indemnified party or parties, and it notifies the
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent
it may elect, by written notice delivered to the indemnified party or parties
promptly after receiving the aforesaid notice from such indemnified party or
parties, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party or parties. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be
at the expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been authorized in writing by the indemnifying
party in connection with the defense of such action, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action
within a reasonable time after notice to the indemnifying party or parties of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
that are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party
or parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any 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
-43-
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 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.
-44-
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.
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 or, in the
Underwriters' opinion, will in the immediate future materially disrupt, 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, will affect the general securities market in the
United States; (v) if a banking moratorium has been declared by a California,
New York, Pennsylvania, Massachusetts, Wisconsin or federal authority; (vi) if a
moratorium in foreign exchange trading 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 there shall have been such
material adverse change, or any development involving a prospective material
adverse change (including a change in management
-45-
or control of the Company) in the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company since
December 31, 1996 or that materially 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 or technology or healthcare issues particularly 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.
13. Default by the Company or the Selling Stockholders.
If the Company or the Selling Stockholders shall fail to sell and deliver
to the Underwriters the Excess Unsubscribed Shares to be sold and delivered by
the Company or the Selling Stockholders at the Closing Date or the Option Shares
to be sold and delivered by the Company at any Option Closing Date under the
terms of this Agreement, then the Underwriters may at their option, by written
notice to the Company and Selling Stockholders either (a) terminate this
Agreement without any liability on the part of any non-defaulting party other
than pursuant to Section 12 or (b) purchase the Shares which the Company and the
Selling Stockholders have agreed to sell and deliver in accordance with the
terms hereof. In the event of a failure of the Selling Stockholders to sell and
deliver as referred to in this Section, either the Underwriters or the Company
shall have the right to postpone the Closing Date or the Option Closing Date, as
the case may be, for a period not exceeding seven business days in order that
the necessary changes in the Registration Statement, Prospectus and any other
documents, as well as any other arrangements, as may be effected. No action
taken pursuant to this Section shall relieve the Company or the Selling
Stockholders from liability in respect of such default.
14. Notices.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunication and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given when delivered to a notice party hereto at the address specified herein or
at the address subsequently communicated in writing by the notice parties.
Notices to the Underwriters shall be directed to the Underwriters in care of
Xxxxxx X. Xxxxx & Co. Incorporated, 000 X. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX
00000-0000, Attention:
-46-
Xxxxxxxx X. Xxxxxxx, and Xxxxx, Xxxxxxxx & Xxxx, Inc., 00 Xxxxx Xxxxxx,
Xxxxxx, XX 00000, Attention: Xxx XxXxxxx, with a copy to Drinker Xxxxxx &
Xxxxx LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxxxxx, Xxxxxx,
Xxxxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, 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
Xxxxxxx LLP, 0000 Xxx Xxxxx Square, Philadelphia, Pennsylvania, Attention:
N. Xxxxxxx Xxxxxxx, Esq. Notices to Safeguard shall be directed to Safeguard
Scientifics, Inc., 000 Xxxxxxxxx Xxxxxxxx, 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 respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained. No purchaser of Shares from the
Underwriters shall be deemed to be a successor by reason merely of such
purchase.
16. Construction.
This Agreement shall be governed by the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles
thereof. The word "including" as used herein shall not be construed so as to
exclude any other thing not referred to or described.
17. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to be one and the same instrument.
18. Entire Agreement.
This Agreement contains the entire agreement between the parties hereto in
connection with the subject matter hereof.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the 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,
-47-
CHROMAVISION MEDICAL SYSTEMS, INC.
By:
-----------------------------------
Name:
Title:
SAFEGUARD SCIENTIFICS, INC.
By:
-----------------------------------
Name:
Title:
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By:
-----------------------------------
Name:
Title:
XL VISION, INC.
By:
-----------------------------------
Name:
Title:
TECHNOLOGY LEADERS, L.P.
By: Technology Leaders Management L.P.,
as sole general partner
By:
------------------------------
Name:
Title:
-48-
TECHNOLOGY LEADERS OFFSHORE, C.V.
By: Technology Leaders Management L.P.,
as co-general partner
By:
------------------------------
Name:
Title:
TECHNOLOGY LEADERS II, L.P.
By: Technology Leaders II Management L.P.,
as sole general partner
By:
------------------------------
Name:
Title:
TECHNOLOGY LEADERS II OFFSHORE, C.V.
By: Technology Leaders II Management L.P.,
as co-general partner
By:
------------------------------
Name:
Title:
-49-
Confirmed and accepted
as of the date first
above written:
XXXXXX X. XXXXX & CO. INCORPORATED XXXXX, XXXXXXXX & XXXX, INC.
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
-50-
Schedule A
Name
Centocor, Inc.
Safeguard Scientifics, Inc.
Safeguard Scientifics (Delaware), Inc.
Technology Leaders L.P.
Technology Leaders Offshore C.V.
Technology Leaders II L.P.
Technology Leaders II Offshore C.V.
XL Vision, Inc.
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxxxx
Xxxxxxxxxxx Xxxxxx
Xxxxxxx X.X. Xxxxxx
Xxxxxx X. Xxxxxx (and his assignees, if any)
Xxxxx X'Xxxxx
Xxxxxxx X. Root
Xxxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxx
-51-
Schedule B
Name of Underwriters % of Underwriter Shares
Xxxxxx X. Xxxxx & Co. Incorporated 50%
Xxxxx, Xxxxxxxx & Xxxx, Inc. 50%
-52-
