UNDERWRITING AGREEMENT
----------------------
Ferris, Baker Watts, Incorporated ______________, 1995
As Representative of the
Several Underwriters Identified
In Schedule B Annexed Hereto
100 Light Street
Baltimore, Maryland 21202
Gentlemen:
SECTION 1. Introduction. Industrial Training Corporation, a
Maryland corporation (the "Company"), has authorized capital stock
consisting of 4,000,000 shares of Common Stock, $0.10 par value per share
(the "Common Stock"), of which [2,455,624] shares are issued and
outstanding. The Company and the several stockholders of the Company
identified in Schedule A annexed hereto (the "Selling Stockholders")
propose to sell an aggregate of 1,050,000 shares of Common Stock (the
"Firm Common Shares") to the several underwriters identified in Schedule B
annexed hereto (the "Underwriters"), who are acting severally and not
jointly. In addition, the Company and one (1) of the Selling Stockholders
have agreed to grant to the Underwriters an option to purchase up to an
aggregate of 157,500 additional shares of Common Stock (the "Optional
Common Shares") as provided in Section 5 hereof. The Firm Common Shares
and, to the extent such option is exercised, the Optional Common Shares,
are hereinafter collectively referred to as the "Common Shares".
You as representative of the Underwriters (the "Representative"),
have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective
portions of the Common Shares on the effective date of the Registration
Statement, as defined in Section 2(f) hereof, or as soon thereafter as in
the Representative's judgment is advisable, and that the purchase price of
the Common Shares will be the public offering price of $____ per share
less underwriting discounts and commissions of ____% or $___ per share.
The Company and the Selling Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company.
The Company represents and warrants to each Underwriter that:
(a) The Company and each subsidiary ("Subsidiary")
identified in Exhibit 21 of the Registration Statement
(hereinafter defined) is duly incorporated and validly existing
as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and
authority to own and/or lease its properties and conduct its
business as described in the Prospectus (as defined in Section
2(f) hereof); each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in, each
jurisdiction in which it owns or leases properties, has an
office, or conducts business and in which such qualification is
required, and 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.
(b) The Company does not own or control any
subsidiary and does not own any material interest in any other
corporation, joint venture, proprietorship or other commercial
entity or organization except as described in the Prospectus.
(c) The issued and outstanding shares of Common Stock
as set forth in the Prospectus have been duly and validly
authorized and validly issued and are fully paid and
nonassessable. There are no pre-emptive, preferential or other
rights to subscribe for or purchase any of the Common Shares to
be sold by the Company hereunder, and no shares of Common Stock
have been issued in violation of such rights of stockholders.
Except as disclosed in the Prospectus, there are no outstanding
rights, warrants or options to acquire or instruments convertible
into or exchangeable for, any shares of Common Stock or other
equity interest in the Company. Except as described in the
Prospectus, no holders of securities of the Company have any
rights to the registration of such securities under the
Registration Statement. The statements made in the Prospectus
under the caption "Description of Securities" are accurate in all
material respects. The outstanding shares held by the Company of
capital stock of the Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable and are all
owned beneficially by the Company free and clear of all liens,
encumbrances, equities and claims.
(d) The Common Shares to be sold by the Company have
been duly authorized, and when issued, delivered and paid for
pursuant to this Agreement, together with the Common Shares to be
sold by the Selling Stockholders when delivered and paid for
pursuant to this Agreement, will be validly issued, fully paid
and nonassessable, and will conform to the description thereof
contained in the Prospectus. Upon consummation of the purchase
of the Common Shares by the Underwriters under this Agreement,
the Underwriters will acquire good and marketable title thereto,
free and clear of any claim, security interest, community
property right, or other encumbrance or restriction on transfer.
(e) The Company has full corporate power and
authority to enter into and perform this Agreement, and the
execution and delivery hereof, and the performance of the
Company's obligations hereunder have been duly authorized by all
necessary corporate action. This Agreement has been duly
executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with
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its terms, except that rights to indemnity or contributions may
be limited by applicable law and enforceability of the Agreement
may be limited by bankruptcy, insolvency or similar laws
generally affecting the rights of creditors and by equitable
principles limiting the right to specific performance or other
equitable relief. The execution and performance by the Company
of this Agreement, including application of the net proceeds of
the offering, if and when received, as described in the
Prospectus under "Prospectus Summary," "Capitalization" and "Use
of Proceeds," will not violate any provisions of the Company's
Articles of Incorporation or By-Laws or any law, rule or
regulation applicable to the Company or Subsidiary of any
government, court, regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or
Subsidiary or any of their respective businesses or properties,
and will not result in the breach, or be in contravention, of any
provision of any loan agreement, lease, franchise, license, note,
bond, other evidence of indebtedness, indenture, mortgage, deed
of trust, other instrument, permit or other contractual
obligation to which the Company or Subsidiary is a party or by
which the Company or Subsidiary or their respective properties
may be bound or affected, or any order of any court or
governmental agency or authority entered in any proceeding to
which the Company or Subsidiary was or is now a party or by which
it is bound except those, if any, described in the Prospectus or
which are not material to the Company and do not materially
affect its business. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency,
or other governmental body is required for the execution and
delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement,
except for compliance with the Securities Act of 1933, as amended
(the "Act") and the state securities laws (the "Blue Sky Laws")
applicable to the public offering of the Common Shares by the
Underwriters, and the clearance of such offering with the
National Association of Securities Dealers, Inc. (the "NASD").
(f) A registration statement with respect to the
Common Shares, prepared by the Company in conformity with the
requirements of the Act and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, has been filed with the Commission, and
the Company has prepared and has filed prior to the effective
date of such registration statement an amendment or amendments to
such registration statement as may be required. There have been
delivered to the Representative and its counsel two signed copies
of such registration statement, as initially filed with the
Commission and for each of the Underwriters conformed copies of
such registration statement, as initially filed with the
Commission and each amendment thereto (but without exhibits) and
of each related form of prospectus included in the registration
statement prior to the time it becomes effective or filed with
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the Commission pursuant to Rule 424(a) under the Act (each, a
"Preliminary Prospectus").
Such registration statement, as finally amended and
revised at the time such registration statement becomes
effective, which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A under the Act and
contained in the Prospectus, is herein referred to as the
"Registration Statement." The related form of prospectus and any
term sheet that may be provided pursuant to Rule 434 of the Act,
including information incorporated by reference therein, filed by
the Company with the Commission pursuant to Rules 424(b) and 430A
under the Act is herein referred to as the "Prospectus."
(g) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus,
and each Preliminary Prospectus as of its date has conformed
fully in all material respects with the requirements of the Act
and the Rules and Regulations, and each Preliminary Prospectus as
of its date has not included any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading. The
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contain all statements that are required to
be stated therein in accordance with the Act and the Rules and
Regulations and in all material respects conform to the
requirements of the Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, includes any untrue statement of
a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not
misleading; provided, however, that the Company and such Selling
Stockholder make no representation or warranty as to information
contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any
Underwriter through the Representative specifically for use in
the preparation thereof. There are no legal or governmental
actions, suits or legal proceedings, and there are no contracts
or other documents, transactions or relationships of or by the
Company required to be described in the Registration Statement or
to be filed as exhibits to the Registration Statement by the Act
or by the Rules and Regulations which have not been described or
filed as required.
(h) Ernst & Young LLP, which has expressed its
opinion with respect to certain of the consolidated financial
statements filed with the Commission as a part of the
Registration Statement and included in the Prospectus, are
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independent certified public accountants as required by the Act
and the Rules and Regulations.
(i) The consolidated financial statements of the
Company for the respective periods covered thereby, and the
related notes and schedules thereto included in the Registration
Statement and the Prospectus, present fairly the financial
position of the Company for the periods covered thereby as of the
respective dates of such financial statements, all in conformity
with generally accepted accounting principles consistently
applied throughout the periods involved and all adjustments
necessary for a fair presentation of results for such periods
have been made. The selected financial data included in the
Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the
financial statements presented therein. No other financial
statements are required by Form SB-2 or otherwise to be included
in the Registration Statement.
(j) Neither the Company nor the Subsidiary is in
violation of its Articles of Incorporation or By-Laws, or in
default under any court or administrative order or decree, or in
default with respect to any provision of any material loan
agreement, lease, franchise, license, note, bond, other evidence
of indebtedness, indenture, mortgage, deed of trust, other
instrument, permit or other contractual obligation to which the
Company or Subsidiary is a party or by which the Company or
Subsidiary or any of their respective properties or businesses
are bound, and, to the knowledge of the Company, there does not
exist any state of facts which constitutes an event of default as
defined in such documents or which, upon notice or lapse of time
or both, would constitute such an event of default, except those,
if any, described in the Prospectus or which are not material to
the Company taken as a whole and do not materially affect its
business taken as a whole.
(k) There are no governmental actions, suits or legal
proceedings pending or, to the Company's knowledge, threatened to
which the Company or Subsidiary is a party or to which the
Company's or the Subsidiary's business or any material property
owned or leased by the Company or the Subsidiary is subject, or
related to product liability, environmental or discrimination
matters which are not disclosed in the Registration Statement and
the Prospectus, or which question the validity of this Agreement
or any action taken or to be taken pursuant hereto except those,
if any, described in the Prospectus or which are not material to
the Company taken as a whole and do not materially affect its
business taken as a whole.
(l) The Company or the Subsidiary has good and
marketable title to all the properties and assets reflected as
owned in the financial statements hereinabove described (or
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elsewhere in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind or nature whatsoever
except those, if any, reflected in such financial statements (or
elsewhere in the Prospectus) or which, in the aggregate, are not
material to the Company and its business and do not materially
affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property; all
material properties held or used by the Company or the Subsidiary
under leases, licenses or other agreements are held under valid,
subsisting and enforceable leases, franchises, or other
agreements with respect to which it is not in default, except to
the extent that the enforceability of the rights and remedies of
the Company or the Subsidiary under any such lease, franchise,
license or other agreement may be limited by bankruptcy,
insolvency or similar laws generally affecting the rights of
creditors and by equitable principles limiting the right to
specific performance or other equitable relief.
(m) The Company will not take and has not taken,
directly or indirectly, any action (and does not know of any
action by its directors, officers or stockholders, or others)
designed to or which has constituted or which might reasonably be
expected to cause or result, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise, in
stabilization or manipulation of the price of the Common Shares
to facilitate the sale or resale of the Common Shares.
(n) Except as reflected in or contemplated by the
Registration Statement or any amendment thereto, since the
respective dates as of which information is given in the
Registration Statement:
(i) the Company has not incurred any material
liabilities or obligations, direct or contingent, nor
entered into any material transactions not in the
ordinary course of business;
(ii) the Company has not paid or declared any
dividends or other distributions with respect to its
capital stock and the Company is not in default in the
payment of principal or interest on any material
outstanding debt obligations; and
(iii) there has not been any change in the
capital stock or long-term debt of the Company, or any
material adverse change in the business (resulting from
litigation or otherwise), business prospects, properties,
condition (financial or otherwise), net worth or results
of operations of the Company.
(o) The Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid
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all taxes shown as due thereon; and the Company has no knowledge
of any tax deficiency which has been asserted or threatened
against the Company which would materially adversely affect the
business or operations or properties of the Company taken as a
whole.
(p) The Company has an outstanding capitalization as
set forth under "Capitalization" in the Prospectus as of the date
indicated therein and there has been no material change therein
except as disclosed in the Prospectus. The financial and
numerical information and data in the Prospectus under
"Prospectus Summary," "Use of Proceeds," "Price Range of Common
Stock and Dividend Policy," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management,"
"Principal Shareholders," "Selling Shareholders," "Certain
Relationships and Related Transactions" and "Description of
Securities" are fairly presented and prepared on a basis
consistent with the audited consolidated financial statements of
the Company.
(q) The Company and the Subsidiary have obtained all
material licenses, permits, approvals and other governmental
authorizations required for the present and proposed conduct of
its business as described in the Prospectus. Such licenses,
permits and other governmental authorizations are in full force
and effect, the Company and the Subsidiary are in all material
respects complying therewith, and neither the Company nor the
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such license, permit, approval
or authorization. The Company and Subsidiary are complying in
all material respects with all material laws, ordinances and
regulations applicable to the Company, the Subsidiary and their
respective properties and businesses.
(r) The Company has maintained its books of account
in accordance with generally accepted accounting principles
consistently applied in all material respects, and such books and
records are, and during periods covered by the financial
statements included in the Registration Statement and the
Prospectus are, correct and complete in all material respects,
and fairly and accurately reflect or reflected the income,
expenses, assets and liabilities of the Company and provide or
provided a fair and materially accurate basis for the preparation
of such financial statements.
(s) The minute books of the Company are current and
contain a materially correct and substantially complete record of
all corporate action taken by the Board of Directors and the
stockholders of the Company, and all signatures contained therein
are true signatures of the persons whose signatures they purport
to be.
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(t) The Company and Subsidiary own or possess all
patents, patent rights, licenses, inventions, copyrights, know-
how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names used by
them or reasonably believed by management necessary in connection
with the present conduct of their business as described in the
Prospectus, and neither the Company nor the Subsidiary has
received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse
change in the condition, financial or otherwise, or in the
earnings, affairs or business prospects of the Company taken as a
whole.
(u) The Company and the Subsidiary are in substantial
compliance with all federal, state or local laws or ordinances,
including orders, rules and regulations thereunder, regulating or
otherwise affecting employee health and safety or the
environment, non-compliance with which could have a material
adverse effect on the Company. To the Company's knowledge, it
and the Subsidiary have disposed of all wastes in substantial
compliance with applicable laws, and the Company is not aware of
any existing condition that may form the basis for any present or
future claim, demand or action seeking clean-up of any site,
location, or body of water, surface or subsurface.
(v) The provisions of any qualified retirement plans
sponsored by the Company are in compliance with the Employee
Retirement Income Security Act of 1974 ("ERISA"), and the Company
is in material compliance with ERISA, including, without
limitation, ERISA's fiduciary and prohibited transaction rules,
or the funding requirements with respect to any such plan. The
Company has timely filed the reports required to be filed by
ERISA in connection with the maintenance of plans sponsored by
the Company, and no fact, including, without limitation, any
"reportable event" as defined by ERISA and the regulations
thereunder, exists in connection with any plan sponsored by the
Company which might constitute grounds for the termination of
such plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United Stated District Court of a
trustee to administer any such plan. With respect to
multiemployer plans in which the Company participates on behalf
of its employees who are members of collective bargaining units,
the Company has no withdrawal liability. The provisions of any
employee benefit welfare plan, as defined in ERISA's Section
3(l), sponsored by the Company, is in material compliance with
ERISA's fiduciary and prohibited transaction rules and reporting
and disclosure requirements with respect to any such plan.
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(w) No labor dispute with the employees of the
Company exists or, to the knowledge of the Company, is imminent,
and the Company is not aware of any existing or imminent labor
disputes by the employees of any of its principal suppliers,
manufacturers or contractors which might be expected to result in
any material adverse change in the condition, financial or
otherwise, or in the earnings, affairs or business prospects of
the Company.
(x) The Subsidiary has registered, and maintains in
full force and effect registration for, its franchises in each
state or other jurisdiction where such registration is required.
The Subsidiary's franchise offering circular, franchise agreement
and related documents comply with applicable federal, state and
Canadian laws and regulations.
A certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be
deemed a representation and warranty of the Company to you as to
the matters covered thereby.
SECTION 3. Additional Representations and Warranties of the
Selling Stockholders. Each Selling Stockholder represents and warrants to
each Underwriter that:
(a) All consents, approvals, authorizations, and
orders necessary for the execution and delivery by each Selling
Stockholder of this Agreement and the Power of Attorney and
Custodian Agreement executed and delivered herewith (the
"Custodian Agreement") and for the sale and delivery of the
Common Shares to be sold by such Selling Stockholder have been
obtained. Such Selling Stockholder has full right, power and
authority to enter into this Agreement, the Custodian Agreement
and to sell, assign, transfer and deliver Common Shares
hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, security interests, equities, claims and
community property rights, other than any created by the
Underwriters; such Selling Stockholder has valid and marketable
title to the Common Shares proposed to be sold by such Selling
Stockholder hereunder as set forth in Schedule A hereto.
(b) Except as disclosed in the Prospectus, such
Selling Stockholder is not a party to any formal or informal
voting agreements, understandings or arrangements with respect to
the voting of the Common Stock.
(c) Such Selling Stockholder has not taken, directly
or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Common
Shares.
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(d) This Agreement and the Custodian Agreement have
each been duly executed and delivered by or on behalf of such
Selling Stockholder and are the legal, valid and binding
agreements of such Selling Stockholder enforceable in accordance
with their terms, except that rights to indemnity or contribution
hereunder or thereunder may be limited by applicable law, and the
enforceability of such agreements may be limited by bankruptcy,
insolvency or similar laws generally affecting rights of
creditors and by equitable principles limiting the right to
specific performance or other equitable relief. The execution,
delivery and performance by such Selling Stockholder of this
Agreement and the Custodian Agreement will not violate any law,
rule or regulation applicable to such Selling Stockholder of any
government, court, regulatory body, administrative agency or
other governmental body having jurisdiction over such Selling
Stockholder, or any of his or its properties, or result in the
breach, or be in contravention, of any provision of any loan
agreement, lease, franchise, license, note, bond, other evidence
of indebtedness, indenture, mortgage, deed of trust, other
instrument, permit or other contractual obligation to which such
Selling Stockholder is a party or by which such Selling
Stockholder or his or its property may be bound or affected, or
any order of any court of governmental agency or authority
entered in any proceeding to which such Selling Stockholder was
or is now a party or by which he or it is bound. No consent,
approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement by such
Selling Stockholder or the consummation by such Selling
Stockholder of the transactions contemplated by this Agreement,
except for compliance with the Act and the Blue Sky Laws
applicable to the public offering of the Common Shares by the
Underwriters and clearance of such offering with the NASD. Such
Selling Stockholder has executed and delivered a Custodian
Agreement, naming the individuals specified therein as such
Selling Stockholder's attorney(s)-in-fact (the "Attorneys-in-
Fact"), and the Selling Stockholder represents and warrants that
such Attorney-in-Fact has been duly appointed as Attorney-in-Fact
by the Selling Stockholder pursuant to the Custodian Agreement,
for the purpose of entering into and carrying out this Agreement,
and the Custodian Agreement has been duly executed by such
Selling Stockholder and a copy thereof has been delivered to you.
(e) Such Selling Stockholder has deposited in
custody, under the Custodian Agreement, with the Custodian (as
defined therein), certificates in negotiable form for the Common
Shares to be sold hereunder by such Selling Stockholder as
specified on Schedule A hereto for the purpose of further
delivery pursuant to this Agreement. Such Selling Stockholder
agrees that the Common Shares on deposit with the Custodian are
subject to the interests of the Company, the Underwriters and the
other Selling Stockholders, that the arrangements made for such
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custody, and the appointment of the Attorney-in-Fact pursuant to
the Custodian Agreement, are to that extent irrevocable, and that
the obligations of such Selling Stockholder hereunder and under
the Custodian Agreement shall not be terminated, except as
provided in this Agreement and the Custodian Agreement, by any
act of such Selling Stockholder, by operation of law, or the
death or incapacity of such Selling Stockholder. If any Selling
Stockholder should die or become incapacitated or if any other
event should occur before the delivery of the Common Shares
hereunder, the certificates for Common Shares, then on deposit
with the Custodian shall, to the extent the Common Shares
represented thereby are purchased by the Underwriters, be
delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity or to
other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof.
(f) All representations and warranties of such
Selling Stockholder in the Custodian Agreement are true and
correct in all material respects.
SECTION 3.A. Representation of Attorney-in-Fact. Each
Attorney-in-Fact represents that he has been authorized by such Selling
Stockholder to execute and deliver this Agreement and the Custodian has
been authorized to receive and acknowledge receipt of the proceeds of sale
of the Common Shares sold by such Selling Stockholder against delivery
thereof and otherwise to act on behalf of such Selling Stockholder.
SECTION 4. Representation of Underwriters. You have been
duly authorized to act and will act as the Representative for the
Underwriters in connection with this financing, and any action under or in
respect of this Agreement taken by you, as such Representative, will be
binding upon all Underwriters.
SECTION 5. Purchase, Sale and Delivery of Common 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 875,000 Firm Common Shares to the Underwriters, and
the Underwriters agree, severally and not jointly, to purchase from the
Company the number of Firm Common Shares as hereinafter set forth at the
price per share set forth in Section 1 hereof.
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, each Selling Stockholder agrees, severally and not jointly, to sell
to the Underwriters that number of full Firm Common Shares set forth in
Schedule A to this Agreement, and the Underwriters agree, severally and
not jointly, to purchase from each Selling Stockholder the number of Firm
Common Shares as hereinafter set forth at the same purchase price per
share stated in the preceding paragraph. The obligation of each
Underwriter to each Selling Stockholder shall be to purchase from that
Selling Stockholder that number of full Firm Common Shares which (as
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nearly as practicable in full shares as determined by the Representative)
bears to the number of Firm Common Shares to be sold by such Selling
Stockholder the same proportion as the number of shares set forth opposite
the name of such Underwriter in Schedule B hereto bears to the total
number of Firm Common Shares to be purchased from the Company by all the
Underwriters under this Agreement.
In addition, 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 an option to the Underwriters,
severally and not jointly, to purchase from the Company up to 109,568
Optional Common Shares, and TDH II Limited, a Selling Stockholder ("TDH"),
hereby grants an option to the Underwriters, severally and not jointly, to
purchase from TDH up to 47,932 Optional Common Shares, at the same
purchase price per share to be paid for the Firm Common Shares, for use
solely in covering any overallotment made by the Underwriters in the sale
and distribution of the Firm Common Shares. The obligation of each
Underwriter to the Company shall be to purchase from the Company that
number of full Optional Common Shares which (as nearly as practicable in
full shares as determined by the Representative) bears to 109,568 the same
proportion as the number of shares set forth opposite the name of such
Underwriter in Schedule B hereto bears to 875,000. The obligation of each
Underwriter to TDH shall be to purchase from TDH that number of full
Optional Common Shares which (as nearly as practicable in full shares as
determined by the Representative) bears to 47,932 the same proportion as
the number of shares set forth opposite the name of such Underwriter in
Schedule B hereto bears to 152,068.
At 9:00 A.M., Baltimore time, on the third full business day
after the public offering, or at such other time not later than one week
after such third full business day as may be agreed upon by the
Representative, the Company and the Attorneys-in-Fact (or any one of
them), the Company and the Custodian will deliver to the Representative,
at the offices of Ferris, Baker Watts, Incorporated, 1720 Eye Street,
N.W., Washington, D.C., for the accounts of the Underwriters, certificates
representing the Firm Common Shares to be sold by them, respectively,
against payment in Baltimore, Maryland of the purchase price therefor in
next day funds payable, as appropriate, to the order of the Company in
respect of the Firm Common Shares being sold by the Company and the
Custodian in respect of the Firm Common Shares being sold by the Selling
Stockholders. Such time of delivery and payment is referred to throughout
this Agreement as the "First Closing Date." The certificates for the Firm
Common Shares to be so delivered will be in denominations and registered
in such names as the Representative requests by notice delivered to the
Company and the Attorneys-in-Fact on behalf of the Selling Stockholders
prior to 9:00 A.M., Baltimore time, no later than two full business days
prior to the First Closing Date, and will be made available for checking
and packaging at such time and at such location to be designated by the
Representative.
The overallotment option granted hereunder may be exercised at
any time (but not more than once) within forty-five (45) days after the
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date the Registration Statement becomes effective upon written notice by
the Representative to the Company and TDH setting forth the aggregate
number of Optional Common Shares as to which the Underwriters are
exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place
at which such certificates will be delivered. Such time of delivery
(which may not be earlier than the First Closing Date, as hereinafter
defined), being herein referred to as the "Second Closing Date," shall be
determined by the Representative, but if at any time other than the First
Closing Date, shall not be earlier than three (3) nor later than five (5)
full business days after delivery of such notice of exercise to the
Company and TDH. Certificates for the Optional Common Shares will be made
available for checking and packaging at such time and at such location to
be designated by the Representative. The manner of payment for and
delivery of (including the denominations of and the names in which
certificates are to be registered) the Optional Common Shares shall be the
same as for the Firm Common Shares purchased from the Company and TDH. As
Representative of the several Underwriters you may cancel the option at
any time prior to its expiration by giving written notice of such
cancellation to the Company and TDH.
The Representative has advised the Company and the Attorneys-in-
Fact on behalf of the Selling Stockholders that each Underwriter has
authorized the Representative to accept delivery of its Common Shares and
to make payment therefor. You, individually and not as the Representative
of the Underwriters, may make payment for any Common Shares to be
purchased by any Underwriter whose funds shall not have been received by
you by the First Closing Date or the Second Closing Date, as the case may
be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any obligation hereunder.
SECTION 6. Covenants of the Company. The Company covenants
and agrees with the several Underwriters and the Selling Stockholders as
follows:
(a) The Company will use its best efforts to cause
the Registration Statement to become effective at the earliest
possible time and upon notification from the Commission that the
Registration Statement has become effective, will so advise the
Representative and its counsel promptly. Thereafter, the Company
will prepare and timely file with the Commission pursuant to Rule
424(b) under the Act the Prospectus containing information
previously omitted in reliance upon Rule 430A under the Act. The
Company will advise the Representative, its counsel and the
Attorneys-in-Fact on behalf of the Selling Stockholders promptly
of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, or of any
notification of the initiation or threatening of any proceedings
for that purpose, and will also advise the Representative, its
counsel and the Attorneys-in-Fact on behalf of the Selling
Stockholders promptly of any request of the Commission for
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amendment or supplement of the Registration Statement (either
before or after it becomes effective), of any Preliminary
Prospectus or of the Prospectus, or for additional information,
and will not file or make any amendment or supplement to the
Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus or to the Prospectus of
which the Representative has not been furnished with a copy prior
to such filing or to which you object; and the Company will file
promptly and will furnish to the Representative at or prior to
the filing thereof copies of all reports and any definitive proxy
or information statements required to be filed by the Company
with the Commission pursuant to Sections 13, 14 and 15 of the
Exchange Act subsequent to the date of the Prospectus, and for so
long as the delivery of a prospectus is required in connection
with the offering or sale of the Common Shares.
(b) If, at any time when a prospectus relating to the
Common Shares is required to be delivered under the Act, any
event occurs as a result of which the Prospectus, including any
subsequent amendment or supplement, would include an untrue
statement of a material fact, or would omit to state any 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, or if it is necessary at any time
to amend the Prospectus, including any amendment or supplement
thereto, to comply with the Act or the Rules and Regulations, the
Company promptly will advise the Representative, its counsel and
the Attorneys-in-Fact on behalf of the Selling Stockholders
thereof and will promptly prepare and file with the Commission an
amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance; and,
in case any Underwriter is required to deliver a prospectus nine
(9) months or more after the effective date of the Registration
Statement, the Company upon request, but at the expense of such
Underwriter, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act.
(c) Except as described in the Prospectus or with the
consent of the Representative which consent shall not be
unreasonably withheld, the Company will not, prior to the Second
Closing Date, incur any material liability or obligation, direct
or contingent, or enter into any material transaction, other than
in the ordinary course of business.
(d) The Company will not acquire any of the Company's
capital stock prior to the Second Closing Date nor will the
Company declare or pay any dividend or make any other
distribution upon its capital stock payable to its holders of
record on a date prior to the Second Closing Date or, if there is
no Second Closing Date, then prior to the First Closing Date.
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(e) Until the Underwriters have completed the
offering referred to in Section 1 above, the Company will not
take, directly or indirectly, any action designed to or which
might reasonably be expected to cause or result, under the
Exchange Act, or otherwise, in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale
of the Common Shares.
(f) The Company will make generally available to the
Representative and to the Company's security holders an earnings
statement (which need not be audited) as soon as practicable, but
in no event later than fifteen (15) months after the end of the
Company's current fiscal quarter, covering a period of twelve
(12) consecutive calendar months beginning after the effective
date of the Registration Statement, which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act and
Rule 158 promulgated thereunder.
(g) During such period as a prospectus is required by
law to be delivered in connection with sales by an Underwriter or
dealer, the Company will furnish the Representative, at the
Company's expense, with copies of the Registration Statement, the
Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as
available and in such quantities as the Representative may
reasonably request, for the purposes contemplated by the Act or
Exchange Act.
(h) The Company will cooperate with the
Representative, its counsel and the Underwriters in qualifying or
registering the Common Shares for sale, or obtaining an exemption
therefrom, under the Blue Sky Laws of such jurisdictions as the
Representative shall designate, and will continue such
qualifications or registrations or exemptions in effect so long
as reasonably requested by the Representative to effect the
distribution of the Common Shares. The Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in any such jurisdiction where it
is not presently qualified.
(i) During the period of three (3) years after the
date hereof, as soon as practicable after the end of each fiscal
year, the Company will furnish the Representative with two (2)
copies, and to each of the other Underwriters who may so request,
one (1) copy, of the Annual Report of the Company containing the
consolidated balance sheet of the Company as of the close of such
fiscal year and corresponding consolidated statements of income,
stockholders' equity and cash flows the year then ended, such
consolidated financial statements to be under the certificate or
opinion of the Company's independent certified public
accountants. During such period the Company will also furnish
the Representative with one (1) copy:
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(i) promptly after the filing
thereof, of each report filed by the Company with the
Commission; and
(ii) as soon as available, of each
report of the Company mailed to its stockholders.
(j) The Company will comply or cause to be complied
with the conditions to the obligations of the Underwriters set
forth in Section 9 hereof.
(k) The Company shall take all necessary and
appropriate action such that the Common Shares are authorized for
trading on the NASDAQ National Market System as soon as
practicable after the effectiveness of the Registration Statement
and the Common Shares shall remain so authorized for at least
thirty-six (36) months thereafter; provided, however, that during
such thirty-six (36) month period, the Company may list its
shares on any other registered stock exchange.
(l) The Company shall promptly prepare and file with
the Commission, from time to time, such reports as may be
required to be filed by the Rules and Regulations.
(m) The Company shall comply in all respects with the
undertakings given by the Company in connection with the
qualification or registration of the Common Shares for offering
and sale or exemption therefrom under the Blue Sky Laws of one or
more jurisdictions.
(n) The Company shall apply the net proceeds from the
sale of the Common Shares to be sold by it hereunder for the
purposes set forth in the Prospectus.
(o) Except for the sale of Common Shares pursuant to
this Agreement or pursuant to an effective Registration Statement
on Form S-8, the Company shall not make any offering, sale or
other disposition of any of its Common Stock on the open market,
within 180 days after the effective date of the Registration
Statement without the Representative's prior written consent.
The Company has obtained for the benefit of the Underwriters, the
agreement of all present officers and directors of the Company,
and each of the Named Stockholders (hereinafter defined) that for
the period indicated in the foregoing sentence, they will not
offer, sell or otherwise dispose of any Common Stock on the open
market without the Representative's prior written consent except
that officers and directors who have options that will expire
during the 180-day period may, upon the exercise of such options,
sell the shares underlying the options; provided, however, that
the number of shares that each such option holder may sell will
be limited to those shares necessary for the option holder to
effect a cashless exercise of those options. The "Named
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Stockholders" are TDH, Walt Hopkins, Harvey Shuster, Glenn Crews,
Phyllis Fobes and Ben Dyer. The Company also has obtained for
the benefit of the Underwriters the agreement of TDH to refrain
from exercising, for a period of 360 days after the effective
date of the Registration Statement the demand registration rights
granted by the Company to TDH.
SECTION 7. Covenants of the Selling Stockholders. Each
Selling Stockholder agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the
extent necessary to cause the Registration Statement to become
effective at the earliest possible time, and will do and perform
all things to be done and performed by such Selling Stockholder,
pursuant to this Agreement or his or its Custodian Agreement.
(b) Such Selling Stockholder will pay all federal and
other taxes, if any, on the transfer or sale of the Firm Common
Shares and Optional Common Shares being sold by such Selling
Stockholder to the Underwriters.
(c) Such Selling Stockholder will do and perform all
things to be done or performed by such Selling Stockholder prior
to the First Closing Date or Second Closing Date, as the case may
be, pursuant to this Agreement or his or its Custodian Agreement.
(d) Such Selling Stockholder will deliver to the
Custodian on or prior to the First Closing Date a properly
completed and executed United States Treasury Department Form W9
(or other applicable substitute form or statement specified by
Treasury Department Regulations in lieu thereof).
(e) Until the Underwriters have completed the
offering referred to in Section 1 above, such Selling Stockholder
will not, directly or indirectly, take any action designed to or
which might be reasonably expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale
of the Common Shares.
SECTION 8. Payment of Expenses. Whether or not the
transactions contemplated hereunder are consummated or this Agreement
becomes effective or is terminated for any reason, except as otherwise set
forth below, the Company will pay the costs and expenses incurred in
connection with the public offering. Costs, fees and expenses to be paid
by the Company are:
(a) All costs, fees and expenses incurred in
connection with the performance of the Company's and the Selling
Stockholders's obligations hereunder, except as provided below
with respect to Selling Stockholders, including without limiting
the generality of the foregoing, all costs and expenses incurred
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in connection with the production, printing, filing and
distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and
financial statements) and all agreements and supplements provided
for herein.
(b) All costs, fees and expenses, including legal
fees and disbursements of counsel for the Underwriters not to
exceed $10,000, incurred by the Underwriters in connection with
qualifying or registering all or any part of the Common Shares
for offer and sale under the Blue Sky Laws, or obtaining
exemptions from registration, including the preparation of the
Preliminary and any Supplemental Blue Sky Memoranda relating to
the Common Shares; provided, however, that a Selling Stockholder
seeking to distribute Common Shares in a jurisdiction other than
those in which the Company and the Underwriters determine the
Common Shares shall be sold shall be responsible for payment of
all costs, fees and expenses of qualifying or registering such
Common Shares or obtaining an exemption therefrom under the Blue
Sky Laws of such jurisdiction.
(c) All fees and expenses of the Company's transfer
agent, printing of the certificates for the Common Shares, and
all transfer taxes, if any, with respect to the transfer, sale
and delivery of the Common Shares to the several Underwriters and
all fees of the NASD.
(d) Expenses incurred by the Representative, as
follows:
(i) $20,000 if this Agreement is terminated
after the date on which the Registration Statement is filed with
the Commission but prior to the date of closing of the Offering;
or
(ii) $27,500 upon the closing of the
Offering;
provided, however, that the Representative shall not be entitled
to such payment if the Representative terminates this Agreement
except as provided in Section 15(b) hereof or the Company
terminates this Agreement because of the negligence or material
breach on the part of the Representative which was the cause of
the failure of the Offering to be completed.
Notwithstanding the foregoing, each Selling Stockholder
shall be solely responsible for (a) all expenses related to
underwriting discounts or commissions applicable to the sale of
Common Shares by such Selling Stockholder, (b) expenses incurred
by any legal counsel retained by such Selling Stockholder, (c)
any transfer or sales tax imposed upon the transfer and sale of
his or its Common Shares to the Underwriters and (d) for such
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Selling Stockholder's respective pro rata share of all fees and
expenses of the Attorneys-in-Fact and the Custodian. All costs
and expenses incident to the performance of any Selling
Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section will be borne and paid
solely by each such Selling Stockholder.
SECTION 9. Conditions of the Obligations of the
Underwriters. The obligations of the Underwriters to purchase and pay for
the Firm Common Shares on the First Closing Date and the Optional Common
Shares on the Second Closing Date shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders herein set forth as of the date hereof and as of the First
Closing Date or the Second Closing Date, as the case may be, to the
accuracy of the statements of Company officers, the Selling Stockholders
and the Attorneys-in-Fact on behalf of the Selling Stockholders made
pursuant to the provisions hereof, to the performance by the Company and
the Selling Stockholders of their respective obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 1:00 P.M., Baltimore time, on the date
of this Agreement, or such later time as shall have been
consented to by the Representative but in no event later than
1:00 P.M., Baltimore time, on the third full business day
following the date hereof; prior to each Closing Date, no stop
order suspending the effectiveness of the Registration Statement
shall have been instituted or shall be pending or, to the
knowledge of the Company, or the Representative, shall be
contemplated by the Commission, and any request of the Commission
for additional information shall have been complied with to the
Representative's reasonable satisfaction.
(b) The Common Shares shall have been qualified or
registered for sale or exempted therefrom under the Blue Sky Laws
of such states as shall have been specified by the Representative
prior to the date hereof.
(c) The legality and sufficiency of the
authorization, issuance and sale of the Common Shares hereunder,
the validity and form of the certificates representing the Common
Shares, the transfer and sale of the Common Shares being sold by
the Selling Stockholders, the execution and delivery of this
Underwriting Agreement, and all corporate proceedings and other
legal matters incident thereto, and the form of the Registration
Statement and the Prospectus (except financial statements and
other financial data included therein) shall have been approved
by Shapiro and Olander, Baltimore, Maryland, counsel for the
Representative and the Underwriters.
(d) The Representative shall not have advised the
Company that the Registration Statement or Prospectus, or any
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amendment or supplement thereto, contains an untrue statement of
fact, which, in the opinion of Shapiro and Olander, counsel for
the Representative and the Underwriters, is material or omits to
state a fact which, in the written opinion of such counsel, is
material and is required to be stated therein or necessary to
make the statements therein not misleading.
(e) Since the specific dates as of which information
is given in the Registration Statement:
(i) the Company shall not have sustained any
material loss or interference with its business from any
labor dispute, strike, fire, explosion, flood or other
calamity (whether or not insured), or from any court or
governmental action, order or decree; and
(ii) there shall not have been any change in
the capital stock, short-term debt or long-term debt of
the Company or a material change or a development
involving a prospective change in or affecting the
ability of the Company to conduct its business (whether
by reason of any court, legislative, other governmental
action, order, decree, or otherwise), or in the general
affairs, management, financial position, stockholders'
equity or results of the operations of the Company,
whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth
in or contemplated by the Registration Statement and
Prospectus, the effect of which on the Company, in any
such case described in clause (i) or (ii), above, is in
the Representative's opinion sufficiently material and
adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the
Common Shares on the terms and in the manner contemplated
in the Registration Statement and the Prospectus.
(f) All formal and informal voting agreements,
understandings and arrangements with respect to the voting of
Common Stock shall have been terminated and shall be of no
further force or effect except as disclosed in the Prospectus.
(g) There shall have been furnished to you, as
Representative of the Underwriters, on each Closing Date:
(i) (A) An opinion of Kirkpatrick & Lockhart LLP,
counsel for the Company and the Selling Stockholders,
addressed to the Representative as such and dated the
First Closing Date or the Second Closing Date, as the
case may be, to the effect that:
(1) each of the Company and the
Subsidiary is duly incorporated, validly existing
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and in good standing under the laws of its
jurisdiction of incorporation with full corporate
power and authority to own and/or lease its
properties and conduct its business as described
in the Prospectus; and each of the Company and
the Subsidiary is duly qualified to do business
as a foreign corporation under the corporation
law of, and is in good standing as such in each
state where such qualification is required and
does not own or lease any property or have any
employees situated in any other state.
(2) the Company does not, to such
counsel's knowledge after due investigation, own
any material interest in any other corporation,
joint venture, proprietorship or other commercial
entity or organization except as described in the
Prospectus.
(3) the authorized capital stock of
the Company consists of 4,000,000 shares of
Common Stock, $0.10 par value, and all such
capital stock conforms as to legal matters to the
description thereof in the Registration Statement
and Prospectus; the issued and outstanding shares
of Common Stock, to their knowledge, have been
duly authorized and validly issued and are fully
paid and nonassessable and were issued in
compliance with exemptions from the registration
provisions of Section 5 of the Act and comparable
provisions of applicable Blue Sky Laws; to their
knowledge, there are not preemptive, preferential
or other rights to subscribe for or purchase any
of the Common Shares to be sold by the Company
and the Selling Stockholders hereunder and no
shares of Common Stock have been issued in
violation of such rights of stockholders; and, to
such counsel's knowledge, after due
investigation, there are no, except as described
in the Prospectus, outstanding rights, warrants
or options to acquire, or instruments convertible
into or exchangeable for, any shares of Common
Stock or other equity interest in the Company.
Except as otherwise stated in the Registration
Statement, to such counsel's knowledge, after due
investigation, no holders of securities of the
Company have rights to the registration of such
securities in the Registration Statement. The
statements made in the Prospectus under the
section entitled "Description of Capital Stock"
are accurate in all material respects.
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(4) the certificates for Common
Shares to be delivered hereunder are in due and
proper form and, when duly countersigned by the
Company's transfer agent and, where appropriate,
duly endorsed by the Selling Stockholders, and
delivered to you or upon your order against
payment of the agreed consideration therefor in
accordance with the provisions of this Agreement,
the Common Shares represented thereby will be
duly authorized and validly issued, fully paid
and nonassessable and, upon consummation of the
purchase by the Underwriters, and assuming they
have no knowledge of any liens, claims or
encumbrances affecting the Common Shares, the
Underwriters will acquire good and marketable
title thereto, free and clear of any claim,
security interest, community property right, or
other encumbrance or restriction on transfer
(except for restrictions under the Act and under
the Blue Sky Laws).
(5) the Company has full corporate
power and authority to enter into and perform
this Agreement, and this Agreement, the execution
and delivery hereof, and the performance of the
Company's obligations hereunder have been duly
authorized by all necessary corporate action.
This Agreement has been duly executed and
delivered by and on behalf of the Company, and is
a legal, valid, and binding agreement of the
Company, enforceable in accordance with its
terms, except that rights to indemnity or
contribution may be limited by applicable law and
enforceability of the Agreement may be limited by
bankruptcy, insolvency or similar laws affecting
the rights of creditors and by equitable
principles limiting the right to specific
performance or other equitable relief.
(6) the execution and performance by
the Company of this Agreement, including
application of the net proceeds of the offering,
if and when received, as described in the
Prospectus under "Prospectus Summary,"
"Capitalization" and "Use of Proceeds," will not
violate any provisions of the Company's Articles
of Incorporation or By-Laws or, to such counsel's
knowledge after due investigation, any law, rule
or regulation applicable to the Company or the
Subsidiary of any government, court, regulatory
body, administrative agency or other governmental
body having jurisdiction over the Company or the
- 22 -
Subsidiary or any of their respective properties
or businesses, and will not, to such counsel's
knowledge after due investigation, result in the
breach, or be in contravention, of any provision
of any loan agreement, lease, franchise, license,
note, bond, other evidence of indebtedness,
indenture, mortgage, deed of trust, other
instrument, permit or other contractual
obligation to which the Company or the Subsidiary
is a party or by which the Company or the
Subsidiary or their respective property is bound,
or any order of any court or governmental agency
or authority entered in any proceeding to which
the Company or the Subsidiary was or is now a
party or by which it is bound.
(7) to the knowledge of such
counsel, after due investigation, no consent,
approval, authorization or other order of any
court, regulatory body, administrative agency or
other governmental body is required for the
execution and delivery of this Agreement by the
Company and/or the Selling Stockholders or the
consummation by the Company and/or the Selling
Stockholders of the transactions contemplated by
this Agreement, except for compliance with the
Act and Blue Sky Laws applicable to the public
offering of the Common Shares by the
Underwriters, and the clearance of such offering
with the NASD.
(8) the Registration Statement has
become effective under the Act, and, to the
knowledge of such counsel, 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 contemplated under the Act, and the
Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form
in all material respects with the requirements of
the Act and the Rules and Regulations (except
that such counsel need express no opinion as to
the financial statements and other financial data
included therein); such counsel has no reason to
believe that either the Registration Statement or
the Prospectus or any such amendment or
supplement thereto, or any document incorporated
by reference therein, contains any untrue
statement of a material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein, in
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light of the circumstances in which they are
made, not misleading (except that such counsel
need express no opinion as to the financial
statements and other financial data included
therein); such counsel, after due investigation,
does not know of any legal or governmental
proceedings or of any contracts or other
documents, transactions or relationships of or by
the Company or the Subsidiary required to be
described in the Registration Statement or to be
filed as exhibits to the Registration Statement
by the Act or the Rules and Regulations which are
not described or filed, as required.
(9) to such counsel's knowledge
after due inquiry, except as described in the
Prospectus, there are no legal or governmental
actions, suits or legal proceedings pending or
threatened to which the Company or the Subsidiary
is a party or to which the Company's or the
Subsidiary's business or material property owned
or leased by the Company or the Subsidiary is
subject, or which question the validity of this
Agreement or any action taken or to be taken
pursuant hereto.
(10) to the knowledge of such counsel
after due investigation: (i) the Company and the
Subsidiary possess all licenses, permits,
approvals and other governmental authorizations
required for the conduct of their businesses, as
described in the Prospectus; (ii) such licenses,
permits and other governmental authorizations are
in full force and effect and the Company and the
Subsidiary are in all material respects complying
therewith; (iii) the Company and the Subsidiary
are complying in all respects with all laws,
ordinances and regulations applicable to them,
and their respective properties and businesses,
the noncompliance or violation of which would
have a material adverse effect on the Company.
(B) An opinion of Spencer, Frank &
Schneider, counsel for the Company, addressed to the
Representative as such and dated the First Closing Date
or the Second Closing Date, as the case may be, to the
effect that, to the knowledge of such counsel after due
investigation, the Company and the Subsidiary own or
possess all patents, patent rights, licenses, inventions,
copyrights, trademarks, service marks, and trade names
used by them or reasonably believed by management to be
- 24 -
necessary in connection with the conduct of their
respective businesses as described in the Prospectus.
(C) An opinion of Anne J. Fletcher, Esquire,
the Company's general counsel, addressed to the
Representative as such and dated the First Closing Date
or the Second Closing Date, as the case may be, to the
effect that:
(1) the authorized capital stock of
the Company consists of 4,000,000 shares of
Common Stock, $0.10 par value, and all such
capital stock conforms as to legal matters to the
description thereof in the Registration Statement
and Prospectus; the issued and outstanding shares
of Common Stock have been duly authorized and
validly issued and are fully paid and
nonassessable and were issued in compliance with
exemptions from the registration provisions of
Section 5 of the Act and comparable provisions of
applicable Blue Sky Laws; there are not
preemptive, preferential or other rights to
subscribe for or purchase any of the Common
Shares to be sold by the Company and the Selling
Stockholders hereunder and no shares of Common
Stock have been issued in violation of such
rights of stockholders; and, to such counsel's
knowledge, after due investigation, there are no,
except as described in the Prospectus,
outstanding rights, warrants or options to
acquire, or instruments convertible into or
exchangeable for, any shares of Common Stock or
other equity interest in the Company. Except as
otherwise stated in the Registration Statement,
to such counsel's knowledge, after due
investigation, no holders of securities of the
Company have rights to the registration of such
securities in the Registration Statement. The
statements made in the Prospectus under the
section entitled "Description of Capital Stock"
are accurate in all material respects.
(2) each Selling Stockholder (other
than TDH) has full right, power and authority to
enter into this Agreement and the Custodian
Agreement and to sell, assign, transfer and
deliver the Common Shares to be delivered by such
Selling Stockholder hereunder; to such counsel's
knowledge after due investigation, each Selling
Stockholder (other than TDH) has obtained all
consents, approvals, authorizations, and orders
necessary for the execution and delivery by such
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Selling Stockholder of this Agreement and the
Custodian Agreement and for the sale and delivery
of the Common Shares to be sold by such Selling
Stockholder; each Selling Stockholder (other than
TDH) has valid and marketable title to the Common
Shares proposed to be sold by such Selling
Stockholder hereunder; this Agreement and the
Custodian Agreement have each been duly executed
and delivered by or on behalf of each Selling
Stockholder (other than TDH) and are the legal,
valid and binding agreements of such Selling
Stockholder enforceable in accordance with their
terms, except that rights to indemnity or
contribution hereunder or thereunder may be
limited by applicable law and the enforceability
of such agreements may be limited by bankruptcy,
insolvency or similar laws generally affecting
rights of creditors and by equitable principles
limiting the right to specific performance or
other equitable relief.
(3) to the knowledge of such
counsel, the real properties held or used by the
Company or the Subsidiary under leases or other
agreements as set forth in the Prospectus are
held by it under valid, subsisting and
enforceable leases or other agreements with
respect to which, to such counsel's knowledge
after due investigation, neither the Company nor
the Subsidiary is in default, except to the
extent that the enforceability of the rights and
remedies of the Company or the Subsidiary under
any such lease or other agreement may be limited
by bankruptcy, insolvency, or similar laws
generally affecting the rights of creditors and
by equitable principles limiting the right to
specific performance or other equitable relief.
(4) the Subsidiary has registered,
and maintains in full force and effect
registration for, its franchises in each state or
other jurisdiction where such registration is
required. The Subsidiary's franchise offering
circular, franchise agreement and related
documents substantially complied at such
documents' dates, with applicable federal, state
and Canadian laws and regulations.
(5) to the knowledge of such counsel
after due investigation, the Company and the
Subsidiary own or possess all trade secrets and
other unpatented or unpatentable proprietary or
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confidential information, systems or procedures
used by them or reasonably believed by management
to be necessary in connection with the conduct of
their respective businesses as described in the
Prospectus.
(D) An opinion of Pepper, Hamilton &
Scheetz, counsel for TDH, addressed to the Representative
as such and dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that TDH
has full right, power and authority to enter into this
Agreement and the Custodian Agreement and to sell,
assign, transfer and deliver the Common Shares to be
delivered by TDH hereunder; to such counsel's knowledge
after due investigation, TDH has obtained all consents,
approvals, authorizations, and orders necessary for the
execution and delivery by TDH of this Agreement and the
Custodian Agreement and for the sale and delivery of the
Common Shares to be sold by TDH; TDH has valid and
marketable title to the Common Shares proposed to be sold
by TDH hereunder; this Agreement and the Custodian
Agreement have each been duly executed and delivered by
or on behalf of TDH and are the legal, valid and binding
agreements of TDH enforceable in accordance with its
terms, except that rights to indemnity or contribution
hereunder or thereunder may be limited by applicable law
and the enforceability of such agreements may be limited
by bankruptcy, insolvency or similar laws generally
affecting rights of creditors and by equitable principles
limiting the right to specific performance or other
equitable relief.
It is understood that the opinion of each such counsel may state
that such counsel is relying as to factual matters on certificates of
officers of the Company and of state officials and, as to legal matters in
jurisdictions other than in which they are domiciled, on opinions of local
counsel or of other counsel retained or having rendered legal services
with respect to specific matters, in which case their opinion is to state
that they are so doing and they believe such reliance is reasonable, and
copies of said certificates and/or opinions are to be attached to the
opinion. The opinion of such counsel shall state that Shapiro and
Olander, Counsel for the Representative and the Underwriters, shall be
entitled to rely on such opinions with respect to the due incorporation,
existence, and good standing of the Company and the Subsidiary, and the
capital stock of the Company, including the Common Shares, and matters
relating to the Selling Stockholders.
(ii) An opinion of Shapiro and Olander, counsel for the
Representative and the Underwriters, addressed to the
Representative in such capacity and dated the First Closing Date
or the Second Closing Date, as the case may be, with respect to
the validity of the Common Shares, the Registration Statement and
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the Prospectus and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel
such documents and shall have exhibited to them such papers and
records as they request for the purpose of enabling them to pass
upon such matters.
(iii) A certificate of the chief executive officer and
the principal financial officer of the Company, dated the First
Closing Date or the Second Closing Date, as the case may be, to
the effect that:
(1) to the knowledge of the respective
signatories, the representations and warranties of the
Company set forth in Section 2 of this Agreement are true
and correct as of the date of this Agreement and as of
the First Closing Date or the Second Closing Date, as the
case may be, as if again made on and as of such Closing
Date, and the Company has complied with all the
agreements and satisfied all the conditions to be
performed or satisfied by it at or prior to such Closing
Date.
(2) to the knowledge of the respective
signatories, the Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus or the Prospectus filed as a part of the
Registration Statement or any amendment thereto; 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
contemplated under the Act.
(3) each of the respective signatories of the
certificate has carefully examined the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, and, in the opinion of such signatory
and to his knowledge, the Registration Statement and the
Prospectus and any amendment or supplement thereto
contain all statements that are required to be stated
therein, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto,
includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein
or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading,
and, since the date on which the Registration Statement
was first filed with the Commission, there has occurred
no event required to be set forth in an amended or
supplemented prospectus or in an amendment to the
Registration Statement which has not been so set forth.
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(4) to the knowledge of the respective
signatories, after due inquiry, since the date on which
said Registration Statement was initially filed, there
has not been any material adverse change or a development
involving a prospective material adverse change in the
business, properties, financial condition or earnings of
the Company, whether or not arising from transactions in
the ordinary course of business, except as disclosed in
said Registration Statement as heretofore amended
including the proposed amendment thereto delivered to the
Representative prior to or contemporaneously with the
execution of this Agreement or (but only if the
Representative expressly consents thereto in writing)
delivered to the Representative thereafter; since such
date and except as so disclosed or in the ordinary course
of business, the Company has not incurred any liability
or obligation, direct or indirect, or entered into any
material transaction; since such date and except as so
disclosed there has not been any material change in the
capital stock, short-term debt or long-term debt of the
Company and the Company has not acquired any of the
Common Shares nor has the Company declared or paid any
dividend, or made any other distribution, upon its
outstanding shares of Common Stock payable to
stockholders of record on a date prior to the First
Closing Date or Second Closing Date, as the case may be;
since such date and except as so disclosed, the Company
has not incurred any material contingent obligations, and
no material litigation is pending or threatened against
the Company; and, since such date and except as so
disclosed the Company has not sustained a material loss
or interference by strike, labor dispute, fire,
explosion, flood, windstorm, accident or other calamity
(whether or not insured) or from any court or
governmental action, order or decree.
The delivery of the certificate provided for in this subparagraph
(iii) shall be and constitute a representation and warranty of the Company
as to the facts required in the immediately foregoing clauses (1), (2),
(3) and (4) of this subparagraph (iii) to be set forth in said
certificate.
(iv) A certificate from each Selling
Stockholder (which may be signed by such Selling
Stockholder's Attorneys-in-Fact), dated the First Closing
Date or the Second Closing Date, as the case may be, to
the effect that the representations and warranties of
such Selling Stockholder in Section 3 of this Agreement
are true and correct as of the date of this Agreement and
as of the First Closing Date or the Second Closing Date,
as the case may be, as if again made on and as of such
Closing Date, and such Selling Stockholder has complied
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with all applicable covenants herein and satisfied all
the conditions to be performed or satisfied by such
Selling Stockholder at or prior to such Closing Date.
(v) A written agreement or agreements signed
by each director and officer of the Company and by each
Named Stockholder as provided in Section 6(o) of this
Agreement.
(vi) At the time this Agreement is executed
and also on the First Closing Date and the Second Closing
Date, there shall be delivered to the Representative a
letter addressed to the Representative, as Representative
of the Underwriters, from Ernst & Young, LLP independent
certified public accountants, the first letter to be
dated the date of this Agreement, the second letter to be
dated the First Closing Date and the third letter (in the
event of a Second Closing) to be dated the Second Closing
Date, to the effect set forth in Schedule C annexed
hereto and containing the information set forth therein
and such other information as may be requested by the
Representative as of a date within five days of the date
of such letter. There shall not have been any change or
decrease specified in any of the letters referred to in
this subparagraph (vi) which makes it impractical or
inadvisable in the Representative's judgment to proceed
with the public offering or the purchase of the Common
Shares as contemplated hereby.
(vii) Such further certificates and documents as
the Representative may reasonably request.
All such opinions, certificates, letters and documents
shall be in compliance with the provisions hereof only if they
are satisfactory to the Representative and to Shapiro and
Olander, counsel for the Representative and the Underwriters.
The Company and the Selling Stockholders shall furnish the
Representative with such manually signed or conformed copies of
such opinions, certificates, letters and documents as the
Representative may reasonably request.
If any condition to the Underwriters' obligations
hereunder to be satisfied prior to or at either Closing Date is
not so satisfied, this Agreement at the Representative's election
will terminate upon notification to the Company and the
Attorneys-in-Fact for the Selling Stockholders without liability
on the part of any Underwriter (including the Representative),
the Company or the Selling Stockholders, except for the expenses
to be paid by the Company and the Selling Stockholders pursuant
to Section 8 hereof or reimbursed by the Company pursuant to
Section 10 hereof and except to the extent provided in Section 12
hereof.
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SECTION 10. Reimbursement of Underwriters' Expenses. If the
sale to the Underwriters of the Common Shares at the First Closing Date is
not consummated because any condition to the Underwriters' obligations
hereunder is not satisfied, because the Company terminates this Agreement
pursuant to Section 15 or because of any refusal, inability or failure on
the part of the Company or the Selling Stockholders to perform any
agreement herein or comply with any provision hereof, the Company shall
pay the Representative $20,000 as provided in Section 8 hereof. Any such
termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 8 and Section 12 shall
at all times be effective and shall apply.
SECTION 11. Effectiveness of Registration Statement. The
Company and the Selling Stockholders will each use their respective best
efforts to cause the Registration Statement to become effective, to
prevent the issuance of any stop order suspending the effectiveness of the
Registration Statement, and, if such stop order is issued, to obtain as
soon as possible the lifting thereof.
SECTION 12. Indemnification.
(a) The Company and each Selling Stockholder agrees
to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the
Act or the Exchange Act against any losses, claims, damages, or
liabilities, joint or several, to which such Underwriter or each
such controlling person may become subject under the Act, the
Exchange Act, Blue Sky Laws or other federal or state securities
laws or regulations, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any
application filed under any Blue Sky Law or other document
executed by the Company specifically for that purpose or filed in
any state or other jurisdiction in order to qualify any or all of
the Common Shares under the securities laws thereof (any such
application or document being hereinafter referred to as a "Blue
Sky Application") or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not
misleading; the Company agrees to reimburse each Underwriter and
each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or any such controlling
person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent
that:
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(i) any such loss, claim, damage or
liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto or in any Blue Sky Application in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of any
Underwriter through the Representative specifically for
use therein; or
(ii) if such statement or omission was
contained or made in any Preliminary Prospectus and
corrected in the Prospectus and (1) any such loss, claim,
damage or liability suffered or incurred by any
Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who
purchased Common Shares which are the subject thereof
from such Underwriter in the offering, and (2) such
Underwriter failed to deliver or provide a copy of the
Prospectus to such person at or prior to the confirmation
of the sale of such Common Shares in any case where such
delivery is required by the Act unless such failure was
due to failure by the Company to provide copies of the
Prospectus to the Underwriters as required by this
Agreement.
The indemnification obligations of the Company and Selling
Stockholders as provided above are in addition to any liabilities
the Company and Selling Stockholders may otherwise have under
other agreements, under common law or otherwise.
(b) Each Underwriter will severally and not jointly
indemnify and hold harmless each Selling Stockholder and the
Company, each of its directors and each of its officers who sign
the Registration Statement, and each person, if any, who controls
the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities to which the
Company, any Selling Stockholder or any such director, officer or
controlling person may become subject under the Act, the Exchange
Act, Blue Sky Laws or other federal or state statutory laws or
regulations, at common law or otherwise (including in settlement
of any litigation, if such settlement is effected with the
written consent of such Underwriter and the Representative, which
shall not be unreasonably withheld), insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application,
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
- 32 -
therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application,
in reliance upon and in conformity with any written information
furnished to the Company by such Underwriter through the
Representative specifically for use in the preparation thereof;
each Underwriter will severally reimburse any legal or other
expenses reasonably incurred by the Company, any Selling
Stockholder or any such director, officer, or controlling person
in connection with investigating or defending any such loss,
claim, damage, liability or action. The indemnification
obligations of each Underwriter as provided above are in addition
to any liabilities any such Underwriter may otherwise have under
other agreements, under common law or otherwise. Notwithstanding
the provisions of this Section, no Underwriter shall be required
to indemnify the Company, any Selling Stockholder or any officer,
director or controlling person of the Company in any amount in
excess of the total price at which the Common Shares purchased by
any such Underwriter hereunder were offered to the public, plus
reimbursement for reasonable legal fees and other reasonable
expenses incurred. For all purposes of this Agreement, the
legend required by Item 502(d)(2) of Regulation S-B promulgated
under the Act, the name of each Underwriter and the amounts of
the selling concession and reallowance set forth in the
Prospectus constitute the only information furnished in writing
by or on behalf of any Underwriter expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, the
Prospectus (as from time to time amended or supplemented) or Blue
Sky Application.
(c) Each Selling Stockholder agrees to indemnify and
hold harmless the Company, each of its directors and each of its
officers who signs the Registration Statement, and each person,
if any, controlling the Company with the meaning of the Act or
the Exchange Act to the same extent as the foregoing indemnity
from the Company and the Selling Stockholders to each Underwriter
set forth in paragraph (a) hereof of this Section, but only with
respect to information relating to such Selling Stockholder
furnished in writing by such Selling Stockholder expressly for
use in connection with the Registration Statement or the
Prospectus. In case any action or claim shall be brought or
asserted against the Company, its directors, such officers or any
such controlling person, in respect of which indemnity may be
sought against any Selling Stockholder, such Selling Stockholder
shall have the rights and duties given the Company, and the
Company, such directors or officers and any such controlling
person shall have the rights and duties given to the Underwriters
by paragraph (a) of this Section.
- 33 -
(d) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party under this Section, notify
the indemnifying party in writing of the commencement thereof,
but the omission to so notify the indemnifying party will not
relieve any indemnifying party from any liability which it or he
may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any
indemnified party and such indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that
it or he may wish, jointly with all other indemnifying parties,
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, provided,
however, 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 or he 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 its election to assume the defense of such action and
upon approval by the indemnified party of counsel to the
indemnifying party, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless:
(i) the indemnified party shall have
employed such counsel in connection with the assumption
of legal defenses 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, approved by
the Representative in the event that one or more of the
Underwriters, their directors, officers or controlling
persons, are the indemnified parties);
(ii) the indemnifying party shall not have
employed counsel reasonably 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 at the expense of the
indemnifying party.
- 34 -
(e) If the indemnification provided for in this
Section is unavailable to an indemnified party under
subparagraphs (a), (b) or (c) hereof in respect of any losses,
claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified
party, shall, subject to the limitations hereinafter set forth,
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the Company,
each Selling Stockholder and the Underwriters from the
offering of the Common Shares; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but
also the relative fault of the Company, each Selling
Stockholder and the Underwriters in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other
relevant equitable considerations.
The respective relative benefits received by the Company,
each Selling Stockholder and the Underwriters shall be deemed to
be in such proportion so that the Underwriters are responsible
for the portion of the losses, claims, damages or liabilities
represented by the percentage that the underwriting discount per
share appearing on the cover page of the Prospectus bears to the
public offering price per share appearing thereon, the Selling
Stockholders are responsible for the portion represented by the
percentage that the total net proceeds received by the Selling
Stockholders bears to the total public offering price appearing
on the cover page of the Prospectus, provided that no Selling
Stockholder shall in any case be required to contribute or make
other payments under this Agreement which, in the aggregate,
exceeds the proceeds of the offering received by such Selling
Stockholder, and the Company is responsible for the remaining
portion. The relative fault of the Company, each Selling
Stockholder and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to the information supplied by
the Company, by each Selling Stockholder or by the Underwriters
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result
of the losses, claims, damages and liabilities referred to above
shall be deemed to include, subject to the limitations set forth
in paragraph (d) of this Section, any legal or other fees or
- 35 -
expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
or per capita allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method or
allocation which does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Common Shares
underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section
are several in proportion to their respective underwriting
commitments and not joint.
SECTION 13. Default of Underwriters. It shall be a condition
to this Agreement and the obligation of the Company and each of the
Selling Stockholders to sell and deliver the Common Shares hereunder, and
of each Underwriter to purchase the Common Shares hereunder in the manner
as described herein, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all of the
Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representative of all such Common Shares in accordance with
the terms hereof. If any Underwriter or Underwriters default in their
obligations to purchase Common Shares hereunder on either the First or
Second Closing Date and the aggregate number of Common Shares which such
defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of Common Shares which
the Underwriters are obligated to purchase on such Closing Date, the
Representative in the case of a default on the First Closing Date may make
arrangements satisfactory to the Company and the Selling Stockholders and
in the case of a default on the Second Closing Date, may make arrangements
satisfactory to the Company and TDH for the purchase of such Common Shares
by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the nondefaulting Underwriters
shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Common Shares which such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default or defaults occur is greater
than the above percentage and arrangements satisfactory to the
Representative, the Company and the Selling Stockholders in the case of a
default on the First Closing Date or arrangements satisfactory to the
- 36 -
Representative and the Company and TDH in the case of a default on the
Second Closing Date, for the purchase of such Common Shares by other
persons are not made with 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter,
the Company or any Selling Stockholder, except for the expenses to be paid
by the Company and the Selling Stockholders pursuant to Section 8 hereof
and except to the extent provided in Section 12 hereof.
In the event that Common Shares to which a default relates are to
be purchased by the non-defaulting Underwriters or by another party or
parties, the Representative or the Company shall have the right to
postpone the First or Second Closing Date, as the case may be, for not
more than seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any
other arrangements, may be effected. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section.
SECTION 14. Effective Date. If the date of execution of this
Agreement is subsequent to the date upon which the Registration Statement
becomes effective, this Agreement shall become effective immediately in
all respects. If the date of execution of this Agreement precedes the
date upon which the Registration Statement becomes effective, this
Agreement shall become effective immediately as to Sections 8, 10, 12 and
15 and, as to all other provisions, at 9:00 A.M., Baltimore time, on the
day following the date upon which the Registration Statement becomes
effective, unless such a day is a Saturday, Sunday or holiday (in which
event this Agreement shall become effective at such hour on the business
day next succeeding such Saturday, Sunday or holiday); notwithstanding the
foregoing, this Agreement shall nevertheless become effective (a) at such
earlier time after the Registration Statement becomes effective as the
Representative may determine on and by notice to the Company and to the
Attorneys-in-Fact for the Selling Stockholders or (b) by release of any of
the Common Shares for sale to the public. For the purposes of this
Section, the Common Shares shall be deemed to have been released upon the
release for publication of any newspaper advertisement relating to the
Common Shares or upon the release by the Representative of telegrams:
(a) advising the Underwriters that the Common Shares
are released for public offering; or
(b) offering the Common Shares for sale to securities
dealers, whichever may occur first.
SECTION 15. Termination. Without limiting the right to
terminate this Agreement pursuant to any other provisions hereof:
(a) This Agreement may be terminated by the Company
by notice to the Representative and to the Attorneys-in-Fact for
the Selling Stockholders or by the Representative by notice to
- 37 -
the Company and to the Attorneys-in-Fact for the Selling
Stockholders at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company
or any Selling Stockholder to any Underwriter (except for the
expenses to be paid by the Company and the Selling Stockholders
pursuant to Section 8 hereof and except to the extent provided in
Section 12 hereof) or of any Underwriter to the Company or any
Selling Stockholder.
(b) This Agreement may also be terminated by the
Representative prior to the First Closing Date, and the option
from the Company and TDH referred to in Section 5 hereof, if
exercised, may be canceled at any time prior to the Second
Closing Date, if in the Representative's reasonable judgment
payment for and delivery of the Common Shares is rendered
impracticable or inadvisable because:
(i) 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, the
American Stock Exchange, the NASDAQ National Market
System or over-the-counter market, or trading in
securities generally shall have been suspended on either
such exchange or over-the-counter market or a general
banking moratorium shall have been established by
federal, or New York authorities; or
(ii) any event shall have occurred or shall
exist which makes untrue or incorrect in any material
respect any statement or information contained in the
Registration Statement or which is not reflected in the
Registration Statement but should be reflected therein in
order to make the statements or information contained
therein, in light of the circumstances in which they are
made, not misleading in any material respect; or
(iii) an outbreak or escalation of major
hostilities or other national or international emergency
or calamity or any substantial change in political,
financial or economic conditions shall have occurred or
shall have accelerated to such extent, as in your
reasonable judgment, as will have a material adverse
effect on the general United States securities market or
make it impractical or inadvisable under such
circumstances to proceed with completion of the sale of
and payment for the Common Shares; or
(iv) since the respective dates as of which
information is given in the Registration Statement and
- 38 -
the Prospectus, a material adverse change has occurred in
the business, financial condition, results of operations,
properties or business prospects of the Company, whether
or not in the ordinary course of business; or
(v) trading in any of the securities of the
Company shall have been suspended by the Securities and
Exchange Commission, the NASDAQ National Market System.
Any termination pursuant to this subsection (b) shall be
without liability on the part of any Underwriter to the Company
or any Selling Stockholder or on the part of the Company or any
Selling Stockholders to any Underwriter (except for expenses to
be paid by the Company and the Selling Stockholders pursuant to
Section 8 hereof and except as to indemnification to the extent
provided in Section 12 hereof).
SECTION 16. Representations and Indemnities to Survive
Delivery. The respective indemnities, agreements, representations,
warranties, and other statements of the Company, of its officers or
directors, of the Selling Stockholders and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter, Selling Stockholder or the Company or any of its or their
partners, officers, directors or any controlling person, as the case may
be, and will survive delivery of and payment for the Common Shares sold
hereunder.
SECTION 17. Notices. All communications hereunder will be in
writing and, if sent to the Underwriters or the Representative will be
mailed, delivered or telegraphed and confirmed to you c/o Ferris, Baker
Watts, Incorporated, 100 Light Street, 8th Floor, Baltimore, Maryland
21202, Attention: Todd L. Parchman, Senior Vice President,
With a copy to:
Shapiro and Olander
20th Floor
36 S. Charles Street
Baltimore, Maryland 21201
Attention: Melissa Allison Warren
If sent to the Company, will be mailed, delivered or telegraphed
and confirmed to the Company at:
Industrial Training Corporation
13515 Dulles Technology Drive
Herndon, Virginia 22071
Attention: Philip J. Facchina
- 39 -
With a copy to:
Kirkpatrick & Lockhart
1800 M Street, N.W.
South Lobby, 9th Floor
Washington, D.C. 20036
Attention: Alan J. Berkeley
and, if sent to any of the Selling Stockholders, will be mailed,
delivered or telegraphed and confirmed to the Attorneys-in-Fact at such
address as they have previously furnished to the Company and the
Representative (or, in the event of the failure so to furnish, to the
Selling Stockholders at their respective addresses set forth in the
Custodian Agreement).
SECTION 18. Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, personal representatives and assigns, and to the benefit of
the officers and directors and controlling persons referred to in Section
12, and no other person will have any right or obligations hereunder. The
term "successors" shall not include any purchaser of the Common Shares as
such from any of the Underwriters merely by reason of such purchase.
SECTION 19. Partial Unenforceability. If any section,
paragraph or provision of this Agreement is for any reason determined to
be invalid or unenforceable, such determination shall not affect the
validity or enforceability of any other section, paragraph or provision
hereof.
SECTION 20. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Maryland.
SECTION 21. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon this Agreement will become a binding agreement among the
Company, the Selling Stockholders and the several Underwriters, including
you, all in accordance with its terms.
Very truly yours,
INDUSTRIAL TRAINING CORPORATION
By: ______________________________
- 40 -
Name: ____________________________
Title: ____________________________
Each of the Selling Stockholders named
in Schedule A hereto.
By:_________________________________
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
FERRIS, BAKER WATTS, INCORPORATED
By:
Acting as Representative of the several
Underwriters (including itself) named in
Schedule B hereto.
- 41 -
SCHEDULE A
----------
Number of Shares
to be Sold
----------------
Industrial Training Corporation . . . . . . 875,000
Selling Stockholders:
TDH II Limited . . . . . . . . . . . . 152,068
Steven L. Roden . . . . . . . . . . . 12,762
Harvey Shuster . . . . . . . . . . . . 5,947
Glen Crews . . . . . . . . . . . . . . 2,510
Phyllis Fobes . . . . . . . . . . . . 1,713
TOTAL . . . . . . . . . . . . . 1,050,000
=========
SCHEDULE B
----------
Number of
Name of Underwriter Shares
------------------ ---------
Ferris, Baker Watts, Incorporated
_________
Total . . . . . . . . . . . . . . . . . . 1,050,000
=========
SCHEDULE C
----------
Comfort Letter Ernst & Young LLP
--------------------------------
(1) They are independent public accountants with respect to
the Company within the meaning of the Act and the applicable rules and
regulations thereunder, and the answer to Item 10 of the Form SB-2
Registration Statement, insofar as it relates to them, is correct.
(2) In their opinion, the consolidated financial statements
of the Company included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Act and the rules and regulations thereunder.
(3) They have not examined any financial statements of the
Company as of any date or for any period subsequent to December 31, 1994;
although they have made an examination for the year ended December 31,
1994, the purpose (and therefore the scope) of the examination was to
enable them to express their opinion on the consolidated financial
statements as of December 31, 1994, and for the year then ended, but not
on the financial statements for any interim period within that period.
Therefore, they are unable to and do not express any opinion on the
unaudited consolidated balance sheet as of June 30, 1995 or the unaudited
consolidated statements of income, stockholder's equity and cash flows for
the six months ended June 30, 1995 and June 30, 1994 included in the
Registration Statement.
(4) For purposes of their letter, they have read the 1995
minutes of meetings of the stockholders and Board of Directors as set
forth in the minute books at September___, 1995, officials of the Company
having advised them that the minutes of all such meetings through that
date were set forth therein, and have carried out other procedures to
September ___, 1995 as follows:
(a) With respect to the six-month periods ended June
30, 1995 and June 30, 1994, they have:
(i) Read the unaudited consolidated balance
sheets of the Company as of June 30 1995 and June 30,
1994 and the unaudited consolidated statements of income,
stockholders' equity and cash flows for the six-month
periods ended June 30, 1995 and June 30, 1994 included in
the Registration Statement; and
(ii) Made inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters regarding (1) whether the unaudited
financial statements referred to under (4)(a)(i) comply
in form in all material aspects with the applicable
accounting requirements of the Act and the rules and
regulations thereunder and (2) whether those financial
statements are in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement.
(b) With respect to the period from July 1, 1995 to
August 31, 1995, they have:
(i) Read the unaudited consolidated
financial statements of the Company for July and August
of both 1994 and 1995 furnished to them by the Company,
officials of the Company having advised them that no
financial statements as of any date or for any period
subsequent to August 31, 1995 were available; and
(ii) Made inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters as to whether the unaudited financial
statements referred to in (4)(b)(i) are in conformity
with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited
financial statements included in the Registration
Statement.
(5) On the basis of the specified procedures detailed above
(which did not include an examination in accordance with generally
accepted auditing standards), nothing came to their attention as a result
of the foregoing procedures, however, that caused them to believe that:
(a) The financial statements described in (4)(a)(i),
included in the Registration Statement, do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the rules and regulations thereunder
or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that
of the audited financial statements; or
(b) At August 31, 1995 there was any change in the
capital stock or long-term debt of the Company as compared with
amounts shown in the June 30, 1995 unaudited consolidated balance
sheet included in the Registration Statement.
(6) Company officials have advised them that no statements as
of any date or for any period subsequent to August 31, 1995 are available;
accordingly, the procedures carried out by them after August 31, 1995
have, of necessity, been even more limited than those with respect to the
periods referred to in 4 above. They have made inquiries of certain
Company officials who have responsibility for financial and accounting
matters regarding whether (a) there was any change at September ___, 1991
in the capital stock or long-term debt of the Company or any decreases in
net current assets or stockholders' equity as compared with amounts shown
on the June 30, 1995 unaudited consolidated balance sheet included in the
Registration Statement or (b) for the period from July 1, 1995 to
September ____, 1995 there were any decreases, as compared with the
corresponding period in the preceding year, in net sales or in the total
or per share amounts of net earnings. On the basis of these inquiries and
their reading of the minutes as described in 4 above, nothing came to
their attention that caused them to believe that there was any such change
or decrease except in all instances for changes or decreases that the
Registration Statement discloses have occurred or may occur.
(7) In addition to the procedures referred to in 4, 5 and 6
above, they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Registration
Statement, which have previously been specified by the Representative and
which are specified in their letter, and have compared certain of such
items with, and have found such amounts, percentages, numerical data and
financial information to be in agreement with, the accounting, financial
and other records of the Company.