DRAFT
2,300,000 Shares1
METALOGICS, INC.
Common Stock
UNDERWRITING AGREEMENT
____________, 1998
CRUTTENDEN XXXX INCORPORATED
JOSEPHTHAL & CO. INC.
BARINGTON CAPITAL GROUP, L.P.
As Representatives of the several Underwriters,
c/o Cruttenden Xxxx Incorporated
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Gentlemen:
Metalogics, Inc., a Delaware corporation (the "Company"), addresses you
as the Representatives of each of the persons, firms and corporations listed in
Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirms its agreement with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
2,300,000 shares of its authorized and unissued Common Stock, $0.001 par value
per share (the "Firm Shares"), to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 345,000
additional shares of the Company's Common Stock, $0.001 par value per share (the
"Option Shares"), as provided in Section 7 hereof. The Company also proposes to
sell to you, individually and not in your capacity as Representatives, warrants
(the "Representatives' Warrants") to purchase up to 230,000 shares of Common
Stock of the Company (the "Representatives' Warrant Stock"), which sale will be
consummated in accordance with the terms and conditions of the Representatives'
Warrant Agreement (the "Representatives' Warrant Agreement"), the form of which
is filed as an exhibit to the Registration Statement described below. As used in
this Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, $0.001 par value per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock." -------- 1
Plus an option to purchase up to 345,000 additional shares from the Company to
cover over-allotments.
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2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to and agrees with each Underwriter
that:
(a) A registration statement on Form SB-2 (File No. 333-_____) with
respect to the Shares, the Representatives' Warrants and the Representatives'
Warrant Stock, including a prospectus subject to completion, has been prepared
by the Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the applicable rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement and such amended prospectuses subject
to completion as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file such
additional amendments to such registration statement and such amended
prospectuses subject to completion as may hereafter be required. Copies of such
registration statement and amendments and of each related prospectus subject to
completion (the "Preliminary Prospectuses") have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations pursuant to subparagraph
(1) or (4) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final form
of prospectus). If the registration statement relating to the Shares has not
been declared effective under the Act by the Commission, the Company will
prepare and promptly file an amendment to the registration statement, including
a final form of prospectus. The term "Registration Statement" as used in this
Agreement shall mean such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Rules and
Regulations, including financial statements, schedules and exhibits, in the form
in which it became or becomes, as the case may be, effective (including, if the
Company omitted information from the registration statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations); in the event of any amendment thereto after the
effective date of such registration statement, shall also mean (from and after
the effectiveness of such amendment) such registration statement as so amended;
and in the event that after the effective date a new registration statement is
filed pursuant to Rule 462(b) of the Rules and Regulations, shall also mean
(from and after the effectiveness of such new registration statement) such new
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations), except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus on file with the Commission at the time
the Registration Statement became or becomes, as the case may be, effective
(whether or not such revised prospectus
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is required to be filed with the Commission pursuant to Rule 424(b)(3) of the
Rules and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters for
such use.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased, (i)
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company;
no proceeding has been instituted in any such jurisdiction, revoking, limiting
or curtailing, or seeking to revoke, limit or curtail, such power and authority
or qualification; the Company is in possession of and operating in compliance
with all authorizations, licenses, certificates, consents, orders and permits
from state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect;
the Company is not in violation of its charter or bylaws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which it or its properties may be bound; and the
Company is not in material violation of any law, order, rule, regulation, writ,
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injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
properties of which it has knowledge. The Company does not own or control,
directly or indirectly, any corporation, association or other entity.
(d) The Company has full legal right, power and authority to enter into
each of this Agreement and the Representatives' Warrant Agreement and to perform
the transactions contemplated hereby and thereby. Each of this Agreement and the
Representatives' Warrant Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable in accordance with its terms, except as rights to
indemnification under this Agreement or the Representatives' Warrant Agreement
may be limited by applicable law and except as the enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the Representatives'
Warrant Agreement and the consummation of the transactions herein or therein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any bond, debenture, note or
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which its properties may be
bound, (ii) the charter or bylaws of the Company, or (iii) any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or over its properties. No consent, approval, authorization or order of
or qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its properties
is required for the execution and delivery of this Agreement and the
Representatives' Warrant Agreement and the consummation by the Company of the
transactions herein and therein contemplated, except such as may be required
under the Act or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, or
any of its officers or any of its properties, assets or rights before any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its officers or properties or otherwise
which (i) might result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company or might materially and adversely affect its properties, assets
or rights, (ii) might prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement by the Act or the Rules and Regulations or
by the Securities Exchange Act of 1934 (the "Exchange Act") or the rules and
regulations of the Commission thereunder which have not been accurately
described in all material respects in the Registration Statement or Prospectus
or filed as exhibits to the Registration Statement.
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(f) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" and conforms in all material respects to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Shares and the Option Shares have been
duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders exists with respect to any of the Firm
Shares or Option Shares or the issuance and sale thereof other than those that
have been expressly waived prior to the date hereof and those that will
automatically expire upon the consummation of the transactions contemplated on
the Closing Date. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale or transfer of the Shares except as may be required under the Act or under
state or other securities or Blue Sky laws. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company, and
the related notes thereto, included in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's performance bonus, stock option and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(g) KPMG Peat Marwick LLP, which has examined the financial statements
of the Company, together with the related schedules and notes, filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations; the audited financial statements of the Company, together
with the related schedules and notes, and the unaudited financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and all
audited financial statements of the Company, together with the related schedules
and notes, and the unaudited financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
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(h) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, (ii) any transaction
that is material to the Company, except transactions entered into in the
ordinary course of business, (iii) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except obligations incurred in
the ordinary course of business, (iv) any change in the capital stock or
outstanding indebtedness of the Company that is material to the Company, (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been sustained
which has a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(i) Except as set forth in the Registration Statement and Prospectus,
(i) the Company has good and marketable title to all properties and assets
described in the Registration Statement and Prospectus as owned by it, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, other than such as would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company, (ii) the agreements to which the Company is a party
described in the Registration Statement are valid agreements, enforceable by the
Company, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) the Company has valid and enforceable leases
for all properties described in the Registration Statement and Prospectus as
leased by it, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles. Except as set forth in the Registration Statement and Prospectus,
the Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(j) The Company has timely filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown thereon as
due, and there is no tax deficiency that has been or, to the best of the
Company's knowledge, might be asserted against the Company that might have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, and all tax
liabilities are adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its businesses and consistent with insurance coverage maintained by
similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect;
the Company has not been refused any insurance coverage sought or applied for;
and the Company does not have any reason to believe
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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 materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(l) To the best of Company's knowledge, no labor disturbance by the
employees of the Company exists or is imminent; and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of its
principal suppliers or international distributors, that might be expected to
result in a material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company. No
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all patents,
patent rights, inventions, trade secrets, know-how, trademarks, service marks,
trade names and copyrights which are necessary to conduct its businesses as
described in the Registration Statement and Prospectus, the expiration of any
patents, patent rights, trade secrets, trademarks, licences, service marks,
trade names or copyrights would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company; the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, licenses, service marks, trade names or
copyrights; and the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of others with respect
to any patent, patent rights, inventions, trade secrets, know-how, trademarks,
licenses, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(n) The Common Stock has been approved for quotation on the American
Stock Exchange, subject to official notice of issuance.
(o) The Common Stock is registered pursuant to Section 12(b) of the
Exchange Act and is listed on The American Stock Exchange, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the American Stock Exchange, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. ("NASD") is contemplating terminating such registration or
listing.
(p) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company" or
a company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
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(q) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(r) The Company has not at any time during the last five (5) years (i)
made any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(s) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(t) Each officer, director, stockholder and optionholder of the Company
has agreed in writing that such person will not, without the prior written
consent of Cruttenden Xxxx Incorporated on behalf of the Underwriters (which
consent may be withheld in its sole discretion) and subject to certain limited
exception, offer, pledge, sell, contract to sell, sell any option or contract to
purchase, sell short, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or enter into any swap or similar
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Common Stock, for a period of 12 months commencing on the
date of the Prospectus (the "Lock-up Period"); provided that such restrictions
do not apply to shares of Common Stock sold or purchased pursuant to this
Agreement or to shares of Common Stock purchased in the open market following
the offering by Cruttenden Xxxx Incorporated, on behalf of the Underwriters,
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to these lock-up agreements. In addition, the
Company has agreed that, for a period of 12 months after the date of this
Prospectus, it will not, without the consent of Cruttenden Xxxx Incorporated,
make any offering, sale or other disposition of any shares of Common Stock or
other securities convertible into or exchangeable or exercisable for shares of
Common Stock (or agreement for such) except for the grant of options to purchase
shares of Common Stock pursuant to its 1998 Stock Option Plan and shares of
Common Stock issued pursuant to the exercise of options granted under such plan
provided that such options shall not vest, or the Company shall obtain the
written consent of the holder thereof not to transfer such shares, until the end
of such 12- month period. Furthermore, such person will also agree and consent
to the entry of stop transfer instructions with the Company's transfer agent
against the transfer of the Securities held by such person except in compliance
with this restriction. The Company has provided to counsel for the Underwriters
a complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies of
all of the agreements pursuant to which its officers, directors and stockholders
have agreed to such or similar restrictions (the "Lock-up Agreements") presently
in effect or effected hereby. The Company hereby represents and warrants
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that it will not release any of its officers, directors or other stockholders
from any Lock-up Agreements currently existing or hereafter effected without the
prior written consent of Cruttenden Xxxx Incorporated.
(u) Except as set forth in the Registration Statement and Prospectus,
(i) the Company is in compliance with all rules, laws and regulations relating
to the use, treatment, storage and disposal of toxic substances and protection
of health or the environment ("Environmental Laws") which are applicable to its
business, (ii) the Company has received no notice from any governmental
authority or third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the Registration Statement and the
Prospectus, (iii) the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(x) The Representatives' Warrants have been duly and validly authorized
by the Company and upon delivery to you in accordance with the Representatives'
Warrant Agreement will be duly issued and legal, valid and binding obligations
of the Company.
(y) The Representatives' Warrant Stock has been duly authorized and
reserved for issuance upon the exercise of the Representatives' Warrants and
when issued upon payment of the exercise price therefor will be validly issued,
fully paid and nonassessable shares of Common Stock of the Company.
(z) Neither the Company nor any of its Subsidiaries is, and if operated
in the manner described in the Prospectus under the caption "Business" will not
be, a "broker" within the meaning of Section 3(a)(4) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or a "dealer" within the meaning of
Section 3(a)(5) of the Exchange Act or required to be registered pursuant to
Section 15(a) of the Exchange Act.
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(aa) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or 5% or greater securityholders, except as set forth in the
Registration Statement.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company (and the Company agrees not to deposit any such check in the bank on
which it is drawn until the day following the date of its delivery to the
Company) at the offices of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, 0000
Xxxxxxxx Xxxxxxxxx, Xxxxxx Floor, East Tower, Beverly Hills, California, or such
other place as may be agreed upon among the Representatives and the Company, at
7:00 A.M., California time, on the third (3rd) full business day following the
first day that Shares are traded or at such other time and date not later than
seven (7) full business days following the first day that Shares are traded as
the Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date." The certificates for the Firm Shares to be so delivered will be
made available to you at such office or such other location as you may
reasonably request for checking at least one (1) full business days prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
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The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), in the [penultimate]
paragraph on page 2 concerning stabilization and over-allotment by the
Underwriters, and in the fourth and penultimate paragraphs under the caption
"Underwriting" in any Preliminary Prospectus and in the final form of Prospectus
filed pursuant to Rule 424(b) constitutes the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of
11
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations and the rules and regulations of the
Commission thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive notice
or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, copies of
the Registration Statement (four of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act (four of which will include all
exhibits) all in such quantities as you may from time to time reasonably
request.
(e) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its stockholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's stockholders, (ii) concurrently with furnishing to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity, and of
cash flows of the Company
12
for such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange or
the NASD, (v) every material press release and every material news item or
article in respect of the Company or its affairs which was generally released to
stockholders or prepared by the Company, and (vi) any additional information of
a public nature concerning the Company, or its business which you may reasonably
request. During such five (5) year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(g) The Company will list, subject to notice of issuance, the Shares on
the American Stock Exchange.
(h) The Company will apply the net proceeds from the sale of the Shares
being sold by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(i) The Company will comply in the first 10-QSB with requirements on
reporting.
(j) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
(k) If the transactions contemplated hereby are not consummated for any
reason, the Company will pay the several Underwriters for all out-of-pocket
expenses (including fees and disbursements of Underwriters' Counsel) incurred by
the Underwriters in investigating or preparing to market or marketing the
Shares, up to a maximum of $50,000.
(l) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(m) The Company has caused each officer, director, stockholder and
optionholder of the Company to furnish to you, on or prior to the date of this
agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer, sell,
sell short or otherwise dispose of any shares of Common Stock of the Company or
other capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for Common Shares or derivative of Common Shares
owned by such person (or as to which such person has the right to direct the
disposition of) for a period of 12 months after the
13
date of this agreement, directly or indirectly, except with the prior written
consent of Cruttenden Xxxx Incorporated.
(n) During a period of ninety (90) days from the effective date of the
Registration Statement, the Company will not file a registration statement
registering shares under the Option Plan or other employee benefit plan.
(o) The Company will not invest in futures contracts, options on
futures contracts or option on commodities unless the Company is exempt from the
registration requirements of the Commodity Exchange Act, as amended (the
"Commodity Act"), or otherwise complies with the Commodity Act. The Company will
not engage in any activities bearing on the Commodity Act, unless such
activities are exempt from the Commodity Act or otherwise comply with the
Commodity Act. The Company shall not invest or otherwise use the proceeds
received by it from the sale of the shares in such a manner as would require the
Company to register as an investment company under the 1940 Act.
(p) The Company is substantially on track to meet its revenues and
earnings goals for 1998.
5. Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, the Preliminary Blue Sky Survey and any supplemental Blue Sky
Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes, if any,
the cost of all certificates representing the Shares and transfer agents' and
registrars' fees; the fees and disbursements of counsel for the Company; all
fees and other charges of the Company's independent certified public
accountants; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
NASD filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and disbursements and
legal fees of Underwriters' Counsel in connection with Blue Sky qualifications;
up to $50,000 of the fees and expenses of counsel for the Underwriters and all
other expenses directly incurred by the Company in connection with the
performance of its obligations hereunder.
(ii) In addition to its other obligations under Section 8(a) hereof,
the Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding described in Section 8(a)
hereof, it will reimburse the Underwriters on a monthly basis for all reasonable
legal or other expenses incurred in connection
14
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriters shall promptly return such payment to the Company
together with interest, compounded daily, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) listed from time to time in The Wall Street Journal which represents
the base rate on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriters within thirty (30)
days of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) In addition to their other obligations under Section 8(c) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(c) hereof, they will reimburse the Company on
a monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(iii) and 5(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD in Orange
County, California (or as close geographically to Orange County, California as
is reasonably practical). Any such arbitration must be commenced by service of a
written demand for arbitration or a written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(iii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 8(a) and 8(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(d) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date
15
hereof and the Closing Date and any later date on which Option Shares are to be
purchased, as the case may be, of the representations and warranties of the
Company to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., California time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date there shall not have been any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are purchased , as the case may be, the following opinion
of Xxxxxxxxx Traurig Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, counsel for the Company,
dated the Closing Date or such later date on which Option Shares are purchased,
addressed to the Underwriters (and stating that it may be relied upon by
Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, a law corporation, Underwriters'
Counsel, in rendering its opinion pursuant to Section 6(e) of this Agreement)
and with reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company as a corporation in good standing under the laws of
the jurisdiction of its incorporation;
(ii) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described
in the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to
be so qualified or be in good standing would
16
not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company. To such
counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(v) The Firm Shares and the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement each
have been duly authorized and, upon issuance and delivery against
payment therefor in accordance with the terms hereof, will be duly
and validly issued and fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right of stockholders;
(vi) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(vii) The Company has the corporate power and authority to enter into
the Representatives' Warrant Agreement and to issue, sell and deliver
to the Representatives the Representatives' Warrants to be issued and
sold by it thereunder;
(viii) Each of this Agreement, the Representatives' Warrant Agreement
and the Representatives' Warrants has been duly authorized by all
necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general
equitable principles;
(ix) The Registration Statement has become effective under the Act
and, 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 under the Act;
17
(x) The Registration Statement and the Prospectus, and each amendment
or supplement thereto (other than the financial statements (including
supporting schedule) and financial data derived therefrom as to which
such counsel need express no opinion), as of the effective date of
the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules
and Regulations;
(xi) The information in the Prospectus under the captions
"Management," "Certain Transactions," "Description of Capital Stock,"
and "Shares Eligible for Future Sale," and in the Registration
Statement in Items 24 and 26 and insofar as they constitute matters
of law or legal conclusions, has been reviewed by such counsel and is
a fair summary of such matters and conclusions;
(xii) The form of certificate evidencing the Common Stock filed as an
exhibit to the Registration Statement complies with Delaware law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes
are accurate and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or referred to therein
or filed as required;
(xv) The execution and delivery of this Agreement and the
Representatives' Warrant Agreement and the performance of and the
consummation of the transactions herein and therein contemplated
(other than performance of the Company's indemnification obligations
hereunder and thereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's
charter or bylaws or (b) result in a material breach or violation of
any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or under
any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument known to
such counsel to which the Company is a party or by which its
properties are bound, or any applicable statute, rule or regulation
or any order, writ or decree of any court, government or governmental
agency or body having jurisdiction over the Company or over any of
its properties or operations;
(xvi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or
body having jurisdiction over the Company or over any of its
properties or operations is necessary in connection with the
consummation by the Company of the transactions contemplated in this
18
Agreement and the Representatives' Warrant Agreement, except such as
have been obtained under the Act or such as may be required under
state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company of
a character required to be disclosed in the Registration Statement or
the Prospectus by the Act or the Rules and Regulations or by the
Exchange Act or the applicable rules and regulations of the
Commission thereunder, other than those described therein;
(xviii) The Company is not presently (a) in material violation of its
charter or bylaws, or (b) in material breach of any applicable
statute, rule or regulation or, to such counsel's knowledge, any
order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company or over any of its properties or
operations;
(xix) The Representatives' Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with
the Representatives' Warrant Agreement will be duly issued and legal,
valid and binding obligations of the Company;
(xx) The Representatives' Warrant Stock to be issued by the Company
pursuant to the terms of the Representatives' Warrant has been duly
authorized and, upon issuance and delivery against payment therefor
in accordance with the terms of the Representatives' Warrant
Agreement, will be duly and validly issued and fully paid and
nonassessable, and to such counsel's knowledge, will not have been
issued in violation of or subject to any preemptive right, cosale
right, registration right, right of first refusal or other similar
right of shareholders;
(xxi) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or
other securities of the Company have registration rights with respect
to securities of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities of
the Company having rights known to such counsel to registration of
such shares of Common Stock or other securities, because of the
filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration
Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights;
(xxii) The offer and sale of all securities of the Company made
within the last three years as set forth in Item 26 of the
Registration Statement were exempt from the registration requirements
of the Securities Act, pursuant to the
19
provisions set forth in such Item, and from the registration or
qualification requirements of all relevant state securities laws.
(xx) The Company is not, and if operated in the manner described in
the Prospectus under the caption "Business" will not be, (i) an
"investment company" or an "affiliated person" of, or "promotor" or
"principal underwriter" for, an "investment company," as such terms
are defined in the Investment Company Act or (ii) a "broker" within
the meaning of Section 3(a)(4) of the Exchange Act or a "dealer"
within the meaning of Section 3(a)(5) of the Exchange Act or required
to be registered pursuant to Section 15(a) of the Exchange Act.
(xxi) The Shares have been duly authorized for listing by the
American Stock Exchange upon official notice of issuance.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although (except as specifically set forth in paragraphs (xii)
and (xiii) above) they have not verified the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, nothing
has come to the attention of such counsel which leads them to believe that, at
the time the Registration Statement became effective and at all times subsequent
thereto up to and on the Closing Date and on any later date on which Option
Shares are to be purchased, the Registration Statement and any amendment or
supplement, when such documents became effective or were filed with the
Commission (other than the financial statements including supporting schedules
and other financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or at the Closing
Date or any later date on which the Option Shares are to be purchased, as the
case may be, the Registration Statement, the Prospectus and any amendment or
supplement thereto, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of Delaware upon
opinions of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, and of government officials, in which
case its opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Xxxxxx & Xxxxxx, special
intellectual property counsel for the Company, dated the Closing Date or the
Option Closing Date as the case
20
may be, addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) the Company is listed in the records of the United States Patent
and Trademark Office ("PTO") as the holder of record of the registered
trademarks consisting of [the name "Metalogics" and "Intelligent Configuration
Management"] (collectively, the "Trademarks"). To such counsel's knowledge,
there is no claim of any party other than the Company to any ownership interest
or lien with respect to any of the Trademarks. The Company has a valid
registered trademark or trademark application relating to the Trademarks in each
of the foreign jurisdiction listed on Exhibit A;
(ii) the statements in the Prospectus under the captions "Risk Factors
-- Limited Intellectual Property Protection," and "Business -- Intellecutual
Property" (the "Intellectual Property Portions"), to our knowledge, insofar as
such statements relate to trademarks, patents, intellectual property or any
legal matters, documents and proceedings relating thereto fairly present the
information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.
(iii) to such counsel's knowledge, there is not pending or threatened
in writing any action, suit, proceeding or claim by others (A) challenging the
validity or scope of the Trademarks or any other material trademarks, trademark
applications or domain names held by or licensed to the Company, or (B) other
than as disclosed to the Underwriters in writing, asserting that any trademark
is infringed by the activities of the Company described in the Prospectus or by
the manufacture, use, sale, promotion or advertising of any of the Company's
products or use of its domain names.
(iv) to such counsel's knowledge, there is not pending or threatened in
writing any action, suit proceeding or claim by the Company asserting
infringement on the part of any third party of the Trademarks or any other
trademarks, trademark applications, domain names, trade names or advertising
slogans held by or licensed to the Company.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, a law corporation, in form and
substance satisfactory to you, with respect to the sufficiency of all such
corporate proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have requested
for the purpose of enabling them to pass upon such matters.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
KPMG Peat Marwick LLP, addressed to the Company and the Underwriters, dated the
Closing Date or such later date on which Option Shares are to be purchased, as
the case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations and based upon the procedures
described
21
in such letter delivered to you concurrently with the execution of this
Agreement (herein called the "Original Letter"), but carried out to a date not
more than five (5) business days prior to the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company from that
set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from KPMG Peat Marwick
LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth its opinion with respect to its examination of
the balance sheet of the Company as of March 31, 1998 and (iii) address other
matters agreed upon by KPMG Peat Marwick LLP and you. In addition, you shall
have received from KPMG Peat Marwick LLP a letter addressed to the Company and
made available to you for the use of the Underwriters stating that its review of
the Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of its examination of the Company's
financial statements as of March 31, 1998 did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(h) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the President and Chief
Financial Officer of the Company, to the effect that, and you shall be satisfied
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased, as
the case may be, and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date or any later date on which
Option Shares are to be purchased, as the case may be;
(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 threatened under the Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto,
22
contained all material information required to be included therein by
the Act and the Rules and Regulations or the Exchange Act and the
applicable rules and regulations of the Commission thereunder, as the
case may be, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations or the Exchange
Act and the applicable rules and regulations of the Commission
thereunder, as the case may be, the Registration Statement, and any
amendment or supplement thereto, did not and does not include any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been
so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of
the Company, (b) any transaction that is material to the Company,
except transactions entered into in the ordinary course of business,
(c) any obligation, direct or contingent, that is material to the
Company, incurred by the Company, except obligations incurred in the
ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company that is material to the
Company, (e) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company, or (f) any loss or
damage (whether or not insured) to the property of the Company which
has been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(i) The Company shall have obtained and delivered to you an agreement
from each officer and director of the Company, and each beneficial owner of
Common Stock in writing prior to the date hereof that such person will not,
during the Lock-up Period, effect the Disposition of any Securities now owned or
hereafter acquired directly by such person or with respect to which such person
has or hereafter acquires the power of disposition, otherwise than (i) as a bona
fide gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction, (ii) as a distribution to limited partners or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of Cruttenden Xxxx Incorporated. The foregoing restriction is
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities during the Lockup Period, even if
such Securities would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would including, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without
23
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person will have also agreed and consented to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Securities held by such person except in compliance with
this restriction.
(j) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request (including certificates of
officers of the Company as to the accuracy of the representations and warranties
of the Company, as to the performance by the Company of its obligations
hereunder and as to the other conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
(k) The Representatives' Warrant Agreement shall have been entered into
by the Company and you, and the Representatives' Warrants shall have been issued
and sold to you pursuant thereto.
(l) Prior to the Closing Date, the Shares shall have been duly
authorized for listing by the American Stock Exchange upon official notice of
issuance.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a nontransferable option to purchase up to an aggregate of 345,000 Option
Shares at the purchase price per share for the Firm Shares set forth in Section
3 hereof. Such option may be exercised by the Representatives on behalf of the
several Underwriters on one (1) or more occasions in whole or in part during the
period of forty-five (45) days after the date on which the Firm Shares are
initially offered to the public, by giving written notice to the Company. The
number of Option Shares to be purchased by each Underwriter upon the exercise of
such option shall be the same proportion of the total number of Option Shares to
be purchased by the several Underwriters pursuant to the exercise of such option
as the number of Firm Shares purchased by such Underwriter (set forth in
Schedule A hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (set forth in Schedule A hereto), adjusted by the
Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Company (and
24
the Company agrees not to deposit any such check in the bank on which it is
drawn until the day following the date of its delivery to the Company). Such
delivery and payment shall take place at the offices of Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxx Floor, East Tower,
Beverly Hills, California, or at such other place as may be agreed upon among
the Representatives and the Company (i) on the Closing Date, if written notice
of the exercise of such option is received by the Company at least three (3)
full business days prior to the Closing Date, or (ii) on a date which shall not
be later than the fifth (5th) full business day following the date the Company
receives written notice of the exercise of such option, if such notice is
received by the Company less than three (3) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location as you may reasonably
request for checking at least two (2) full business days prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least three (3) full business days prior to
such date of payment and delivery. If the Representatives so elect, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company herein, to the accuracy of the
statements of the Company and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such Option Shares
shall be satisfactory in form and substance to you and to Underwriters' Counsel,
and you shall have been furnished with all such documents, certificates and
opinions as you may request in order to evidence the accuracy and completeness
of any of the representations, warranties or statements, the performance of any
of the covenants or agreements of the Company or the compliance with any of the
conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject (including, without limitation, in its
capacity as an Underwriter or as a "qualified independent underwriter" within
the meaning of Rule 2720(b)(15) of the NASD Conduct Rules), under the Act, the
Exchange Act or otherwise, specifically including, but not limited
25
to, losses, claims, damages or liabilities, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any breach of any representation, warranty, agreement or covenant of
the Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter within the meaning of the Act or the Exchange Act.
This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subsections (ii) and (iii)
26
of this Section 8(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter, directly or through you, specifically for use in
the preparation thereof, and agrees to reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 8(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer of the
Company who signed the Registration Statement and each director of the Company
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 8(a)
or 8(b) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect
27
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company is responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter in excess of the amount of damages which such Underwriter
has otherwise required to pay and (ii) no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(d) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls the Underwriters or the Company within the meaning
of the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act. The parties are advised that federal or state public policy, as interpreted
by the courts in certain jurisdictions, may be contrary to certain of the
provisions of this Section 8, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under this Section 8 and further agree not to attempt to assert any such
defense.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
within the meaning of the Act or the Exchange Act, or by or on behalf of the
Company or any of its officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
28
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective number
of Firm Shares to be purchased by the remaining Underwriters and substituted
underwriter or underwriters shall be taken as the basis of their underwriting
obligation. If the remaining Underwriters shall not take up and pay for all such
Firm Shares so agreed to be purchased by the defaulting Underwriter or
Underwriters or substitute another underwriter or underwriters as aforesaid and
the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, the Company shall not be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
29
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., California time, on the second full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time at or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse, or (ii) if additional material governmental restrictions,
not in force and effect on the date hereof, shall have been imposed upon trading
in securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. Any termination pursuant to any of subparagraphs (ii) through
(v) above shall be without liability of any party to any other party except as
provided in Sections 4(i), 5 and 8 hereof. In the event of termination pursuant
to subparagraph (i) above, the Company shall also remain obligated to pay costs
and expenses pursuant to Sections 4(i), 5 and 8 hereof.
30
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, telecopier number (714) 852- 9603,
Attention: Xx. Xxxxx Xxxx; if sent to the Company, such notice shall be mailed,
delivered, telegraphed (and confirmed by letter) or telecopied (and confirmed by
letter) to Riverview Historical Plaza, 00-00 Xxxxxx Xxxxxx, Xxxxx 0-X, Xxxxxxx,
Xxx Xxxxxx 00000 telecopier number (201) 656- 0901, Attention: Xxxxxxx X. Xxxxx,
Chairman, President and Chief Executive Officer.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
or corporation, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or corporation.
No purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall act on
behalf of each of the several Underwriters, and the Company shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you jointly or by Cruttenden Xxxx Incorporated on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original.
31
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
Metalogics, Inc.
By:---------------------------------
Xxxxxxx X. Xxxxx
Chairman, President and Chief Executive
Officer
32
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
JOSEPHTHAL & CO. INC.
BARINGTON CAPITAL GROUP L.P.
By: Cruttenden Xxxx Incorporated
On its behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
By:--------------------------
Authorized Signatory
33
SCHEDULE A
Number of
Firm
Shares
To Be
Underwriters Purchased
------------ ---------
Cruttenden Xxxx Incorporated ..........................
Josephthal & Co. Inc. .................................
Barington Capital Group L.P. .........................
---------------
Total.................................................. 2,300,000
===============
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