EXHIBIT 1.1
2,000,000 SHARES
DATAMETRICS CORPORATION
COMMON STOCK
__________________
UNDERWRITING AGREEMENT
__________________
Radnor, Pennsylvania
May __, 1995
Pennsylvania Merchant Group Ltd
Cruttenden Roth Incorporated
As Representatives of the Several Underwriters
Named in Schedule I Attached Hereto
Suite 390, Fidelity Court
259 Radnor-Chester Road
Radnor, Pennsylvania 19087
Dear Sirs:
Datametrics Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell an aggregate of 2,000,000 shares of its Common Stock, $0.01
par value (the "Common Shares"), to Pennsylvania Merchant Group Ltd ("PMG") and
Cruttenden Roth Incorporated (collectively with PMG, the "Representatives") and
the several underwriters named in Schedule I hereto (collectively with the
Representatives, the "Underwriters" and individually, an "Underwriter," which
terms shall also include any Underwriter substituted as hereinafter provided in
Section 11). The aforementioned 2,000,000 Common Shares to be issued and sold
to the several Underwriters by the Company are hereinafter referred to as the
"Offered Shares." The Offered Shares shall be offered to the public at an
initial offering price of $__________ per Offered Share (the "Offering Price").
In addition, the several Underwriters, in order to cover over-allotments in
the sale of the Offered Shares, may purchase from the Company within 30 business
days after the Effective Date (as hereinafter defined), for their own account
for offering to the public at the Offering Price, up to 300,000 additional
Common Shares (the "Optional Shares"), upon the terms and conditions set forth
in Section 4 hereof. The Offered Shares and the Optional Shares are hereinafter
collectively referred to as the "Shares." The Company, intending to be legally
bound hereby, confirms its agreement with each of the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to, and agrees with, the several Underwriters that:
(a) The Company has prepared in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules,
regulations, releases and instructions (the "Regulations") of the
Securities and Exchange Commission (the "SEC") under the Act in effect
at all applicable times and has filed with the SEC a registration
statement on Form S-2 (File No. 33-________) and one or more
amendments thereto registering the Shares under the Act. Any
preliminary prospectus included in such registration statement or
filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of
such registration statement, including all exhibits thereto and the
information contained in any form of final prospectus filed with the
SEC pursuant to Rule 424(b) of the Regulations in accordance with
Section 5(a) of this Agreement and deemed by virtue of Rule 430A of
the Regulations to be part of such registration statement at the time
it was declared effective, each as amended at the time such
registration statement became effective, are hereinafter collectively
referred to as the "Registration Statement." The final prospectus in
the form included in the Registration Statement or first filed with
the SEC pursuant to Rule 424(b) of the Regulations and any amendments
or supplements thereto is hereinafter referred to as the "Prospectus."
(b) The Registration Statement has become effective under the Act
as of the Effective Date, and the SEC has not issued any stop order
suspending the effectiveness of the Registration Statement or
preventing or suspending the use of any Preliminary Prospectus nor has
the SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an order. No
stop order suspending the sale of the Shares in any jurisdiction
designated by the Representatives pursuant to Section 5(f) hereof has
been issued, and no proceedings for that purpose have been instituted
or are threatened or, to the Company's knowledge, contemplated. The
Company has complied with any request of the SEC, or any state
securities commission in a state designated by the Representatives
pursuant to Section 5(f) hereof, for additional information to be
included in the Registration Statement or Prospectus or otherwise.
Each Preliminary Prospectus conformed to the Act and the Regulations
as of its date and did not as of its date contain an untrue statement
of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
except the foregoing shall not apply to statements in or omissions
from any Preliminary Prospectus in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf
of any Underwriter through the Representatives expressly for use
therein. The Registration Statement on the date on which it was
declared effective by the SEC (the "Effective Date") conformed, and
any post-effective amendment thereof on the date it shall become
effective, and the Prospectus at the time it is filed with the SEC
pursuant to Rule 424(b) of the Regulations and on the Closing Date (as
defined in Section 3 hereof) and any Option Closing Date (as defined
in Section 4(b) hereof), will conform to the requirements of the Act
and the Regulations, and neither the Registration Statement, any post-
effective amendment
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thereof nor the Prospectus will, on any of such respective dates,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by or
on behalf of any Underwriter through the Representatives expressly for
use therein. It is understood that the statements appearing in any
Preliminary Prospectus, the Prospectus or the Registration Statement
(A) on the inside front cover page with respect to stabilization, (B)
in the table in the section entitled "Underwriting," and the second
paragraph following such table with respect to the amount of the
dealers' concession and allowance and reallowance discount and (C) in
the section entitled "Legal Matters" with respect to the identity of
counsel for the Underwriters constitute the only information furnished
in writing by or on behalf of any Underwriter for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement.
(c) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, with all necessary
power and authority, corporate and other, and all required licenses,
permits, certifications, registrations, approvals, consents and
franchises to own or lease and operate its properties and to conduct
its business as described in the Prospectus and to execute, deliver
and perform this Agreement. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Company.
(d) The Company does not own any stock or other equity interest
in, or control, directly or indirectly, any corporation, partnership
or other entity other than Datametrics, Limited, which has no assets
and conducts no business.
(e) The Company has all necessary power and authority to execute
and deliver the Warrants to purchase Common Shares to be issued and
sold to the Representatives under the terms of Warrant Agreement (as
hereinafter defined) in accordance with Section 5(r) of this Agreement
(the "Representatives Warrants").
(f) This Agreement, the Warrant Agreement and the Representatives
Warrants have been duly authorized, executed and delivered by the
Company and constitute its legal, valid and binding obligations,
enforceable against the Company in accordance with their respective
terms, except as rights to indemnity and contribution hereunder or
thereunder may be limited by federal or state securities laws or
principles of public policy. This Agreement, the Warrant Agreement
and the Representatives Warrants conform to the description thereof in
the Prospectus.
(g) The execution, delivery and performance of this Agreement,
the Warrant Agreement and the Representatives Warrants by the Company
does not and will not, with or without the giving of notice or the
lapse of time, or both, (A) conflict with any terms or provisions of
the Certificate of Incorporation or
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By-laws of the Company, as amended to the date hereof and the Closing
Date or Option Closing Date, as the case may be; (B) result in a
breach of, constitute a default under, result in the termination or
modification of or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties of
the Company pursuant to any indenture, mortgage, deed of trust,
contract, commitment or other agreement or instrument to which the
Company is a party or by which any of its properties or assets are
bound or affected; (C) violate any law, rule, regulation, judgment,
order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or businesses or (D) result
in a breach, termination or lapse of the power and authority of the
Company to own or lease and operate its properties and conduct its
business as described in the Prospectus.
(h) The Company has authorized and outstanding capital stock and,
as of the date or dates indicated the Company had the capitalization,
set forth under the caption "Capitalization" in the Prospectus and
will have the as-adjusted capitalization set forth under the caption
"Capitalization" in the Prospectus. On the Effective Date, the
Closing Date and any Option Closing Date, there will be no options or
warrants for the purchase of, other outstanding rights to purchase,
agreements or obligations to issue or agreements or other rights to
convert or exchange any obligation or security into, capital stock of
the Company or securities convertible into or exchangeable for capital
stock of the Company, except as described in the Prospectus with
respect to the outstanding options that have been granted to employees
and directors to purchase 1,419,290 Common Shares (the "Employee
Options"), the outstanding warrants to purchase 170,000 Common Shares
(the "Warrants"), the Representatives Warrants and the Over-allotment
Option (as hereinafter defined).
(i) The authorized capital stock of the Company, including,
without limitation, the outstanding Common Shares and the Shares being
issued on the Closing Date and Option Closing Date (if any and to the
extent applicable), conforms to the descriptions thereof in the
Prospectus, and such descriptions conform to the descriptions thereof
set forth in the instruments defining the same. The information in
the Prospectus insofar as it relates to the Employee Options, the
Representatives Warrants and the Warrants, in each case as of the
Effective Date, the Closing Date and any Option Closing Date, is true,
correct and complete.
(j) The outstanding Common Shares have been duly authorized and
are validly issued, fully paid and non-assessable. The Employees
Options and the Warrants have been duly authorized and validly issued
and are legal, valid and binding obligations enforceable against the
Company in accordance with their terms. The Warrant Agreement and the
Representatives Warrants, as of the Closing Date, will have been duly
authorized and validly issued and, when executed and delivered by the
Company, will be legal, valid and binding obligations enforceable
against the Company in accordance with their terms. The Common Shares
issuable pursuant to the Employee Options, the Representatives
Warrants and the Warrants, when issued in accordance with the
respective terms thereof, will be duly authorized, validly issued,
fully paid and non-assessable. None of such outstanding Common
Shares,
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Employee Options, or Warrants were, and none of the Representatives
Warrants or such issuable Common Shares will be, issued in violation
of any preemptive rights of any security holder of the Company. The
Company has reserved a sufficient number of Common Shares for issuance
pursuant to the Employee Options, the Representatives Warrants and the
Warrants. The holders of the outstanding Common Shares are not, and
will not be, subject to personal liability solely by reason of being
such holders, and the holders of the Common Shares issuable pursuant
to the Employee Options, the Representatives Warrants and the Warrants
will not be subject to personal liability solely by reason of being
such holders. The offers and sales of the outstanding Common Shares,
the Employee Options and the Warrants were, and the issuance of the
Common Shares pursuant to the Employee Options, the Representatives
Warrants and the Warrants will be, made in conformity with applicable
registration requirements or exemptions therefrom under federal and
applicable state securities laws.
(k) The issuance and sale of the Shares by the Company have been
duly authorized and, when the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and non-assessable, and the holders thereof
will not be subject to personal liability solely by reason of being
such holders. None of the Shares will be issued in violation of any
preemptive rights of any stockholder of the Company. The certificates
representing the Shares are in proper legal form under, and conform to
the requirements of the Delaware General Corporation Law, as amended
(the "GCL"). Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives
any security holder of the Company any rights, other than those which
have been waived, for or relating to the registration of any Common
Shares or other security of the Company.
(l) No consent, approval, authorization, order, registration,
license or permit of any court, government, governmental agency,
instrumentality or other regulatory body or official is required for
the valid authorization, issuance, sale and delivery by the Company of
any of the Shares, or for the execution, delivery or performance by
the Company of this Agreement, except such as may be required for the
registration of the Shares under the Act, the Regulations and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which consent, approval and authorization have been obtained, and for
compliance with the applicable state securities or Blue Sky laws, or
the By-laws, rules and other pronouncements of the National
Association of Securities Dealers, Inc. (the "NASD"). Upon the
effectiveness of the Registration Statement, the Common Shares will be
registered pursuant to Section 12(g) of the Exchange Act, and will be
included on the American Stock Exchange (the "AMEX"). The Company has
taken no action designed, or likely, to have the effect of terminating
the registration of the Common Shares under Section 12(g) of the
Exchange Act or the inclusion of the Common Shares on the AMEX, nor
has the Company received any notification that the SEC or the AMEX is
contemplating terminating such registration or inclusion.
(m) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of or references to contracts,
agreements or other documents,
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are accurate in all material respects and present or summarize fairly,
the information required to be disclosed under the Act and the
Regulations, and there are no contracts, agreements or other documents
required to be described or referred to in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration Statement
under the Act or the Regulations that have not been so described,
referred to or filed, as required.
(n) The financial statements (including the notes thereto) filed
as part of any Preliminary Prospectus, the Prospectus and the
Registration Statement present fairly the financial position of the
Company, as of the respective dates thereof, and the results of
operations and cash flows of the Company, for the periods indicated
therein, all in conformity with generally accepted accounting
principles consistently applied. The supporting schedules included in
the Registration Statement fairly state the information required to be
stated therein in relation to the basic financial statements taken as
a whole. The financial information included in the Prospectus under
the captions "Prospectus Summary" and "Selected Financial Data"
presents fairly the information shown therein and has been compiled on
a basis consistent with that of the audited financial statements
included in the Registration Statement.
(o) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been (A) any material adverse change
(including, whether or not insured against, any material loss or
damage to any assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets,
management, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company, (B) any
transaction entered into by the Company that is material to the
Company, (C) any dividend or distribution of any kind declared, paid
or made by the Company on its capital stock, (D) any liabilities or
obligations, direct or indirect, incurred by the Company that are
material to the Company, or (E) any material change in the short-term
debt or long-term debt of the Company. The Company does not have any
contingent liabilities or obligations that are material and that are
not disclosed in the Prospectus.
(p) The Company has not distributed and, prior to the later to
occur of the Closing Date, the Option Closing Date or the completion
of the distribution of the Shares, will not distribute any offering
material in connection with the offering or sale of the Shares other
than the Registration Statement, each Preliminary Prospectus and the
Prospectus, in any such case only as permitted by the Act and the
Regulations.
(q) The Company has filed with the appropriate federal, state and
local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns that are required to be filed,
or has duly obtained extensions of time for the filing thereof and has
paid all taxes shown on such returns and all assessments received by
it to the extent that the same have become due. The Company has not
executed or filed with any taxing authority, foreign or domestic, any
agreement extending the period for assessment or collection of any
income taxes, is not a party to any pending action or proceeding by
any foreign or domestic governmental
6
agencies for the assessment or collection of taxes, and no claims for
assessment or collection of taxes have been asserted against the
Company that might materially adversely affect the general affairs,
properties, assets, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the
Company.
(r) Ernst & Young LLP, which is certifying the financial
statements included in the Prospectus and forming a part of the
Registration Statement, is a firm of independent public accountants as
required by the Act and the Regulations.
(s) The Company is not in violation of, or in default under, any
of the terms or provisions, of (A) its Certificate of Incorporation or
Bylaws, each as amended to the date hereof, the Closing Date or the
Option Closing Date, as the case may be, (B) any indenture, mortgage,
deed of trust, contract, loan or credit agreement, commitment or other
agreement or instrument to which the Company is a party or by which it
or any of its properties are bound or affected, (C) any law, rule,
regulation, judgment, order or decree of any government or
governmental agency, instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its properties or
businesses or (D) any license, permit, certification, registration,
approval, consent or franchise referred to in subsections (b) or (c)
of this Section 1.
(t) There are no claims, actions, suits, proceedings,
arbitrations investigations, or inquiries pending before, or
threatened or, to the Company's knowledge, contemplated by, any
governmental agency, instrumentality, court or tribunal, domestic or
foreign, or before any private arbitrational tribunal, relating to or
affecting the Company or its properties or businesses that might
affect the issuance or validity of any of the Shares or the validity
of any of the outstanding Common Shares, or that, if determined
adversely to the Company, would, in any case or in the aggregate,
result in any material adverse change in the general affairs,
properties, assets, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects, of the
Company; nor is there any reasonable basis for any such claim, action,
suit, proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental
agency, instrumentality or other tribunal enjoining the Company from,
or requiring the Company to take or refrain from taking any action, or
to which the Company, or any of its properties, assets or businesses
is bound or subject.
(u) The Company owns, or possesses adequate rights to use all
patents, patent applications, trademarks, trademark registrations,
applications for trademark registration, trade names, service marks,
licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
technology, information, systems, design methodologies and devices or
procedures developed or derived from the Company's businesses), trade
secrets, confidential information, processes and formulations
necessary for, used in or proposed to be used in the conduct of its
business as described in the Prospectus (collectively, the
"Intellectual Property") that, if not so owned or possessed, would
materially adversely affect the general affairs, properties, condition
(financial or
7
otherwise), results of operations, stockholders' equity, business or
prospects of the Company. The Company has not infringed, is not
infringing or has not received any notice of conflict with the
asserted rights of others with respect to the Intellectual Property,
and no others have infringed upon or are in conflict with the
Intellectual Property.
(v) The Company has obtained all permits, licenses and other
authorizations that are required, to the extent required, under all
environmental laws, including but not limited to the Federal Water
Pollution Control Act (33 U.S.C. (S)1251 et seq.), Resource
Conservation & Recovery Act (42 U.S.C. (S)6901 et seq.), Safe Drinking
Water Act (21 U.S.C. (S)349, 42 U.S.C. (S)(S)201, 300f), Toxic
Substances Control Act (15 U.S.C. (S)2601 et seq.), Clean Air Act (42
U.S.C. (S) 7401 et seq.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. (S)9601 et seq.), other
appropriate laws of jurisdictions in which the Company's products have
been used or located and any other laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including, without limitation, ambient
air, surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes under any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder
(collectively, the "Environmental Laws"). The Company is in
compliance with all terms and conditions of any required permits,
licenses and authorizations, and is in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in the
Environmental Laws, except where the failure to so comply would not
have a material adverse effect on the Company.
(w) There are no present or, to the Company's knowledge, past
events, conditions, circumstances, activities, practices, incidents,
actions or plans relating to the business as presently being conducted
by the Company that interfere with or prevent compliance with or
continued compliance with the Environmental Laws, or which would be
reasonably likely to give rise to any material legal liability
(whether statutory or common law) or otherwise would be reasonably
likely to form the basis of any claim, action, demand, suit,
proceeding, hearing, notice of violation, study, investigation,
remediation, or clean up based on or related to the generation,
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release
into the workplace, community or environment of any pollutant,
contaminant, chemical or industrial, toxic, or hazardous substance or
waste.
(x) The Company has good and marketable title to all personal
property (tangible and intangible) described in the Prospectus as
being owned by it, free and clear of all liens, security interests,
charges or encumbrances, except such as are described in the
Prospectus. The Company has adequately insured the personal property
of the Company against loss or damage by fire or other casualty and
maintains, in adequate amounts, insurance against such other risks as
management
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of the Company deems appropriate. The Company does not own any real
property, and all real property used or leased by the Company, as
described in the Prospectus (the "Premises"), is held by the Company
under a valid, subsisting and enforceable lease. The Premises, and
all operations conducted thereon, are now and, since the Company began
to use such Premises, always have been and, to the Company's
knowledge, prior to when the Company began to use such Premises,
always had been, in compliance with the Environmental Laws. There is
no, and the Company has not received notice of any, claim, demand,
investigation, regulatory action, suit or other action instituted or
threatened against any of them or the Premises relating to any of the
Environmental Laws. The Company has not received any notice of
material violation, citation, complaint, order, directive, request for
information or response thereto, notice letter, demand letter or
compliance schedule to or from any governmental or regulatory agency
arising out of or in connection with hazardous substances (as defined
by applicable Environmental Laws) on, about, beneath, arising from or
generated at the Premises.
(y) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) No unregistered securities of the Company have been sold by
the Company or on behalf of the Company by any person or persons
controlling, controlled by or under common control with the Company
within the three years prior to the date hereof, except as disclosed
in the Registration Statement.
(aa) Each contract or other instrument (however characterized or
described) to which the Company is a party or by which any of the
properties or business of it is bound or affected and to which
reference has been made in the Prospectus or which has been filed as
an exhibit to the Registration Statement has been duly and validly
executed by the Company, and by the other parties thereto. Except as
described in the Prospectus, each such contract or other instrument is
in full force and effect and is enforceable against the parties
thereto in accordance with its terms, and neither the Company, nor any
other party is in default thereunder and no event has occurred that,
with the lapse of time or the giving of notice, or both, would
constitute a default thereunder.
(bb) Except for the Company's 401(k), disability, health and life
insurance plans, the Company has not had any employee benefit plan,
profit sharing plan, employee pension benefit plan or employee welfare
benefit plan or deferred compensation arrangements (collectively,
"Plans") that are subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, or the rules and regulations
thereunder ("ERISA"). All Plans that are subject to ERISA are, and
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have been at all times since their establishment, in compliance with
ERISA and, to the extent required by the Internal Revenue Code of
1986, as amended (the "Code"), in compliance with the Code. The
Company has not had any employee pension benefit plan that is subject
to Part 3 of Subtitle B of Title 1 of ERISA or any defined benefit
plan or multiemployer plan. The Company has not maintained retiree
life and retiree health insurance plans that are employee welfare
benefit plans providing for continuing benefit or coverage for any
employee or any beneficiary of any employee after such employee's
termination for employment, except as required by Section 4980B of the
Code. No fiduciary or other party in interest with respect to any of
the Plans has caused any of such Plans to engage in a "prohibited
action" as defined in Section 406 of ERISA. As used in this
subsection, the terms "defined benefit plan," "employee benefit plan,"
"employee pension benefit plan," "employee welfare benefit plan,"
"fiduciary" and "multiemployer plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
(cc) No labor dispute exists with the employees of the Company
and no such labor dispute is imminent. There is no existing or, to
the Company's knowledge, imminent labor disturbance by the employees
of any of the Company's principal suppliers, contractors or customers
(including, without limitation, any distributors or end-users of its
products).
(dd) The Company has not incurred any liability for any finder's
fees or similar payments in connection with the transactions
contemplated herein.
(ee) Except as described in the Prospectus, the Company is not a
party to, and is not bound by, any agreement pursuant to which any
material royalties, honoraria or fees are payable by the Company to
any person by reason of the ownership or use of any Intellectual
Property.
(ff) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Regulations.
(gg) The Company is familiar with the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future
to continue to conduct, its affairs in such a manner to ensure that it
will not become an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(hh) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company has, directly or indirectly, (A) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to any political activity, (B) made any unlawful
payment to foreign or domestic governments or governmental officials
or employees or to foreign or domestic political parties or campaigns
from corporate funds, (C) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended or (D) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
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Any certificate signed by any officer of the Company in such capacity and
delivered to the Representatives or to counsel for the Underwriters
pursuant to this Agreement shall be deemed a representation and warranty by
the Company to the several Underwriters as to the matters covered thereby.
2. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company shall sell the
Offered shares to the several Underwriters at the Offering Price less the
underwriting discount shown on the cover page of the Prospectus (the
"Underwriting Discount"), and the Underwriters, severally and not jointly, shall
purchase from the Company, on a firm commitment basis, at the Offering Price
less the Underwriting Discount, the respective Offered Shares set forth opposite
their names on Schedule I hereto. In making this Agreement, each Underwriter is
contracting severally, and not jointly, and, except as provided in Sections 4
and 11 hereof, the agreement of each Underwriter is to purchase only that number
of Offered shares specified with respect to that Underwriter in Schedule I
hereto. The Underwriters shall offer the Offered Shares to the public as set
forth in the Prospectus.
3. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be made to
the Company by certified or official bank check payable to the order of the
Company in Philadelphia Clearing House funds (next day funds), at the offices of
Latham & Watkins, 633 West Fifth Street, Los Angeles, California 90071, or at
such other location as shall be agreed upon by the Company and the
Representatives, or in immediately available funds wired to such account or
accounts as the Company may specify (with all costs and expenses incurred by the
Underwriters in connection with such settlement in immediately available funds
(including, but not limited to, interest or cost of funds expenses) to be born
by the Company), against delivery of the Offered Shares to the Representatives
at the offices of PMG, Suite 390, Fidelity Court, 259 Radnor-Chester Road,
Radnor, Pennsylvania 19087, for the respective accounts of the Underwriters.
Such payments and delivery will be made at 10:00 A.M., Philadelphia time, on the
fifth business day after the date of this Agreement or at such other time and
date not later than five business days thereafter as the Representatives and the
Company shall agree upon. Such time and date are referred to herein as the
"Closing Date." The certificates representing the Offered Shares to be sold and
delivered will be in such denominations and registered in such names as the
Representatives request not less than two full business days prior to the
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the office of the Company's Transfer Agent, not less
than one full business day prior to the Closing Date.
4. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Offered Shares as contemplated by the
Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Company to
purchase all or any part of the Optional Shares from the Company (the
"Over-allotment Option"). The purchase price per share to be paid for the
Optional Shares shall be the Offering Price less the Underwriting Discount.
The Over-allotment Option granted hereby may be exercised by the
Representatives on behalf of the several Underwriters as to all or any part
of the Optional Shares at any time and from time to time within 30 business
days after the Effective Date. No Underwriter shall be under any
obligation to purchase any Optional Shares prior to an exercise of the
Over-allotment Option.
11
(b) The Over-allotment Option granted hereby may be exercised by the
Representatives on behalf of the several Underwriters by giving notice to
the Company by a letter sent by registered or certified mail, postage
prepaid, telex, telegraph, telegram or facsimile (such notice to be
effective when sent), addressed as provided in Section 13 hereof, setting
forth the number of Optional Shares to be purchased, the date and time for
delivery of and payment for the Optional Shares and stating that the
Optional Shares referred to therein are to be used for the purpose of
covering over-allotments in connection with the distribution and sale of
the Offered Shares. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment shall not be earlier
than either five full business days thereafter or the Closing Date,
whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment shall be a
date selected by the Representatives that is not later than five full
business days after the exercise of the Over-allotment Option. The date
and time set forth in such a notice is referred to herein as an "Option
Closing Date," and a closing held pursuant to such a notice is referred to
herein as an "Option Closing." The number of Optional Shares to be sold to
each Underwriter pursuant to each exercise of the Over-allotment Option
shall be the number that bears the same ratio to the aggregate number of
Optional Shares being purchased through such Over-allotment Option exercise
as the number of Offered Shares opposite the name of such Underwriter in
Schedule I hereto bears to the total number of all Offered Shares; subject,
however, to such adjustment as the Representatives may approve to eliminate
fractional shares and subject to the provisions for the allocation of
Optional Shares purchased for the purpose of covering over-allotments set
forth in Section 9 of the Agreement Among Underwriters. Upon each exercise
of the Over-allotment Option, the Company shall become obligated and sell
to the Representatives for the respective accounts of the Underwriters, and
on the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set forth,
and the several Underwriters shall become severally, but not jointly,
obligated to purchase from the Company, the number of Optional Shares
specified in each notice of exercise of the Over-allotment Option.
(c) Payment for the Optional Shares shall be made to the Company by
certified or official bank check payable to the order of the Company in
Philadelphia Clearing House funds (next day funds), at the office of Latham
& Watkins, 633 West Fifth Street, Los Angeles, California 90071, or such
other location as shall be agreed upon by the Company and the
Representatives, or in immediately available funds wired to such account as
the Company may specify (with all costs and expenses incurred by the
Underwriters in connection with such settlement in immediately available
funds (including, but not limited to, interest or cost of funds expenses)
to be borne by the Company), against delivery of the Optional Shares to the
Representatives at the offices of PMG, Suite 390, Fidelity Court, 259
Radnor-Chester Road, Radnor, Pennsylvania 19087, for the respective
accounts of the Underwriters. The certificates representing the Optional
Shares to be issued and delivered will be in such denominations and
registered in such names as the Representatives request not less than two
full business days prior to the Option Closing Date, and will be made
available to the Representatives for inspection, checking and packaging at
the office of the Company's Transfer Agent not less than one full business
day prior to the Option Closing Date.
12
5. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the Company will
timely file the Prospectus pursuant to and in compliance with Rule 424(b)
of the Regulations and will advise the Representatives of the time and
manner of such filing.
(b) The Company will not at any time, whether before or after the
Registration Statement shall have become effective, during such period as,
in the opinion of counsel for the Underwriters, the Prospectus is required
by law to be delivered in connection with sales by the Underwriters or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representatives have not been
previously advised and furnished a copy, or which is not in compliance with
the Regulations, or, during the period before the distribution of the
Offered Shares and the Optional Shares is completed, file or publish any
amendment or supplement to the Registration Statement or Prospectus to
which the Representatives reasonably object in writing.
(c) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time and date that this Agreement is
executed and delivered by the parties hereto, to become effective and will
advise the Representatives immediately, and confirm such advice in writing,
(i) when the Registration Statement, or any post-effective amendment to the
Registration Statement, is filed with the SEC, (ii) of the receipt of any
comments from the SEC, (iii) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective,
or when any supplement to the Prospectus or any amended Prospectus has been
filed, (iv) of any request of the SEC for amendment or supplementation of
the Registration Statement or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under the
Act and Regulations, of the happening of any event which in the Company's
judgment makes any material statement in the Registration Statement or the
Prospectus untrue or which requires any changes to be made in the
Registration Statement or Prospectus in order to make any material
statements therein not misleading and (vi) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, the suspension of the qualification of any of
the Shares for offering or sale in any jurisdiction in which the
Underwriters intend to make such offers or sales, or of the initiation or
threatening of any proceedings for any such purposes. The Company will use
its best efforts to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued,
to obtain as soon as possible the lifting thereof.
(d) The Company has delivered to the Representatives, without charge,
and will continue to deliver from time to time until the Effective Date, as
many copies of each Preliminary Prospectus as the Representatives may
reasonably request. The Company will deliver to the Representatives,
without charge, as soon as possible after the Effective Date, and
thereafter from time to time during the period when delivery of the
Prospectus is required under the Act, such number of copies of the
Prospectus (as supplemented or amended, if the Company makes any
supplements or amendments to the Prospectus) as the Representatives may
reasonably request. The Company hereby consents to the use of such copies
of each Preliminary Prospectus and the Prospectus for purposes permitted by
the Act,
13
the Regulations and the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered or sold by the several Underwriters and by all
dealers to whom Shares may be offered or sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter as
the Prospectus is required by the Act to be delivered in connection with
sales by any Underwriter or dealer. The Company has furnished or will
furnish to the Representatives two signed copies of the Registration
Statement as originally filed and of all amendments thereto, whether filed
before or after the Effective Date, two copies of all exhibits filed
therewith and two signed copies of all consents and certificates of
experts, and will deliver to the Representatives such number of conformed
copies of the Registration Statement, including financial statements and
exhibits, and all amendments thereto, as the Representatives may reasonably
request.
(e) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of offers and sales of, and dealings in, the Shares for as long
as may be necessary to complete the distribution of the Shares as
contemplated hereby.
(f) The Company will furnish such information as may be required and
otherwise cooperate in the registration or qualification of the Shares, or
exemption therefrom, for offering and sale by the several Underwriters and
by dealers under the securities or Blue Sky laws of such jurisdictions in
which the Representatives determine to offer the Shares, after consultation
with the Company, and will file such consents to service of process or
other documents necessary or appropriate in order to effect such
registration or qualification; provided, however, that no such
qualification shall be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to taxation or qualification
as a foreign corporation doing business in such jurisdiction where it is
not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Shares, in any jurisdiction where it is not now so subject.
The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect
for so long a period as is required under the laws of such jurisdiction for
such offering and sale.
(g) Subject to subsection (b) of this Section 5, in case of any event,
at any time within the period during which, in the opinion of counsel for
the Underwriters, a prospectus is required to be delivered under the Act
and Regulations, as a result of which event any Preliminary Prospectus or
the Prospectus, as then amended or supplemented, would contain, in the
judgment of the Company or in the opinion of counsel for the Underwriters,
an untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, if it is
necessary at any time to amend any Preliminary Prospectus or the Prospectus
to comply with the Act and Regulations or any applicable securities or Blue
Sky laws, the Company promptly will prepare and file with the SEC, and any
applicable state securities commission, an amendment or supplement that
will correct such statement or omission or an amendment that will effect
such compliance and will furnish to the Representatives such number of
copies of such amendment or amendments or supplement or supplements to such
Preliminary Prospectus or the Prospectus (in form and substance
satisfactory to the Representatives and counsel for Underwriters) as the
Representatives may reasonably request. For purposes of this subsection,
the Company will furnish such information to the
14
Representatives, the Underwriters' counsel and counsel for the Company as
shall be necessary to enable such persons to consult with the Company with
respect to the need to amend or supplement any Preliminary Prospectus or
the Prospectus, and shall furnish to the Representatives and the
Underwriters' counsel such further information as each may from time to
time reasonably request. If the Company and the Representatives agree that
any Preliminary Prospectus or the Prospectus should be amended or
supplemented, the Company, if requested by the Representatives, will, if
and to the extent required by law, promptly issue a press release
announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(h) The Company will make generally available to its security holders
as soon as practicable and in any event not later than 45 days after the
end of the period covered thereby, an earnings statement of the Company
(which need not be audited unless required by the Act, the Regulations, the
Exchange Act or the rules or regulations thereunder) that shall comply with
Section 11(a) of the Act and cover a period of at least 12 consecutive
months beginning not later than the first day of the Company's fiscal
quarter next following the Effective Date.
(i) For a period of five years from the Effective Date, the Company
will deliver to the Representatives: (A) a copy of each report or
document, including, without limitation, reports on Forms 8-K, 10-C, 10-K
and 10-Q (or such similar forms as may be designated by the SEC),
registration statements and any exhibits thereto, filed with or furnished
to the SEC or any securities exchange or the NASD, on the date each such
report or document is so filed or furnished, (B) as soon as practicable,
copies of any reports or communications (financial or other) of the Company
mailed to its security holders and (C) every material press release in
respect of the Company or its affairs that was released or prepared by the
Company.
(j) For a period of three years from the Effective Date, the Company
will deliver to the Representatives, subject to execution of an appropriate
confidentiality agreement, such additional information concerning the
business and financial condition of the Company and its subsidiaries as the
Representatives may from time to time reasonably request in writing,and
which can be prepared or obtained by the Company without unreasonable
effort or expense.
(k) During the course of the distribution of the Shares, the Company
has not taken, nor will it take, directly or indirectly, any action
designed to or that might, in the future, reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common
Shares.
(l) The Company will cause each person listed on Schedule II hereto to
execute a legally binding and enforceable agreement (a "lockup agreement")
to, for a period of 120 days from the Effective Date, not sell, offer to
sell, contract to sell, grant any option for the sale of or otherwise
transfer or dispose of any Common Shares (except for the sale of the Shares
as contemplated by this Agreement), any options to purchase Common Shares
or any securities convertible into or exchangeable for Common Shares
(excluding the issuance of Common Shares pursuant to the Employee Options)
without the prior written consent of PMG, which lockup agreement shall be
in form and substance satisfactory to the
15
Representatives and the Underwriters' counsel, and deliver such lockup
agreement to the Representatives prior to the Effective Date. Appropriate
stop transfer instructions will be issued by the Company to the transfer
agent for the securities affected by the lockup agreements.
(m) The Company will not sell, issue, contract to sell, offer to sell
or otherwise dispose of any Common Shares, options to purchase Common
Shares or any other security convertible into or exchangeable for Common
Shares, from the date of the Effective Date through the period ending 120
days after the Effective Date, without the prior written consent of PMG,
except for the sale of the Shares as contemplated by this Agreement, the
granting of options, and the issuance of Common Shares upon their exercise,
under the Company's stock option plans described in the Prospectus, the
issuance of Common Shares pursuant to the Employee Options and the Warrants
and the issuance of the Representatives Warrants.
(n) The Company will use all reasonable efforts to maintain the
inclusion of the Common Shares on the AMEX.
(o) The Company shall, at its sole cost and expense, supply and
deliver to the Representatives and the Underwriters' counsel (in the form
they require), within a reasonable period after the Closing Date, six
transaction binders, each of which shall include the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, each Preliminary Prospectus, the Prospectus, the Preliminary
Blue Sky Memorandum and any supplement thereto and all underwriting and
other closing documents.
(p) Upon the Representatives' request, individually and not as the
Representatives of the several Underwriters, the Company shall make
available its stock transfer records for examination by the Representatives
at the offices of the Company's transfer agent for a period of 12 months
after the Effective Date.
(q) The Company will use the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description
thereof set forth in the Prospectus and shall file such reports with the
SEC with respect to the sale of such Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the
Act.
(r) On the Closing Date, the Company shall sell to the
Representatives, at a purchase price of $0.001 per share, Representatives
Warrants to purchase 200,000 Common Shares. Such Representatives Warrants
shall be issued pursuant to the terms of the Warrant Agreement and shall
have an exercise price per share equal to 120 percent of the Offering
Price, shall be exercisable during the period beginning on the first
anniversary of the Effective Date and ending on the fifth anniversary of
the Effective Date, shall contain customary anti-dilution and registration
rights provisions and shall otherwise be in a form that is acceptable to
the Representatives and their counsel.
6. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this Agreement are
consummated and regardless of the reason this Agreement is terminated, the
Company will
16
pay or cause to be paid, and bear or cause to be borne, all costs and
expenses incident to the performance of the obligations of the Company
under this Agreement, including: (i) the fees and expenses of the
accountants and counsel for the Company incurred in the preparation of the
Registration Statement and any post-effective amendments thereto (including
financial statements and exhibits), each Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto; (ii) printing and
mailing expenses associated with the Registration Statement and any post-
effective amendments thereto, each Preliminary Prospectus, the Prospectus
(including any supplement thereto), this Agreement, the Agreement Among
Underwriters, the Underwriters' Questionnaire, the Power of Attorney, the
Selected Dealer Agreement and related documents and the Preliminary Blue
Sky Memorandum and any supplement thereto; (iii) the costs (other than fees
and expenses of the Underwriters' counsel except in connection with Blue
Sky filings or exemptions as provided herein) incident to the
authentication, issuance, delivery and transfer of the Shares to the
Underwriters; (iv) all taxes, if any, on the issuance, delivery and
transfer of the Shares to be sold by the Company; (v) the fees, expenses
and all other costs of qualifying the Shares for the sale under the
securities or Blue Sky laws of those jurisdictions in which the Shares are
to be offered or sold including the reasonable fees and disbursements of
Underwriters' counsel and such local counsel as may have been reasonably
required and retained for such purpose; (vi) the fees, expenses and other
costs of, or incident to, securing any review or approvals by or from the
NASD exclusive of fees of the Underwriters' counsel; (vii) the filing fees
of the SEC; (viii) the cost of furnishing to the Underwriters copies of the
Registration Statement, each Preliminary Prospectus and the Prospectus
(including any supplement or amendment thereto) as herein provided; (ix)
the Company's travel expenses in connection with meetings with the
brokerage community and institutional investors and expenses associated
with hosting such meetings, including meeting rooms, meals, facilities and
ground transportation expenses; (x) the costs and expenses associated with
settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by the Company; (xi) the fees for
inclusion of the Shares on the AMEX; (xii) the cost of printing and
engraving certificates for the Shares; (xiii) the cost and charges of any
transfer agent; and (xiv) all other costs and expenses reasonably incident
to the performance of its obligations hereunder that are not otherwise
specifically provided for in this Section 6, provided that, except as
specifically set forth in subsection (c) of this Section 6, the
Underwriters shall be responsible for their out-of-pocket expenses,
including their lodging and travel expenses associated with meetings with
the brokerage community and institutional investors, and the fees and
expenses of their counsel for other than Blue Sky work.
(b) The Company shall pay as due any registration, qualification and
filing fees and any accountable out-of-pocket disbursements in connection
with such registration, qualification or filing in the jurisdictions in
which the Representatives determine, after consultation with the Company,
to offer or sell the Shares.
(c) In order to reimburse the Representatives for those costs and
expenses customarily incurred during the registration process, in the event
the issuance and sale of the Offered Shares to the several Underwriters is
not consummated as contemplated by this Agreement, the Company shall
reimburse the Representatives for all of their out-of-pocket expenses
incurred in connection with the offering of the Offered Shares (including
but not limited to the fees and disbursements of its counsel), in an amount
not to exceed $75,000.
17
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Offered Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 4 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy of the representations and
warranties of the Company set forth herein, to the performance by the Company of
its covenants, agreements and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M., Philadelphia time, on the date of this Agreement, or at
such later time or on such later date as the Representatives may agree to
in writing; if required by the Regulations, the Prospectus shall have been
filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations and in
accordance with subsection (a) of Section 5 hereof; on or prior to the
Closing Date or any Option Closing Date, as the case may be, no stop order
or other order preventing or suspending the effectiveness of the
Registration Statement or the sale of any of the Shares shall have been
issued under the act or any state securities law and no proceedings for
that purpose shall have been initiated or shall be pending or, to the
Representatives' knowledge or the knowledge of the Company, shall be
contemplated by the SEC or any authority in any jurisdiction designated by
the Representatives pursuant to subsection (f) of Section 5 hereof and any
request on the part of the SEC for additional information shall have been
complied with to the reasonable satisfaction of counsel for the
Underwriters.
(b) All corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement, the Warrant Agreement,
the Representatives Warrants and the Shares and the form of the
Registration Statement, each Preliminary Prospectus and the Prospectus, and
all other legal matters relating to this Agreement and the transactions
contemplated hereby, shall be satisfactory in all respects to counsel to
the Underwriters; the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters; and the Representatives shall have received from
the Underwriters' counsel, Stradling, Yocca, Carlson & Rauth, a favorable
opinion, dated as of the Closing Date and any Option Closing Date, as the
case may be, and addressed to the Representatives individually and as the
Representatives of the several Underwriters with respect to the due
authorization, execution and delivery of this Agreement, that the issuance
and sale of the Shares have been duly authorized by the Company, that when
the Shares have been duly delivered against payment therefor as
contemplated by this Agreement, they will be validly issued, fully paid and
non-assessable and that the Registration Statement has become effective
under the Act.
(c) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of any of the Shares.
(d) The Representatives shall have received copies of the lockup
agreements described in subsection (l) of Section 5 signed by those persons
set forth on Schedule II hereto.
(e) The Representatives shall have received at or prior to the Closing
Date from the Underwriters' counsel a memorandum or summary, in form and
substance satisfactory
18
to the Representatives, with respect to the qualification for offering and
sale by the Underwriters of the Shares under the securities or Blue Sky
laws of such jurisdictions designated by the Representatives pursuant to
subsection (f) of Section 5 hereof.
(f) On the Closing Date and any Option Closing Date, there shall have
been delivered to the Representatives a signed opinion of Latham & Watkins,
counsel for the Company ("Company Counsel"), dated as of each such date and
addressed to the Representatives individually and as the Representatives of
the several Underwriters to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with all necessary corporate power and corporate authority to own or
lease and operate its properties and to conduct its business as
described in the Prospectus and to execute, deliver and perform this
Agreement. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which it
owns or leases properties, or conducts any business, so as to require
such qualification, except where the failure so to qualify or be in
good standing would not have a material adverse effect on the general
affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity or business of the Company.
(ii) To Company Counsel's knowledge, the Company does not own any
stock or other equity interest in or control, directly or indirectly,
any corporation, partnership or other entity other than Datametrics,
Limited, which has no assets and conducts no business.
(iii) The Company has all necessary corporate power and
corporate authority to execute and deliver the Warrant Agreement and
the Representatives Warrants.
(iv) This Agreement and the Warrant Agreement have been duly
authorized, executed and delivered by the Company and each constitutes
its legal, valid and binding agreement, enforceable against the
Company in accordance with its terms, except as rights to indemnity
and contribution each may be limited by federal or state securities
laws or principles of public policy.
(v) The execution, delivery and performance of this Agreement,
the Warrant Agreement and the Representatives Warrants by the Company
does not and will not, with or without the giving of notice or the
lapse of time, or both, (A) conflict with any terms or provisions of
the Company's Certificate of Incorporation or By-laws, as amended to
the date hereof and the Closing Date or the Option Closing Date, as
the case may be; (B) result in a breach of, constitute a default
under, result in the termination or modification of or result in the
creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties of the Company pursuant to any
indenture, mortgage, deed of trust, contract, commitment or other
agreement or instrument known to Company Counsel to which the Company
is a party or by which any of its properties or assets are bound or
affected, (C) violate any law, rule or regulation, or any judgment,
order or
19
decree known to Company Counsel of any government or governmental
agency, instrumentally or court, domestic or foreign, having
jurisdiction over the Company or any of properties or assets or (D)
result in a breach, termination or lapse of the corporate power or
authority of the Company to own or lease and operate its properties
and conduct its business as described in the Prospectus.
(vi) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the captions
"Capitalization" and "Description of Capital Stock." As of the date
or dates indicated, the Company had the capitalization, and will have
the as-adjusted capitalization, set forth in the Prospectus under the
caption "Capitalization." To the knowledge of Company Counsel, on the
Effective Date, there were, and on the Closing Date and any Option
Closing Date, there will be, no options or warrants for the purchase
of, other outstanding rights to purchase, agreements or obligations
to issue or agreements or their other to convert or exchange any
obligation or security into capital stock of the Company or securities
convertible into or exchangeable for capital stock of the Company,
except as described in the Prospectus with respect to the Employee
Options, the Over-allotment Option, the Representatives Warrants and
the Warrants.
(vii) The authorized capital stock of the Company, including
without limitation, the outstanding Common Shares and the Shares being
issued on the Closing Date and any Option Closing Date, conforms, in
all material respects, with the descriptions thereof in the
Prospectus, and such descriptions conform with the descriptions
thereof set forth in the instruments defining the same. The
information in the Prospectus insofar as it relates to the Employee
Options, the Representatives Warrants and the Warrants, in each case
as of the Effective Date, the Closing Date and any Option Closing
Date, is true, correct and complete, in all material respects.
(viii) The Common Shares outstanding immediately prior to the
Closing Date or the Option Closing Date, as the case may be, have been
duly authorized and are validly issued, fully paid and non-assessable.
The Employee Options and the Warrants have been duly authorized and
validly issued and are legal, valid and binding obligations,
enforceable against the Company in accordance with their respective
terms. The Representatives Warrants, as of the Closing Date, will
have been duly authorized and validly issued and, when executed and
delivered by the Company, will be legal, valid and binding obligations
enforceable against the Company in accordance with their terms. The
Common Shares issuable pursuant to the Employee Options, the
Representatives Warrants and the Warrants, when issued in accordance
with the respective terms thereof, will be duly authorized and validly
issued, fully paid and non-assessable. The Company has reserved a
sufficient number of Common Shares for issuance pursuant to the
Employee Options, the Representatives Warrants and the Warrants. None
of such outstanding Common Shares, the Employee Options, the
Representatives Warrants or the Warrants were issued in violation of
any preemptive rights of any security holder of the Company created by
the Certificate of Incorporation or By-laws of the Company that have
not been waived, and, to the knowledge of Company Counsel, there are
no contractual preemptive rights that have not been waived that exist
with respect to the outstanding Common Shares. None of such issuable
Common Shares will be issued in violation
20
of any existing preemptive rights of any security holder of the
Company created by the Certificate of Incorporation or By-laws of the
Company that have not been waived that exist with respect to the
Common Shares, and, to the knowledge of Company Counsel, there are no
contractual preemptive rights that have not been waived that exist
with respect to the Common Shares. The holders of the outstanding
Common Shares are not, and will not be, subject to personal liability
solely by reason of being such holders, and the holders of the Common
Shares issuable pursuant to the Employee Options, the Representatives
Warrants and the Warrants will not be subject to personal liability
solely by reason of being such holders. The offers and sales of the
outstanding Common Shares, and the issuance of the Employee Options,
the Representatives Warrants and the Warrants, were made in conformity
with applicable registration requirements or exemptions therefrom
under federal and applicable state securities laws.
(ix) The issuance and sale of the Shares by the Company have been
duly authorized and, when the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and nonassessable. None of the Shares will
be issued in violation of any preemptive rights of any stockholder of
the Company pursuant to the Certificate of Incorporation or By-laws,
as amended to the date hereof and the Closing Date, of the Company
and, to the knowledge of Company Counsel, there are no contractual
preemptive rights that have not been waived that exist with respect to
the Shares. The certificates representing the Shares are in proper
legal form under, and conform in all respects to the requirements of,
the GCL. To the knowledge of Company Counsel, neither the filing of
the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives any security holder of the
Company any rights, other than those which have been waived, for or
relating to the registration of any security of the Company.
(x) No consent, approval, authorization, order, registration,
license or permit of any court, government, governmental agency,
instrumentality or other regulatory body or official is required for
the valid authorization, issuance, sale and delivery by the Company of
any of the Shares or for the execution, delivery or performance by the
Company of this Agreement, except such as may be required for the
registration of the Shares under the Act, the Regulations or the
Exchange Act, or for compliance with the applicable state securities
or Blue Sky laws, or by the By-laws, rules and other pronouncements of
the NASD. Upon the effectiveness of the Registration Statement, the
Common Shares will be registered pursuant to Section 12(g) of the
Exchange Act, and will be included on the AMEX.
(xi) The Company is not in violation of, or in default under, any
of the terms or provisions, of (A) its Certificate of Incorporation or
By-laws, each as amended to the date hereof, the Closing Date or the
Option Closing Date, as the case may be, (B) any indenture, mortgage,
deed of trust, material contract, commitment or other agreement or
instrument known to Company Counsel to which the Company is a party or
by which it or any of its properties are bound or affected, (C) to the
knowledge of Company Counsel, any law, rule, regulation, judgment,
order to or decree of any government or governmental agency,
instrumentality or court, domestic
21
or foreign, having jurisdiction over the Company or any of its
properties or businesses, or (D) any license, permit, certification,
registration, approval, consent or franchise, known to Company
Counsel, referred to in subsections (b) or (c) of Section 1 of this
Agreement.
(xii) The descriptions contained in the Registration Statement
and Prospectus of statutes or regulations, legal and governmental
proceedings and of contracts and other documents are accurate in all
material respects and fairly present in all material respects the
information required to be shown. To the knowledge of Company
Counsel, there are no contracts, agreements or other documents
required to be described or referred to in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration Statement
under the Act or the Regulations that have not been so described,
referred to or filed as required.
(xiii) To the knowledge of Company Counsel, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries
pending before, or overtly threatened or contemplated by, any
governmental agency, instrumentality, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, to which the
Company is a party or is threatened to be made a party that can be
reasonably expected, or, if determined adversely to the Company,
would, in any individual case or in the aggregate, result in any
material adverse change in the general affairs, properties, condition
(financial or otherwise), results of operations, stockholders' equity
or business of the Company. To the knowledge of Company Counsel,
there are no outstanding orders, judgments or decrees of any court,
governmental agency, instrumentality or other tribunal enjoining the
Company from, or requiring the Company to take or refrain from taking
any action, or to which the Company, or any of its properties, assets
or businesses is bound or subject.
(xiv) The Company owns, or possesses adequate rights to use, all
Intellectual Property that, if not so owned or possessed, would
materially adversely affect the general affairs, properties, condition
(financial or otherwise), results of operations, stockholders' equity,
businesses or prospects of the Company.
(xv) To the knowledge of Company Counsel the Company does not own
any real property. All real property used or leased by the Company,
as described in the Prospectus, is held by the Company under a valid,
subsisting and enforceable lease.
(xvi) The Company is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, nor, by receipt of the
proceeds from the sale by it of the Shares pursuant to this Agreement,
will the Company become or be deemed to be an "investment company"
under such act.
(xvii) The Registration Statement has become effective under the
Act, as of the Effective Date, and, to the Company Counsel's
knowledge, the SEC has not issued any stop order suspending the
effectiveness of the Registration Statement nor has the SEC instituted
or threatened to institute proceedings with respect to any such
22
order. Any and all filings required by be made by Rule 424 and Rule
430A under the Act have been made.
(xviii) The Registration Statement and the Prospectus, as of the
Effective Date, and each amendment or supplement thereto as of its
effective or issue date (other than the financial statements and
related schedules therein and other than the financial data and
calculations therein based on such financial statements and schedules,
as to which Company Counsel need not express an opinion) comply as to
form in all material respects with the applicable requirements of the
Act and Regulations.
(xix) Company Counsel has participated in the preparation of the
Registration Statement and the Prospectus, including reviews and
discussions of the contents thereof, and, in the course of such
reviews and discussions, no facts came to its attention that would
cause it to have reason to believe that (A) the Registration Statement
or any post-effective amendment thereto, on the date it became
effective and on the Closing Date or the Option Closing Date, as the
case may be, contained any untrue statement of a material fact or
omitted any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
or that (B) the Prospectus on the Effective Date, on the date it was
filed pursuant to Rule 424(b) under the Act and on the Closing Date or
Option Closing Date, as the case may be, contained any untrue
statement of material fact or omitted any material fact necessary to
make the statements therein, in light of the circumstances under which
made, not misleading (except, in each case, for the financial
statements and related schedules therein and the financial data and
calculations therein based on such financial statements and schedules,
as to which Company Counsel need not express an opinion).
The foregoing opinion may be limited to the laws of the United States,
the laws of the State of California and the GCL, and Company Counsel may
rely as to certain legal matters on other counsel to the Company provided
that in each case, Company Counsel shall state that they believe that they
and the Underwriters are justified in relying on such other counsel and
shall deliver signed copies of any such opinion to the Representatives and
as to questions of fact upon the representations of the Company set forth
in this Agreement and upon certificates of officers of the Company and of
governmental officials, all of which certificates must be reasonable and
satisfactory in form and scope to counsel for the Underwriters provided
that in each case, Company Counsel shall deliver signed copies of any such
certificate to the Representatives.
(g) At the Closing Date and any Option Closing Date: (A) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and shall conform, in all material respects, to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor any post-effective amendment thereto nor the Prospectus and
any amendments or supplements thereto shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) since the
respective dates
23
as of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments or
supplements thereto, except as otherwise stated therein, there shall have
been no material adverse change in the properties, condition (financial or
otherwise), results of operations, stockholders' equity, business or
management of the Company, from that set forth therein, whether or not
arising in the ordinary course of business, other than as referred to in
the Registration Statement or Prospectus, (C) since the respective dates as
of which information is given in the Registration Statement and any post-
effective amendment thereto and the Prospectus or any amendment or
supplement thereto, there shall have been no transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business and as set forth in the Registration Statement or Prospectus that
has not been, but would be required to be, set forth in the Registration
Statement or Prospectus; (D) no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Company, threatened
against the Company that would be required to be set forth in Prospectus,
other than as set forth therein, and no proceedings shall be pending or, to
the knowledge of the Company, threatened against the Company before or by
any federal, state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding would materially
adversely affect the properties, condition (financial or otherwise),
results of operations, stockholders' equity or business of the Company,
other than as set forth in the Prospectus. The Representatives shall have
received at the Closing Date and any Option Closing Date certificates of
each of the Chief Executive Officer and the Chief Financial Officer of the
Company dated as of the date of the Closing Date or Option Closing Date, as
the case may be, and addressed to the Representatives, individually and as
the Representatives of the several Underwriters, to the effect, that the
conditions set forth in this subsection have been satisfied and as to the
accuracy and performance, as of the Closing Date or the Option Closing
Date, as the case may be, of the agreements, representations and warranties
of the Company set forth herein.
(h) At the time this Agreement is executed and at the Closing Date and
any Option Closing Date, the Representatives shall have received a letter
addressed to the Representatives, individually and as the Representatives
of the several Underwriters, and in form and substance satisfactory to the
Representatives in all respects (including the nonmaterial nature of the
changes or decreases, if any, referred to in clause (iii) below) from Ernst
& Young LLP dated as of the date of this Agreement, the Closing Date or
Option Closing Date, as the case may be:
(i) confirming that they are independent public accountants
within the meaning of the Act and the Regulations and stating that the
section of the Registration Statement under the caption "Experts" is
correct insofar as it relates to them;
(ii) stating that, in their opinion, the financial statements of
the Company audited by them and included in the Registration Statement
comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations;
(iii) stating that, on the basis of specified procedures, which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of
the minutes of the meetings of the stockholders and the
24
Board of Directors of the Company and audit and compensation
committees of such Board, if any, and inquiries to certain officers
and other employees of the Company who are responsible for financial
and accounting matters and other specified procedures and inquiries,
nothing has come to their attention that would cause them to believe
that (A) the unaudited financial statements and related schedules of
the Company included in the Registration Statement, if any, (I) do not
comply in form in all material respects with the applicable accounting
requirements of the Act and the Regulations or (II) were not fairly
presented in conformity with generally accepted accounting principles
on a basis substantially consistent with that of the audited financial
statements and related schedules included in the Registration
Statement or (B)(I) at a specified date, not more than five business
days prior to the date of such letter there was any change in the
capital stock or short-term or long-term debt of the Company, or any
decrease (increase) in net current assets, total assets or
stockholders' equity as compared with the amounts shown in the
__________, 1995 balance sheet of the Company included in the
Registration Statement, other than as set forth in or contemplated by
the Registration Statement and Prospectus, and (II) during the period
from __________, 1995 to a specified date not more than five business
days prior to the date of such letter, there has been any decrease
(increase), as compared with the corresponding period in the preceding
year, in revenues, operating income or income before income taxes or
in total or per share amounts of net income of the Company or, if
there was any such change or decrease (increase), setting forth the
amount of such change or decrease (increase); and
(iv) stating that they have compared specific dollar amounts,
numbers of shares and other information (including pro forma
information) pertaining to the Company set forth in the Registration
Statement and Prospectus that have been specified by the
Representatives prior to the date of this Agreement, to the extent
that such amounts, numbers, percentages and information may be derived
from the general accounting or other records of the Company with the
result obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute
an audit in accordance with generally accepted auditing standards) set
forth in the letter, and found them to be in agreement.
(i) The Company shall have executed and delivered a Warrant Agreement
in a form satisfactory to the Representatives (the "Warrant Agreement") and
here shall have been tendered to the Representatives certificates
representing all of the Representatives Warrants described in subsection
(r) of Section 5, to be purchased by the Representatives on the Closing
Date.
(j) At the Closing Date and any Option Closing Date, the
Representatives shall have been furnished such additional documents and
certificates as they shall reasonably request.
(k) No action shall have been taken by the NASD the effect of which is
to make it improper, at any time prior to the Closing Date or any Option
Closing Date, for members of the NASD to execute transactions as principal
or as agent in the Shares or to trade or deal in the Shares, and no
proceedings for the purpose of taking such action shall have been
25
instituted or shall be pending or, to the Company's or the Representatives'
knowledge, shall be contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or any Option Closing Date, as the
case may be, shall not have been fulfilled, the Representatives may on behalf of
the several Underwriters terminate this Agreement or, if they so elect, waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
8. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls each Underwriter within the meaning
of the Act or the Exchange Act, against any and all loss, liability, claim,
damage and expense whatsoever, including, but not limited to, any and all
expense whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever or
in connection with any investigation or inquiry of, or action or proceeding
that may be brought against, the respective indemnified parties, arising
out of or based upon any untrue statements or alleged untrue statements of
a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any application or other document (in this
Section 8 collectively called "application") executed by the Company and
based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify all or any part of the Shares
under the securities laws thereof or filed with the SEC or the NASD, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the foregoing indemnity (i) shall not apply in respect of any
statement or omission made in reliance upon and in conformity with written
information furnished to the Company or any Underwriter through the
Representatives expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement
thereof, or in any application or in any communication to the SEC, as the
case may be, and (ii) with respect to any Preliminary Prospectus, shall not
inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchase the Shares
that are the subject thereof (or to the benefit of any person controlling
such Underwriter) if at or prior to the written confirmation of the sale of
such Shares a copy of an amended Preliminary Prospectus or the Prospectus
(or the Prospectus as amended or supplemented) was not sent or delivered to
such person and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the amended
Preliminary Prospectus or Prospectus (or the Prospectus as amended or
supplemented). It is understood that the statements appearing in any
Preliminary Prospectus, the Prospectus or the Registration Statement (A)
on the inside front cover page with respect to stabilization, (B) in the
table in the section entitled "Underwriting," and the second paragraph
following such table with respect to the amount of the dealers' concession
and allowance and reallowance discount and (C) in the section entitled
"Legal Matters" with respect to the identity of counsel for the
Underwriters constitute the only information furnished in writing by or on
behalf of any Underwriter for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement. This indemnity agreement will be
in addition to any liability the Company may otherwise have.
26
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, each of the directors of the Company, each of
the officers of the Company who shall have signed the Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act or the Exchange Act to the same extent as the
foregoing indemnities from the Company to the several Underwriters, but
only with respect to any loss, liability, claim, damage or expense
resulting from (i) statements or omissions, or alleged statements or
omissions, if any, made in any Preliminary Prospectus, Registration
Statement or Prospectus or any amendment or supplement thereof or any
application in reliance upon, and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement
or Prospectus or any amendment or supplement thereof or any application, as
the case may be, (ii) the failure of any Underwriter at or prior to the
written confirmation of the sale of Shares to send or deliver a copy of an
amended Preliminary Prospectus or the Prospectus (or the Prospectus as
amended or supplemented) to the person asserting any such losses, claims,
damages, liabilities or expenses who purchased the Shares that are the
subject thereof and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the amended
Preliminary Prospectus or Prospectus (or the Prospectus as amended or
supplemented) or (iii) the failure to qualify the offering or sale of the
Shares by the several Underwriters under the state securities or Blue Sky
laws or any jurisdiction referred to in Section 5(f) hereof which failure
to qualify is the result of the failure to file the pertinent materials in
any such jurisdiction. This indemnity agreement will be in addition to any
liability such Underwriter may otherwise have.
(c) If any action, inquiry, investigation or proceeding is brought
against any person in respect of which indemnity may be sought pursuant to
any of the two preceding paragraphs, such person (hereinafter called the
"indemnified party") shall, promptly after formal notification of, or
receipt of service of process for, such action, inquiry, investigation or
proceeding, notify in writing the party or parties against whom
indemnification is to be sought (hereinafter called the "indemnifying
party") of the institution of such action, inquiry, investigation or
proceeding and the indemnifying party, upon the request of the indemnified
party, shall assume the defense of such action, inquiry, investigation or
proceeding, including the employment of counsel (reasonably satisfactory to
such indemnified party) and payment of expenses. No indemnification
provided for in this Section 8 shall be available to any indemnified party
who shall fail to give such notice if the indemnifying party does not have
knowledge of such action, inquiry, investigation or proceeding and shall
have been materially prejudiced by the failure to give such notice, but the
omission so to notify the indemnifying party shall not relieve the
indemnifying party otherwise than under this Section 8. Such indemnified
party or controlling person shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless the employment of such
counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action or the indemnifying party shall
not have employed counsel to have charge of the defense of such action,
inquiry, investigation or proceeding or such indemnified party or parties
shall have been advised by counsel that there is a conflict of interest
that would prevent counsel to the indemnifying party from representing both
parties, in any of which events the reasonable fees and expenses of such
counsel shall be borne by the indemnifying party. It is understood that
the indemnifying party shall not, in connection with any proceeding or
related proceedings
27
in the same jurisdiction, be liable for the fees and expenses of more than
one separate counsel (in addition to one local counsel in each jurisdiction
in which any proceeding may be brought) for all indemnified parties. In
the case of any such separate counsel for the Underwriters, such firm shall
be designated in writing by the Representative. Expenses covered by the
indemnification in this subsection (c) of this Section 8 shall be paid by
the indemnifying party as they are incurred by the indemnified party.
Anything in this subsection to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim
effected without its written consent. The indemnifying party shall
promptly notify the indemnified party of the commencement of any
litigation, inquiry, investigation or proceeding against the indemnifying
party or any of its officers or directors in connection with the issue and
sale of any of the Shares or in connection with such Preliminary
Prospectus, Registration Statement or Prospectus or any amendment thereto
or supplement thereof or any such application.
(d) If the indemnification provided for in this Section 8 is
unavailable to or is insufficient to hold harmless an indemnified party
under subsections (a) or (b) of this Section 8 in respect of any losses,
liabilities, claims, damages or expenses (or actions, inquiries,
investigations or proceedings in respect thereof) referred to therein
except either by reason of the provisions set forth in subsections (a) or
(b) or the failure to give notice as required in subsection (c) (provided
that the indemnifying party does not have knowledge of the action, inquiry,
investigation or proceeding and has been materially prejudiced by the
failure to give such notice), then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, liabilities, claims, damages or expenses (or actions, inquiries,
investigations or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted
in such losses, liabilities, claims or reasonable expenses (or actions,
inquiries, investigations or proceedings in respect thereof), as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative faults 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 information supplied by the Company on the one hand or the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this section (d) of this Section 8
were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any method or allocation that
does not take account of the equitable considerations referred to
28
above in this subsection (d) of this Section 8. The amount paid or payable
by an indemnified party as a result of the losses, liabilities, claims,
damages or reasonable expenses (or actions, inquiries, investigations or
proceedings in respect thereof) referred to above in this subsection (d) of
this Section 8 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d) of this Section 8, (i) the provisions of
the Agreement Among Underwriters shall govern contribution among
Underwriters, (ii) no Underwriter (except as provided in the Agreement
Among Underwriters) shall be required to contribute any amount in excess of
the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (iii) 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' obligation in this
subsection (d) of this Section 8 to contribute are several in proportion to
their respective underwriting obligations and not joint.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including without limitation the indemnity and contribution agreements contained
in Section 8 hereof and the agreements contained in Sections 6, 9, 10 and 13
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
and shall survive delivery of the Shares and termination of this Agreement,
whether before or after the Closing Date or any Option Closing Date.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as to Sections
6, 8, 9, 10 and 13 and, as to all other provisions, (i) if at the time of
execution and delivery of this Agreement the Registration Statement has not
become effective, at 11:00 A.M., Philadelphia time, on the first business
day following the Effective Date, or (ii) if at the time of execution and
delivery of this Agreement the Registration Statement has been declared
effective, at 11:00 A.M., Philadelphia time, on the date of execution of
this Agreement; but this Agreement shall nevertheless become effective at
such earlier time after the Registration Statement becomes effective as the
Representatives may determine by notice to the Company or by release of any
of the Shares for sale to the public. For the purposes of this Section 10,
the Shares shall be deemed to have been so released upon the release for
publication of any newspaper advertisement relating to the Shares or upon
the release by the Representatives of telegrams (i) advising the
Underwriters that the shares are released for public offering or (ii)
offering the Shares for sale to securities dealers, whichever may occur
first. The Representatives may prevent the provisions of this Agreement
(other than those contained in Sections 6, 8, 9, 10 and 13) hereof from
becoming effective without liability of any party to any other party,
except as noted below, by giving the notice indicated in subsection (c) of
this Section 10 before the time the other provisions of this Agreement
become effective.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 7
and 11 hereof or if any of the
29
following have occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of
the Company, or the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course of
business; (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or
financial market conditions if such outbreak, calamity, crisis or change
would, in the Representatives' reasonable judgment, have a material adverse
effect on the Company, the financial markets of the United States or the
offering or delivery of the Shares; (iii) suspension of trading generally
in securities on the New York Stock Exchange, the AMEX or the over-the-
counter market or limitation on prices (other than limitations on hours or
numbers of days of trading) for securities or the promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in the Representatives' reasonable opinion
materially and adversely affects trading on either such Exchange or the
over-the-counter market; (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in the Representatives'
reasonable opinion materially and adversely affects or will materially and
adversely affect the business or operations of the Company; (v) declaration
of a banking moratorium by either federal or state authorities; (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the Representatives'
reasonable opinion has a material adverse effect on the securities markets
in the United States; (vii) declaration of a moratorium in foreign exchange
trading by major international banks or other institutions or (viii)
trading in any securities of the Company shall have been suspended or
halted by the NASD or the SEC.
(c) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 10, the Representatives shall notify the Company thereof promptly
by telephone, telex, telegraph or facsimile, confirmed by letter.
11. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Offered Shares or Optional Shares hereunder, and if
the Offered Shares or Optional Shares with respect to which such default
relates do not exceed the aggregate of 10 percent of the number of Offered
Shares or Optional Shares, as the case may be, that all Underwriters have
agreed to purchase hereunder, then such Offered Shares or Optional Shares
to which the default relates shall be purchased severally by the non-
defaulting Underwriters in proportion to their respective commitments
hereunder.
(b) If such default relates to more than 10 percent of the Offered
Shares or Optional Shares, as the case may be, the Representatives may in
its discretion arrange for another party or parties (including a non-
defaulting Underwriter) to purchase such Offered Shares or Optional Shares
to which such default relates, on the terms contained herein. In the event
that the Representatives do not arrange for the purchase of the offered
Shares or Optional Shares to which a default relates as provided in this
Section 11, this Agreement may be terminated by the Representatives or by
the Company without liability on the part of the
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several Underwriters (except as provided in Section 8 hereof) or the
Company (except as provided in Sections 6 and 8 hereof), but nothing herein
shall relieve a defaulting Underwriter of its liability, if any, to the
other several Underwriters and to the Company for damages occasioned by its
default hereunder.
(c) If the Offered Shares or Optional Shares to which the default
relates are to be purchased by the non-defaulting Underwriters, or are to
be purchased by another party or parties as aforesaid, the Representatives
or the Company shall have the right to postpone the Closing Date or any
Option Closing Date, as the case may be, for a reasonable period but not in
any event exceeding seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus
or in any other documents and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement or supplement to the
Prospectus which in the opinion of counsel for the Underwriters may thereby
be made necessary. The terms "Underwriters" and "Underwriter" as used in
this Agreement shall include any party substituted under this Section 11
with like effects as if it had originally been a party to this Agreement
with respect to such Offered Shares or Optional Shares.
12. INFORMATION FURNISHED BY UNDERWRITERS. The statements appearing in
any Preliminary Prospectus, the Prospectus or the Registration Statement (a) on
the inside front cover page with respect to stabilization, (b) in the table in
the section entitled "Underwriting," and the second paragraph following such
table with respect to the amount of the dealers' concession and allowance and
reallowance discount and (c) in the section entitled "Legal Matters" with
respect to the identity of counsel for the Underwriters constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement referred to in subsection (b) of Section 1 hereof and subsections (a)
and (b) of Section 8 hereof.
13. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Pennsylvania Merchant Group Ltd., Suite 390,
Fidelity Court, 259 Radnor-Chester Road, Radnor, Pennsylvania 19087, Attention:
Richard A. Hansen, President, with a copy to Stradling, Yocca, Carlson & Rauth,
660 Newport Center Drive, Newport Beach, California 92660, Attention: Nick E.
Yocca, Esquire; if sent to the Company shall be mailed, delivered, telexed,
telegrammed, telegraphed or telecopied and confirmed to Datametrics Corporation,
21135 Erwin Street, Woodland Hills, California 91367, Attention: Sidney E.
Wing, Chief Executive Officer, with a copy to Latham & Watkins, 701 "B" Street,
Suite 2100, San Diego, California 92101, Attention: Thomas A. Edwards, Esquire.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the
controlling persons, directors and officers referred to in Section 8 hereof, and
their respective successors, assigns, heirs and legal representatives, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors" and "assigns" shall not
include any purchaser of the Shares merely because of such purchase.
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15. DEFINITION OF BUSINESS DAY. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
17. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and performed entirely within such Commonwealth.
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If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
DATAMETRICS CORPORATION
By: _______________________________
Name: Sidney E. Wing
Title: Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
PENNSYLVANIA MERCHANT GROUP LTD. CRUTTENDEN ROTH INCORPORATED
By: ____________________________ By: _______________________________
Name: Name:
Title: Title:
Acting severally on behalf of itself Acting severally on behalf of itself
and the several Underwriters named in and the several Underwriters named in
Schedule I hereto Schedule I hereto
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SCHEDULE I
UNDERWRITERS
NUMBER OF OFFERED SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
SCHEDULE II
PERSONS SUBJECT TO LOCKUP AGREEMENTS
Garland S. White
Sidney E. Wing
John J. Van Buren
Gerald A. Horwitz
Carl C. Stella
Harry P. Alteri
Roger R. DeBruno
Jim W. Foti
Ronald N. Iverson
James D. Sturgeon, Jr.
Kenneth S. Polak
Dann V. Angeloff
Richard A. Foster
Burton L. Kaplan
Richard W. Muchmore
Kenneth K. Zeiger