1
Exhibit 1
2,500,000 Shares
MANCHESTER EQUIPMENT COMPANY, INC.
Common Stock
UNDERWRITING AGREEMENT
New York, New York
November __, 1996
Ladenburg Thalmann & Co. Inc.
Cruttenden Roth Incorporated
As Representatives of the several
Underwriters named in Schedule A hereto
590 Madison Avenue
New York, New York 10022
The undersigned, Manchester Equipment Company, Inc. (the "Company"), a
New York corporation, and Barry R. Steinberg (the "Selling Stockholder") hereby
confirm their agreement with you and the other underwriters named in Schedule A
annexed hereto.
Section 1. Underwriters and Representatives. The term "Underwriters,"
as used herein, will mean and refer collectively to you and the other
underwriters named in Schedule A annexed hereto, and the term "Representatives"
will refer to you in your capacity as the representatives of the Underwriters.
Except as may be expressly set forth below, any reference to you in this
Agreement shall be solely in your capacity as the Representatives.
Section 2. Shares Offered. The Company proposes to issue and sell to
the Underwriters an aggregate of 2,125,000 shares of its authorized and unissued
common stock, $.01 par value per share (the "Common Stock"), and the Selling
Stockholder proposes to sell to the Underwriters an aggregate of 375,000 issued
outstanding shares of Common Stock (collectively, the "Firm Shares"). The
Company also proposes to grant to the Underwriters an Option (hereinafter
defined) to purchase up to an additional aggregate of 375,000 shares (the
"Option Shares") of its authorized and unissued Common Stock on the terms and
for the purposes set forth in Section 4(b) hereof. The Firm Shares and the
Option Shares are hereinafter sometimes together called the "Shares."
2
Section 3. Representations and Warranties. (a) The Company represents
and warrants to each Underwriter that:
(i) A registration statement (File No. 333-13345) on
Form S-1, relating to the Shares, including a preliminary
prospectus, has been prepared by the Company in conformity in
all material respects with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules,
regulations and instructions (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission")
thereunder and has been filed by the Company with the
Commission. One or more amendments to such registration
statement, including in each case a revised preliminary
prospectus, have been so prepared and filed. If such
registration statement has not become effective as of the
execution and delivery of this Agreement, and the filing of a
further amendment (the "Final Amendment") to such registration
statement is necessary to permit such registration statement
to become effective, such amendment will promptly be filed by
the Company with the Commission. If such registration
statement has become effective and any post-effective
amendment has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such
amendment has been declared effective by the Commission. If
such registration statement has become effective, a final
prospectus (the "Rule 430A Prospectus") containing information
permitted to be omitted at the time of effectiveness by Rule
430A of the Rules and Regulations will promptly be filed by
the Company pursuant to Rule 424(b) of the Rules and
Regulations. The term "preliminary prospectus" as used herein
means each prospectus subject to completion included at any
time as part of such registration statement or any amendment
thereto or filed with the Commission pursuant to Rule 424(a)
of the Rules and Regulations; such registration statement as
amended at the time that it becomes or became effective, or,
if applicable, as amended at the time the most recent
post-effective amendment to such registration statement filed
with the Commission prior to the execution and delivery of
this Agreement became effective, including financial
statements and all exhibits (whether filed or incorporated by
reference) and information deemed to be a part thereof at such
time pursuant to Rule 430A of the Rules and Regulations is
herein called the "Registration Statement"; and the term
"Prospectus" as used herein means the final prospectus
relating to the Shares in the form first filed with the
Commission pursuant to Rule 424(b)(1) or (4) of the Rules and
Regulations or if no such filing is required, the form of
final prospectus included in the Registration Statement at the
Effective Date (as hereinafter defined). The date on which the
Registration Statement becomes effective is hereinafter called
the "Effective Date."
(ii) When the Registration Statement becomes
effective, and at all subsequent times to and including the
Closing Time (hereinafter defined), and at each Option
Exercise Time (hereinafter defined), or for such longer period
as the
-2-
3
Prospectus may be required to be delivered in connection with
sales of the Shares by the Underwriters or a dealer, the
Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto;
provided, that no amendment or supplement to the Registration
Statement or the Prospectus shall be made without prior
consultation with you) will comply in all material respects
with the requirements of the Act and the Rules and
Regulations, will contain all statements required to be stated
therein in accordance with the Act and the Rules and
Regulations, will not contain an untrue statement of a
material fact and will not omit to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection
(ii) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon and made
in conformity with written information furnished to the
Company by or on behalf of any Underwriter specifically for
inclusion therein.
(iii) The Commission has not issued an order
preventing or suspending the use of any preliminary prospectus
with respect to the Shares and has not instituted or
threatened to institute any proceedings with respect to such
an order. Each preliminary prospectus, when filed with the
Commission, conformed in all material respects with the
requirements of the Act and the Rules and Regulations and, as
of its date, did not include any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that the representations and warranties in this sentence do
not apply to statements or omissions in each such preliminary
prospectus based upon and made in conformity with written
information furnished to the Company through the
Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(iv) The Company is, and at the Closing Time, and at
each Option Exercise Time will be, a corporation duly
organized, validly existing and in good standing under the
laws of the State of New York. The Company has, and at the
Closing Time and at each Option Exercise Time will have, only
one active subsidiary, Manchester International, Ltd. (the
"Subsidiary"); the Subsidiary is, and at the Closing Time, and
at each Option Exercise Time will be, a corporation duly
organized, validly existing and in good standing under the
laws of the State of its incorporation. The Company owns, free
and clear of all mortgages, pledges, liens, security
interests, conditional sale agreements, charges, encumbrances
and restrictions of every nature, all of the outstanding
shares of the capital stock of the Subsidiary, and all of such
shares have been duly and validly authorized and issued and
are fully paid and non-assessable. Each of the
-3-
4
Company and the Subsidiary has, and at the Closing Time and at
each Option Exercise Time will have, the corporate power and
authority and all necessary approvals, orders, licenses,
certificates, permits and other governmental authorizations to
conduct all of the activities conducted by it, to own or lease
all of the assets owned or leased by it and to conduct its
business as described in the Registration Statement and the
Prospectus, except where failure to have any such approval,
order, license, certificate, permit or governmental
authorization would not have a material adverse effect upon
the Company and the Subsidiary taken as a whole; and is, and
at the Closing Time and at each Option Exercise Time will be,
duly licensed or qualified to do business and in good standing
as a foreign corporation in all jurisdictions in which the
nature of the activities conducted by it and/or the character
of the assets owned and leased by it makes such license or
qualification necessary, except for such jurisdictions in
which the failure to be so licensed or qualified or in good
standing would not have a material adverse effect upon the
Company and the Subsidiary taken as a whole. Except for the
shares of the stock of the Subsidiary owned by the Company and
for shares of stock of certain wholly-owned corporations both
of which are inactive, neither the Company nor the Subsidiary
owns, and at the Closing Time and at each Option Exercise Time
neither the Company nor the Subsidiary will own, any shares of
stock or any other securities of any corporation or have any
equity interest in any firm, partnership, association or other
entity; provided, however, that the foregoing representation
shall not be applicable to the investment of the net proceeds
from the sale of the Shares in short-term interest bearing
notes or money market instruments defined as "Eligible
Investments" in subsection (m) of Section 7 hereof. A complete
and correct copy of the amended certificate of incorporation
of the Company, the certificate of incorporation of the
Subsidiary, the by-laws of the Company and the by-laws of the
Subsidiary as currently in effect have been delivered to you,
and no changes therein will be made subsequent to the date
hereof and prior to the Closing Time or each Option Exercise
Time.
(v) The Company is, and at the Closing Time and at
the Option Exercise Time will be, authorized to issue only
25,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"), and
has heretofore validly issued, and has outstanding, and at the
Closing Time and at each Option Exercise Time will have
outstanding, fully paid and nonassessable, 6,200,000 shares of
the Common Stock, without giving effect to the issuance of
Shares by the Company pursuant to this Agreement, and has no
shares of Preferred Stock outstanding. The Company has, and at
the Closing Time and at each Option Exercise Time will have,
reserved for issuance 1,100,000 shares of Common Stock under
the Company's Amended and Restated 1996 Incentive and
Non-Incentive Stock Option Plan (the "1996 Plan"), pursuant to
which no options to purchase shares are outstanding or will be
outstanding at
-4-
5
the Closing Time. Subsequent to the date hereof and prior to
the Closing Time, the Company will not issue or acquire any
securities of the Company, except the Warrants (as hereinafter
defined) or as set forth in this subsection (v). The Company
does not have outstanding, and at the Closing Time the Company
will not have outstanding, any options to purchase, or any
rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments
to issue or sell shares of capital stock or any warrants,
convertible securities or obligations, except the Warrants.
(vi) The consolidated financial statements of the
Company and its Subsidiary (including the footnotes thereto)
filed with and as part of the Registration Statement and the
Prospectus present fairly the financial position of the
Company and the Subsidiary as of the respective dates thereof
and the consolidated statements of income, shareholders'
equity and cash flows of the Company and its Subsidiary for
the respective periods covered thereby, all in conformity with
generally accepted accounting principles applied on a basis
consistent with prior periods. KPMG Peat Marwick LLP (the
"Company's accountants"), who have reported on certain of such
financial statements, are independent accountants with respect
to the Company as required by the Act and the Rules and
Regulations. The pro forma financial information included in
the Registration Statement and the Prospectus has been
properly compiled and complies in form in all material
respects with the applicable accounting requirements of
Regulation S-X of the Rules and Regulations. Such pro forma
financial information included in the Registration Statement
and the Prospectus presents fairly, on a basis consistent with
that of the audited consolidated financial statements included
therein, what the pro forma income from operations and pro
forma net income of the Company would have been for the
one-year period ended July 31, 1996, and what the pro forma
net income per share would have been at July 31, 1996, based
upon the assumptions set forth in the notes thereto and as
adjusted based upon the assumptions set forth in the notes
thereto. No other financial statements are required to be
included in the Registration Statement and the Prospectus.
(vii) The Company has a duly authorized and
outstanding capitalization as disclosed in the Prospectus
under "Capitalization" and will have the adjusted
capitalization set forth therein at the Closing Time (based on
the assumptions set forth therein). The financial and
numerical information and data set forth in the Prospectus
under "Prospectus Summary, "The Company," "Risk Factors," "Use
of Proceeds," "Dividend Policy," "Capitalization," "Dilution,"
"Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Management," "Principal
Shareholders" and "Description of Capital Stock" are fairly
presented
-5-
6
and prepared on a basis consistent with the audited
consolidated financial statements of the Company.
(viii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and prior to the Closing Time and to each Option
Exercise Time, except as set forth in or contemplated by the
Registration Statement and the Prospectus (A) each of the
Company and the Subsidiary has and will have conducted its
business in substantially the same manner as on July 31, 1996;
(B) neither the Company nor the Subsidiary has incurred or
will have incurred any material liabilities or obligations,
direct or contingent, or entered into any material
transactions, not in the ordinary course of business; (C)
there has been no material adverse change with respect to the
inventory owned by the Company or the Subsidiary such that
such inventory is not, as of the date hereof, current and
readily merchantable, containing no material amount of slow
moving, obsolete or damaged goods which have not been written
down in conformity with generally accepted accounting
principles applied on a basis consistent with prior periods;
(D) neither the Company nor the Subsidiary has paid or
declared nor will pay or declare any dividends or other
distributions on its capital stock; and (E) there has not been
and will not have been any change in the capitalization of the
Company or the Subsidiary or any material adverse change in
the business, business prospects, financial condition or
results of operations of the Company and the Subsidiary taken
as a whole or in the condition of the Company and the
Subsidiary taken as a whole or in the value of the assets of
the Company and the Subsidiary taken as a whole arising for
any reason whatsoever.
(ix) Except as set forth in or contemplated by the
Registration Statement and the Prospectus, neither the Company
nor the Subsidiary has, nor at the Closing Time and at each
Option Exercise Time will have, any material contingent
obligations.
(x) There are no actions, suits or proceedings at law
or in equity pending, or to the knowledge of the Company
threatened, against the Company or the Subsidiary, any of
their respective assets or any of their respective officers or
directors, which have not been disclosed to you, before or by
any federal, state, county or local commission, regulatory
body, administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the Company and
the Subsidiary as a whole, or their businesses, business
prospects, financial conditions, results of operations or
properties taken as a whole. Neither the Company nor the
Subsidiary is involved in any labor dispute nor, to their
knowledge, is any such dispute threatened, which dispute would
have a material
-6-
7
adverse effect upon the properties, business, financial
condition or results of operations of the Company and its
Subsidiary taken as a whole.
(xi) Each of the Company and the Subsidiary has, and
at the Closing Time and at each Option Exercise Time will
have, complied in all respects with all laws, regulations and
orders applicable to it or its business, the violation of
which would have a material adverse effect upon its legal
existence or its business, business prospects, financial
condition, results of operations, earnings or properties. Each
of the Company and the Subsidiary has, and at the Closing Time
and at each Option Exercise Time will have, in all material
respects performed all of the contractual obligations required
to be performed by it, and is not, and at the Closing Time and
at each Option Exercise Time will not be, in material default
under (there being no existing state of facts which with
notice or lapse of time or both would constitute a material
default under) any indenture, mortgage, deed of trust, voting
trust agreement, loan agreement, letter of credit agreement,
bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument
to which it is a party or by which it or any of its property
is bound, and, to the knowledge of the Company, no other party
under any such agreement or instrument to which the Company or
the Subsidiary is a party is in material default thereunder.
(xii) The Company (i) keeps books, records and
accounts that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company and its Subsidiary and (ii) 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 to permit preparation
of financial statements in conformity 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 the
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Neither the Company
nor the Subsidiary has made any payment to any state, federal
or foreign governmental officer or official or other person
charged with similar public or quasi-public duties (other than
payments required or permitted by the laws of the United
States or any jurisdiction thereof).
(xiii) Neither the Company nor the Subsidiary is in
violation of its certificate of incorporation or by-laws, in
each case as amended as of the date hereof.
(xiv) The outstanding shares of the Common Stock have
been, and all of the Shares, and the shares of Common Stock
issuable upon exercise of the
-7-
8
Warrants (as hereinafter defined), will, upon issuance and
payment therefor, be, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights or
similar contractual rights to purchase securities issued by
the Company. The holders of shares of the Common Stock will
not be subject to personal liability for the obligations of
the Company solely by reason of being such holders. The shares
of Common Stock issuable upon exercise of the Warrants have
been duly and validly reserved for issuance. The Common Stock
and the Shares conform, and when the Registration Statement
becomes effective and at the Closing Time and at each Option
Exercise Time will conform, to all statements with regard
thereto contained in the Registration Statement and the
Prospectus.
(xv) The Company has the corporate power and
authority to execute and deliver the Warrants on the terms and
conditions set forth herein and in the Warrants, and has taken
all corporate action necessary therefor; no consent, approval,
authorization or other order of any regulatory agency is
required for such execution or delivery except as may be
required under the Act or state securities or "blue sky" laws;
and when executed and delivered pursuant to the provisions of
this Agreement, the Warrants will constitute the valid,
binding and legally enforceable obligation of the Company.
(xvi) This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid
and binding agreement of the Company enforceable in accordance
with its terms, except as the indemnification and contribution
provisions hereunder may be limited by applicable law and the
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors'
rights generally and by general principles of equity; the
performance of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or
result in a breach or violation of any of the terms and
provisions of, or constitute a default under (there being no
existing state of events which with notice or lapse of time or
both would constitute a default) or result (or with the giving
of notice or lapse of time or both result) in the creation or
imposition of any lien, charge, or encumbrance upon the assets
or properties of the Company or its Subsidiary, pursuant to
any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, letter of credit agreement, bond,
debenture, note agreement or other evidence of indebtedness,
lease, contract or other agreement or instrument to which the
Company or the Subsidiary is a party or by which the Company
or the Subsidiary or any of their respective properties is
bound, or under the certificate of incorporation or by-laws of
the Company or the Subsidiary or under any statute or under
any order, rule or regulation applicable to the Company or the
Subsidiary or their respective businesses or properties or of
any court or other governmental body; and no consent,
approval, authorization or order of any court
-8-
9
or governmental agency or body is required for the
consummation by the Company of the transactions on its part
herein contemplated, except such as may be required under the
Act or under state securities or blue sky laws.
(xvii) Each of the Company and the Subsidiary has
good and marketable title to all properties and assets owned
by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in or referred to
in the Prospectus or are not significant or important in
relation to the business of the Company and its Subsidiary
taken as a whole. Each of the Company and the Subsidiary has
valid, subsisting and enforceable leases for the properties
described in the Prospectus as leased by it, with such
exceptions as are not material and do not materially interfere
with the use made, and proposed to be made, of such properties
by it.
(xviii) There is no document or contract of a
character required to be described in the Prospectus or to be
filed as an exhibit to the Registration Statement which is not
described or filed as required. No transaction has occurred
between or among the Company and its Subsidiary and any of
their officers, directors or stockholders or any affiliate of
any such officer, director or stockholder that is required to
be described in and is not described in the Registration
Statement and the Prospectus.
(xix) The Company believes that each of it and the
Subsidiary has sufficient trademarks, trade names, registered
service marks, patents, patent applications, patent rights,
licenses, permits, copyright protection and governmental or
other authorizations currently required for the conduct of its
business, and each of the Company and the Subsidiary is in all
material respects complying therewith, and the products and
services, and the marks associated therewith, used by the
Company and the Subsidiary do not, to the knowledge of the
Company, violate or infringe in any material respect any
trademarks, trade names, registered service marks, patents,
patent rights, licenses, permits or copyrights held or owned
by any other party. Neither the Company nor the Subsidiary has
received any notice of violation or infringement of or
conflict with asserted rights of others with respect to any
trademarks, trade names, registered service marks, patents,
patent rights, licenses, permits, copyrights or authorizations
owned or used by the Company or the Subsidiary.
(xx) The Company intends to apply its proceeds from
the sale of the Shares for the purposes set forth in the
Prospectus under "Use of Proceeds."
(xxi) The Company is not, and does not intend to
conduct its business in a manner in which it would become, an
"investment company" as defined in
-9-
10
Section 3(a) of the Investment Company Act of 1940 as amended
(the "Investment Company Act").
(xxii) All issuances and sales of securities by the
Company were exempt from registration under the Act and
complied in all material respects with the provisions of all
applicable federal and state securities laws. No holder of any
securities of the Company has the right to require
registration of shares of the Common Stock or other securities
of the Company because of the filing or effectiveness of the
Registration Statement.
(xxiii) Neither the Company nor any of its officers
or directors or affiliates (as defined in the Rules and
Regulations) has taken or will take, directly or indirectly,
any action designed to stabilize or manipulate the price of
any security of the Company, or which has constituted or which
might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of
the Company, to facilitate the sale or resale of any of the
Shares.
(xxiv) The Company has not, and at the Closing Time
and at each Option Exercise Time will not have, incurred any
liability for finder's or brokerage fees or agent's
commissions in connection with the offer and sale of the
Shares, this Agreement or the transactions hereby
contemplated, except for the Underwriters' discounts and
commissions provided for in this Agreement.
(xxv) The Company and the Subsidiary have filed all
federal, state and local income and franchise tax returns
required to be filed through the date hereof and have paid all
taxes due thereon, and no tax deficiency has been, nor does
the Company have any knowledge of any tax deficiency which
might be, asserted against the Company or the Subsidiary which
could materially adversely affect the earnings, assets,
affairs, business prospects or financial condition of the
Company and its Subsidiary taken as a whole.
(b) The Selling Stockholder represents and warrants to each
Underwriter that:
(i) The Selling Stockholder (A) has the
power and authority to execute and deliver this
Agreement on the terms and conditions set forth
herein; (B) is, and when the Registration Statement
shall become effective and at the Closing Time will
be, the owner of the Shares to be sold by him to the
respective Underwriters pursuant to the terms hereof,
in each case free and clear of all liens, charges,
encumbrances and restrictions; (C) has paid to the
Company the full purchase price required to be paid
for such Shares; and (D) has, and when the
Registration Statement shall become effective and at
the Closing Time will have, the power and
-10-
11
authority to convey good and valid title to such
Shares, in each case free and clear of all liens,
charges, encumbrances and restrictions.
(ii) Neither the execution and delivery or
performance of this Agreement or the consummation of
the transactions herein contemplated nor the
compliance with the terms hereof by the Selling
Stockholder will conflict with, or result in a breach
of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of
trust, guaranty, purchase agreement or other
agreement or instrument to which the Selling
Stockholder or any of the Selling Stockholder's
property is bound, or under any statute or under any
order, rule or regulation applicable to the Selling
Stockholder or any of the Selling Stockholder's
property of any court or other governmental agency;
and no consent, approval, authorization or order of
any court or governmental agency or body is required
for the consummation by the Selling Stockholder of
the transactions on the Selling Stockholder's part
herein contemplated, except such as may be required
under the Act or under state securities or blue sky
laws.
(iii) At the Closing Time, all stock
transfer or other taxes (other than income taxes)
which are required to be paid in connection with the
sale and transfer of the Shares to be sold by the
Selling Stockholder to the several Underwriters
hereunder will have been fully paid or provided for
by the Selling Stockholder and all laws imposing such
taxes will have been fully complied with.
(iv) The Selling Stockholder has read each
preliminary prospectus referred to in Section 3(a)(i)
hereof (as amended or as supplemented if the Company
shall have filed with the Commission prior to the
date this representation is given an amendment
thereof or supplement thereto including, without
limitation, the Prospectus) and does not believe or
have any reasonable grounds to believe that any
untrue statement of a material fact is included
therein or that there is omitted therefrom a material
fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstance in which they were made, not misleading.
(v) The Selling Stockholder does not believe
or have any reasonable grounds to believe that any of
the representations and warranties of the Company
contained herein are false or misleading.
-11-
12
(vi) The Selling Stockholder has not, and at
the Closing Time will not have, taken directly or
indirectly, any action to cause or result in, or
which has constituted, or might reasonably be
expected to constitute, the stabilization or
manipulation of the price of the shares of the Common
Stock to facilitate the sale or the resale of any of
the Shares.
Section 4. Purchase, Sale and Delivery of the Shares; Closing Time.
(a)(i) On the basis of the representations and warranties
contained in this Agreement, and subject to the terms and conditions herein set
forth, (A) the Company agrees to sell to the Underwriters, and the Underwriters
agree to purchase from the Company, 2,125,000 Shares at and for a price of
$_____ per Share; and (B) the Selling Stockholder agrees to sell to the
Underwriters 375,000 Shares, and the Underwriters agree to purchase from the
Selling Stockholder, such Shares at and for a price of $_____ per Share. The
number of Shares to be purchased from the Company and the number of Shares to be
purchased from the Selling Stockholder respectively (as adjusted by the
Representatives to eliminate fractions), by each of the Underwriters shall be
determined by multiplying the aggregate number of such Shares to be sold by the
Company or the Selling Stockholder, as the case may be, by a fraction, the
numerator of which is the total number of Firm Shares set forth opposite the
name of such Underwriter in Schedule A hereto and the denominator of which is
the aggregate number of Firm Shares set forth in Schedule A hereto. The
obligations of the Underwriters under this Agreement are several and not joint.
(ii) Delivery of the Firm Shares shall be made to you
for the accounts of the respective Underwriters, at the
offices of Ladenburg Thalmann & Co. Inc. at 590 Madison
Avenue, New York, New York, or such other location in the New
York metropolitan area as you shall advise the Company and the
Selling Stockholder by at least one full business day's notice
in writing, against payment by you on behalf of the respective
Underwriters of the purchase price therefor to the Company by
wire transfer of same-day federal funds of the amount to which
the Company is entitled, at 10:00 A.M., New York City Time, on
____________ 1996, or on such other time and business day
(Saturdays, Sundays and legal holidays in the City or State of
New York not being considered business days for the purposes
of this Agreement), as the Representatives and the Company may
agree upon or as the Representatives may determine pursuant to
Section 12 hereof, which time and date are herein called the
"Closing Time." Delivery of the Firm Shares shall be made in
registered form in such name or names and in such
denominations as you shall request by at least two full
business days' notice in writing. The cost of original issue
tax stamps and transfer stamps, if any, in connection with the
issuance and delivery or sale of the Firm Shares by the
Company to the respective Underwriters shall be borne by the
Company; the cost of transfer stamps, if any, in connection
with the sale of the Firm Shares by the
-12-
13
Selling Stockholder to the respective Underwriters shall be
borne by the Selling Stockholder. The Company will pay and
save each Underwriter or its nominees, and any subsequent
holder of the Firm Shares, harmless from any and all
liabilities with respect to or resulting from any failure or
delay in paying federal or state stamp and other transfer
taxes, if any, which may be payable or determined to be
payable in connection with the sale by the Company or the
Selling Stockholder to such Underwriter of the Firm Shares or
any portion thereof.
(iii) The Company and the Selling Stockholder will
make the certificates for the Firm Shares available to you for
examination at the offices of Ladenburg Thalmann & Co. Inc. at
590 Madison Avenue, New York, New York, or at such other place
as you shall request, not later than 2:00 P.M., New York City
Time, on the business day next preceding the Closing Time.
(b) Purchase, Sale and Delivery of the Option Shares. (i) The
Company hereby grants to the respective Underwriters an option (the "Option") to
purchase from the Company up to 375,000 Option Shares, in the same proportion as
each Underwriter has agreed to purchase the Firm Shares, at and for a price of
$______ for each Option Share; provided, however, that the Option may be
exercised only for the purpose of covering any over-allotments which may be made
by you in connection with the distribution and sale of the Firm Shares.
(ii) The Option is exercisable by you in whole or in
part at any time or times on or before 12:00 noon, New York
City time, on the day prior to the Closing Time, and at any
time or times thereafter during the period ending 30 days
after the date of the Prospectus (or if such thirtieth day
shall be a Saturday, Sunday or holiday, on the next business
day thereafter when the New York Stock Exchange is open for
trading), in each case by giving notice to the Company in the
manner provided in Section 13 hereof, setting forth the number
of Option Shares as to which the Option is being exercised,
the name or names in which the certificates for such Option
Shares are to be registered, the denominations of such
certificates and the date of delivery of such Option Shares,
which date, if not the Closing Time, shall not be less than
two nor more than three business days after such notice.
(iii) Upon each exercise of the Option, the Company
shall sell to the respective Underwriters the aggregate number
of Option Shares specified in the notice exercising the Option
and the Underwriters, on the basis of the representations and
warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to
be delivered to you, but subject to the terms and conditions
of this Agreement, and the respective Underwriters shall
purchase from the Company the aggregate number of Option
Shares specified in such notice.
-13-
14
(iv) Delivery of the Option Shares with respect to
which the Option shall have been exercised shall be made to
you for the account of the respective Underwriters, at the
offices of Ladenburg Thalmann & Co. Inc. at 590 Madison
Avenue, New York, New York, or such other location in the New
York metropolitan area as you shall determine and advise the
Company, against payment by you, on behalf of the respective
Underwriters, of the purchase price therefor to the Company by
wire transfer of same-day federal funds of the amount to which
the Company is entitled, at 10:00 A.M., New York City Time, on
the date designated for delivery of the Option Shares in the
notice given by you as above provided for, unless some other
place, time and date is agreed upon (such time and date being
herein called an "Option Exercise Time"). The cost of original
issue tax stamps or transfer stamps, if any, in connection
with each issuance and delivery of the Option Shares by the
Company to the respective Underwriters shall be borne by the
Company. The Company will pay and save each Underwriter, and
any subsequent holder of Option Shares, harmless from any and
all liabilities with respect to or resulting from any failure
or delay in paying federal and state stamp taxes, if any,
which may be payable or determined to be payable as a result
of the sale by the Company to such Underwriter of the Option
Shares or any portion thereof.
(v) The Company will make the certificates for the
Option Shares to be purchased at each Option Exercise Time
available to you for examination at the offices of Ladenburg
Thalmann & Co. Inc. at 590 Madison Avenue, New York, New York,
or such other place as you shall request, not later than 2:00
P.M., New York City Time, on the business day next preceding
each Option Exercise Time.
(vi) The obligation of the respective Underwriters to
purchase and pay for Option Shares at each Option Exercise
Time shall be subject to compliance as of such date with all
the conditions specified in Section 9 hereof and the delivery
to you of opinions, certificates and letters, each dated the
respective Option Exercise Time, substantially similar in
scope to those specified in Section 9 hereof, and to the
absence of any occurrence referred to in Section 11 hereof.
(c) Wire Transfer Payment; Closing. Each of the Company and
the Selling Stockholder hereby acknowledge that the wire transfer by or on
behalf of the Underwriters of the purchase price for any of the Shares does not
constitute closing of a purchase and sale of the Shares. Only execution and
delivery of a receipt for any of the Shares by the Underwriters indicates
completion of the closing of a purchase of those Shares from the Company and the
Selling Stockholder. Furthermore, in the event that the Underwriters wire funds
to the Company or the Selling Stockholder prior to the completion of the closing
of a purchase of any of the Shares, each of the Company and the Selling
Stockholder hereby acknowledge that until the
-14-
15
Underwriters execute and deliver a receipt for those Shares, by facsimile or
otherwise, the Company and the Selling Stockholder will not be entitled to the
wired funds and shall return the wired funds to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand. In the event that
the closing of a purchase of any of the Shares is not completed and the wired
funds are not returned by the Company or the Selling Stockholder to the
Underwriters on the same day the wired funds were received by the Company, each
of the Company and the Selling Stockholder agree to pay to the Underwriters in
respect of each day the wired funds are not returned by the Company or the
Selling Stockholder, in same-day funds, interest on the amount of such wired
funds in an amount representing the Underwriters' cost of financing as
reasonably determined by the Representatives.
Section 5. Warrants. In order to induce you to enter into this
Agreement, the Company shall execute and deliver to you, in your individual
capacities and not as the Representatives, for an aggregate purchase price of
$2,500.00, five-year warrants (the "Warrants") to purchase an aggregate of
250,000 shares of the Common Stock at an exercise price per share equal to 120%
of the initial public offering price per share set forth on the cover page of
the Prospectus. The Warrants shall be in the form of Exhibit 4.2 to the
Registration Statement. Execution and delivery of Warrants, registered in your
names or the names of such of your officers as you shall notify the Company in
writing, shall be made to you, at the offices of Ladenburg Thalmann & Co. Inc.
at 590 Madison Avenue, New York, New York, at the Closing Time.
Section 6. Registration Statement and Prospectus. (a) The Company will
deliver to you, without charge, three fully signed copies of the Registration
Statement and of each amendment thereto, including all financial statements and
exhibits, and to each Underwriter the number of conformed copies of the
Registration Statement and of each amendment thereto, including all financial
statements, but excluding exhibits, as each Underwriter may reasonably request.
(b) The Company has delivered to each Underwriter, and each of
the Selected Dealers (hereinafter defined), without charge, as many copies as
you have requested of each preliminary prospectus heretofore filed with the
Commission and will deliver to each Underwriter and to others whose names and
addresses are furnished by such Underwriter or a Selected Dealer, without
charge, on the Effective Date, and thereafter from time to time during the
period in which the Prospectus is required by law to be delivered in connection
with sales of Shares by an Underwriter or a dealer, as many copies of the
Prospectus (and, in the event of any amendment of or supplement to the
Prospectus, of such amended or supplemented Prospectus) as you may reasonably
request; without limiting the application of this Section 6(b), the Company, not
later than (i) 6:00 PM, New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 12:00 Noon,
New York City time, on such date or (ii) 6:00 PM, New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 12:00 Noon, New York City time, on such
date, will deliver to the Representatives, without charge,
-15-
16
as many copies of the Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request for purposes of confirming orders that
are expected to settle at the Closing Time.
(c) The Company has authorized the Underwriters to use, and
make available for use by prospective dealers, the preliminary prospectuses, and
authorizes each Underwriter, all dealers (the "Selected Dealers") selected by
you in connection with the distribution of the Shares and all dealers to whom
any of such Shares may be sold by the Underwriters or by any Selected Dealer, to
use the Prospectus, as from time to time amended or supplemented, in connection
with the sale of the Shares in accordance with the applicable provisions of the
Act, the applicable Rules and Regulations and applicable state law until
completion of the public offering of the Shares and for such longer period as
you may request if the Prospectus is required to be delivered in connection with
sales of the Shares by an Underwriter or a dealer.
Section 7. Covenants. (a) The Company covenants and agrees with each
Underwriter that:
(i) After the execution and delivery of this
Agreement, the Company will not, at any time, whether before
or after the Effective Date, file any amendment of or
supplement to the Registration Statement or the Prospectus of
which you shall not previously have been advised and furnished
with a copy, or which you or Fulbright & Jaworski L.L.P.
("counsel for the Underwriters") shall not have approved (such
approval to not be unreasonably withheld or denied), or which
is not in compliance in all material respects with the Act or
the Rules and Regulations.
(ii) If the Registration Statement has not become
effective, the Company will promptly file the Final Amendment
with the Commission and will use its best efforts to cause the
Registration Statement to become effective. If the
Registration Statement has become effective, the Company will
file the Rule 430A Prospectus or other Prospectus that
constitutes a part thereof with the Commission as promptly as
practicable, but in no event later than that permitted by Rule
424(b). The Company will promptly advise you (A) when the
Registration Statement, or any post effective amendment
thereto, shall have become effective, or any amendments or
supplements to the Prospectus shall have been filed with the
Commission; (B) of any request of the Commission or any state
or other regulatory body for any amendment or supplement of
the Registration Statement or the Prospectus or for additional
information and the nature and substance thereof; (C) of the
issuance by the Commission 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 prohibiting the offer or sale of any of the Shares or of
the initiation of any proceedings for such purpose; (D) of any
receipt by the Company of any notification with respect to the
-16-
17
suspension of qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose; and (E) of the happening of any
event during the periods in which the Prospectus is to be used
in conjunction with the offer or sale of Shares which makes
any statement of any material fact made in the Registration
Statement or the Prospectus untrue or which requires the
making of any changes in the Registration Statement or the
Prospectus in order to make the statements of material fact
therein not misleading. The Company will use its best efforts
to prevent the issuance of any stop order or any order
preventing or suspending the use of the Registration Statement
or Prospectus and, if such order is issued, to obtain the
lifting thereof as promptly as possible.
(iii) The Company will prepare and file with the
Commission, upon your request, any such amendments of or
supplements to the Registration Statement or the Prospectus,
in form and substance reasonably satisfactory to each of
Epstein Becker & Green, P.C. and Kressel, Rothlein & Roth,
Esqs. (collectively, "counsel for the Company"), as in the
opinion of counsel for the Underwriters may be necessary or
advisable in connection with the distribution of the Shares or
any change in the price at which, or the terms upon which, the
Shares may be offered by you, and will use its best efforts to
cause the same to become effective as promptly as possible.
(iv) The Company will comply with the Act and the
Rules and Regulations and the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules and regulations
thereunder so as to permit the continuance of sales of and
dealings in the Shares under the Act and the Exchange Act. If
at any time when a prospectus is required to be delivered
under the Act an event shall have occurred as a result of
which it is necessary to amend or supplement the Prospectus in
order to make the statements of material fact therein not
untrue or misleading or to make the Prospectus comply with the
Act, the Company will notify you promptly thereof and will,
subject to the provisions of Section 7 hereof, furnish to you
an amendment or supplement which will correct such statement
in accordance with the requirements of Section 10 of the Act.
(v) The Company will comply in all material respects
with all of the provisions of any undertakings contained in
the Registration Statement.
(vi) The Company will take all necessary actions to
furnish to whomever you direct, when and as requested by you,
all necessary documents, exhibits, information, applications,
instruments and papers as may be required or, in the opinion
of counsel for the Underwriters, desirable in order to permit
or facilitate the sale of the Shares. The Company will use its
best efforts to qualify or register the Shares for sale under
the so-called blue sky laws of such
-17-
18
jurisdictions as you shall request, to make such applications,
file such documents and furnish such information as may be
required for such purpose and to comply with such laws so as
to continue such qualification in effect so long as required
for the purposes of the distribution of the Shares; provided,
however, that the Company shall not be required to qualify as
a foreign corporation in any jurisdiction or to file a consent
to service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Shares.
(vii) During the period of three years commencing on
the Effective Date, the Company will furnish to the
Representatives, in such number of copies as the
Representatives may reasonably request, (A) within 120 days
after the end of each fiscal year of the Company, either (1) a
consolidated balance sheet of the Company and its then
consolidated subsidiaries, and a separate balance sheet of
each subsidiary if any, of the Company the accounts of which
are not included in such consolidated balance sheet, as of the
end of such fiscal year, and consolidated statements of income
and stockholders' equity of the Company and its consolidated
subsidiaries, and separate statements of income and
stockholders' equity of each of the subsidiaries, if any, of
the Company the accounts of which are not included in such
consolidated statements, for the fiscal year then ended, all
in reasonable detail, prepared in accordance with generally
accepted accounting principles, consistently applied, and all
certified by independent accountants (within the meaning of
the Act and the Rules and Regulations), or (2) the Company's
Form 10-K for such fiscal year as filed with the Commission in
accordance with the Exchange Act; (B) within 60 days after the
end of each of the first three fiscal quarters of each fiscal
year, either (1) similar balance sheets as of the end of such
fiscal quarter and similar statements of income and
stockholders' equity for the fiscal quarter then ended, all in
reasonable detail, and all certified by the Company's
principal financial officer or the Company's principal
accounting officer as having been prepared in accordance with
generally accepted accounting principles, consistently
applied, or (2) the Company's Form 10-Q for such fiscal
quarter as filed with the Commission in accordance with the
Exchange Act; (C) as soon as available, each report furnished
to or filed with the Commission or any securities exchange and
each report and financial statement furnished to the Company's
stockholders generally; and (D) as soon as available, such
other material as the Representatives may from time to time
reasonably request regarding the financial condition and
operations of the Company and its subsidiaries.
(viii) The Company will make generally available to
its security holders and to the Representatives as soon as
practicable, but not later than 45 days after the end of the
12-month period beginning at the end of the fiscal quarter of
the Company during which the Effective Date occurs (or 90
days, if such 12-month period coincides with the Company's
fiscal year), an earnings statement of the
-18-
19
Company, which will be in reasonable detail, but need not be
audited, and will cover a period of twelve months commencing
after the Effective Date. Such earnings statement shall comply
with the requirements of Section 11(a) of the Act or Rule 158
of the Rules and Regulations. During the period of five years
commencing on the Effective Date, the Company will furnish to
its stockholders (A) within 75 days after the end of the first
three fiscal quarters of each fiscal year, quarterly reports
containing unaudited financial information, and (B) within 120
days after the end of each fiscal year, an annual report
containing audited financial information.
(ix) Counsel for the Company, the Company's
accountants and the officers of the Company will respectively
furnish the opinions, the letters and the certificates
referred to in subsections (e), (f), (g) and (h) of Section 9
hereof, and, in the event that the Company shall file any
amendment to the Registration Statement relating to the
offering of the Shares or any amendment or supplement to the
Prospectus relating to the offering of the Shares subsequent
to the Effective Date, whether pursuant to subsection (a)(iii)
of this Section 7 or otherwise, such counsel, such accountants
and such officers will, at the time of such filing or at such
subsequent time as you shall specify, respectively, furnish to
you such opinions, letters and certificates, each dated the
date of its delivery, of the same nature as the opinions, the
letters and the certificates referred to in said subsections
(e), (f), (g) and (h) respectively, as you may reasonably
request, or, if any such opinion, letter or certificate cannot
be furnished by reason of the fact that such counsel or such
accountants or any such officer believes that the same would
be inaccurate, such counsel or such accountants or any such
officer will furnish an accurate opinion, letter or
certificate with respect to the same subject matter.
(x) Prior to the later to occur of the termination of
the Option and the Option Exercise Time, the Company will not
issue, directly or indirectly, without your prior consent and
that of counsel for the Underwriters not to be unreasonably
withheld or delayed, any press release or other communication
or hold any press conference with respect to the Company or
its activities or this offering.
(xi) The Company will not, without your prior written
consent, sell, contract to sell or otherwise dispose of any
securities, including shares of Common Stock, for a period of
180 days after the date of this Agreement, except the sale of
the Shares, the issuance of the Warrants and the grant of
options and the issuance of shares of Common Stock pursuant to
the 1996 Plan and in accordance with Section 3(a)(v) hereof;
and the Company has caused each of its officers, directors and
all holders of 5% or more of the Common Stock, including any
holder of a warrant, option or other security convertible into
Common Stock,
-19-
20
and any affiliate thereof, to deliver to you on or before the
date of this Agreement an agreement, satisfactory in form and
substance to you and counsel for the Underwriters, whereby
each agrees, for a period of 180 days after the date of this
Agreement, not to offer, pledge, sell or contract to sell,
transfer or otherwise dispose of any shares of Common Stock,
directly or indirectly, without your prior written consent,
except for the sale of Shares to the Underwriters pursuant to
this Agreement; provided, however, that each officer, director
and holder of 5% or more of the Common Stock may sell,
contract to sell, transfer, donate or bequeath any shares of
Common Stock during this period if the transaction is exempt
from registration under the Act and the transferee agrees,
prior to the transaction, to be bound by all of the terms and
conditions of this Section 7(a)(xi).
(xii) The Company will not at any time, directly or
indirectly, take any action designed to or which will
constitute or which might reasonably be expected to cause or
result in the stabilization of the price of the Shares to
facilitate the sale or resale of any of the Shares.
(xiii) The Company will apply the net proceeds from
the sale of the Shares in the manner set forth under "Use of
Proceeds" in the Prospectus. Prior to the application of such
net proceeds, the Company will invest or reinvest such
proceeds only in Eligible Investments (hereinafter defined).
"Eligible Investments" shall mean the following investments so
long as they have maturities of one year or less (A)
obligations issued or guaranteed by the United States or by
any person controlled or supervised by or acting as an
instrumentality of the United States pursuant to authority
granted by Congress; (B) obligations issued or guaranteed by
any state or political subdivision thereof rated either Aa or
higher, or MIG 1 or higher, by Moody's Investors Service, Inc.
or AA or higher, or an equivalent, by Standard & Poor's
Corporation, both of New York, New York, or their successors;
(C) commercial or finance paper which is rated either Prime-1
or higher or an equivalent by Moody's Investors Service, Inc.
or A-1 or higher or an equivalent by Standard & Poor's
Corporation, both of New York, New York, or their successors;
and (D) certificates of deposit or time deposits of banks or
trust companies, organized under the laws of the United States
or any state thereof, having a minimum equity of $500,000,000.
(xiv) During the period of 180 days commencing on the
date hereof, the Company will not, without the prior written
consent of the Representatives, grant options to purchase
shares at a price less than the initial public offering price
per share set forth on the cover page of the Prospectus, other
than options granted in accordance with Section 3(a)(v) hereof
and (i) pursuant to the 1996 Plan or (ii) with an exercise
price equal to or greater than fair market value.
-20-
21
(xv) The Company has caused the Common Stock to be
duly included for quotation on the Nasdaq Stock Market's
National Market (the "National Market").
(xvi) Until the expiration of two years from the
Closing Time, in connection with any public or private debt or
equity financing by the Company, the Company shall not appoint
anyone as syndicate manager, broker or agent for such
financing or registered public offering, unless the Company
shall first offer the same to Ladenburg Thalmann & Co. Inc.,
upon specified terms and conditions, and if Ladenburg Thalmann
& Co. Inc. shall fail to accept such terms and conditions
within thirty days, then the Company shall be free to appoint
any other firm or organization as its syndicate manager,
broker or agent upon terms and conditions which shall not be
more favorable to such firm or organization than those so
offered to you.
(b) The Selling Stockholder covenants and agrees with each
Underwriter that:
(i) The Selling Stockholder will not, directly or
indirectly, take any action designed to or which will
constitute or which might reasonably be expected to cause or
result in the stabilization of the price of the Shares to
facilitate the sale or the resale of any of the Shares.
(ii) If, subsequent to the date hereof, the Selling
Stockholder shall believe or have any reasonable grounds to
believe that the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment
thereof or supplement thereto) contains any untrue statement
of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or that any of the
representations and warranties of the Company or the Selling
Stockholder contained herein or in any certificate or document
contemplated under this Agreement to be delivered to you are
false when made, the Selling Stockholder will promptly notify
you, as the Representatives, to such effect.
(iii) The Selling Stockholder will not, without your
prior written consent, sell, contract to sell or otherwise
dispose of any shares of Common Stock owned by or held of
record in his name, except the sale of Shares to the
Underwriters pursuant to this Agreement, for a period of 180
days after the Effective Date; provided, however, that the
Selling Stockholder may sell, contract to sell, transfer,
donate or bequeath any shares of Common Stock during this
period if the transaction is exempt from registration under
the Act and the transferee agrees, prior to the transaction,
to be bound by all of the terms and conditions of this Section
7(b)(iii).
-21-
22
(iv) The Selling Stockholder will furnish the
certificates referred to in subsections (a)(viii) and (ix) of
Section 9 hereof.
Section 8. Expenses. The Company will pay and bear all costs, fees,
taxes and expenses incident to the performance of the obligations of the Company
and the Selling Stockholder under this Agreement, including, but not limited to
(a) the costs incident to the issuance, sale and delivery to the Underwriters of
the Shares (except that the Company will not be responsible for the underwriting
discounts and commissions with respect to shares of common stock being sold by
the Selling Stockholder); (b) the costs incident to the preparation, printing
and filing under the Act of each preliminary prospectus, the Prospectus, the
Registration Statement and any amendments or supplements thereof and exhibits
thereto; (c) the costs of distributing the Registration Statement and any
post-effective amendments thereto; (d) the costs of printing and distributing to
the Representatives, the other Underwriters and any Selected Dealers copies of
any preliminary prospectus, the Prospectus, the Registration Statement and any
amendment or supplement to the Prospectus or Registration Statement required by
this Agreement or the Act; (e) the costs of preparation, printing, mailing,
delivery, filing and distribution of preliminary and final blue sky memoranda,
Underwriters' Questionnaires and Powers of Attorney, letters to prospective
Underwriters, the Agreement Among Underwriters, the Selling Agreement, this
Agreement and all documents related thereto; (f) the filing fees of the
Commission; (g) the costs of qualification or registration of the Shares in the
jurisdictions referred to in subsection (f) of Section 7 hereof, including the
legal fees and expenses of counsel for the Underwriters in connection therewith,
and all filing fees in connection therewith, provided, however, that these
expenses shall not exceed $25,000; (h) the cost of preparation, including the
legal fees and expenses of counsel for the Underwriters in connection therewith,
of all filings with the National Association of Securities Dealers, Inc.
("NASD") and all filing fees in connection therewith; (i) fees and expenses of
counsel for the Company, the Company's accountants and the Company's
consultants; (j) fees in connection with the quotation of the Common Stock on
the National Market; and (k) all other costs and expenses incurred or to be
incurred by the Company in connection with the transactions contemplated by this
Agreement. If the Firm Shares are not sold to the Underwriters, for any reason
whatsoever, other than as a result of the Underwriters without cause under, or
in breach of, this Agreement refusing to proceed with the purchase of the Firm
Shares, the Company will pay all accountable out-of-pocket expenses which you
may incur in connection with this Agreement and the transactions hereby
contemplated, including all fees and expenses of counsel for the Underwriters in
connection therewith. The provisions of this Section 8 are intended to relieve
the Underwriters from payment of costs and expenses which the Company hereby
agrees to pay and shall not effect any agreement between the Company and the
Selling Stockholder for the sharing of such costs and expenses.
Section 9. Conditions of the Underwriters' Obligations. The
Underwriters' obligations hereunder to purchase and pay for the Shares are
subject (as of the date hereof, the Closing Time and each Option Exercise Time)
to the accuracy of and compliance with the representations and warranties of the
Company and the Selling Stockholder herein and in each
-22-
23
certificate and document contemplated under this Agreement to be delivered, to
the accuracy of the statements of the Company and the Selling Stockholder and of
the officers of the Company and the Selling Stockholder made pursuant to the
provisions hereof, to the performance by the Company and the Selling Stockholder
of their respective covenants and agreements hereunder and under each such
certificate and document, and to the following additional conditions:
(a) (i) The Registration Statement shall have become effective
not later than 5:00 P.M., New York City Time, on the date of this Agreement, or
at such later time or on such later date as you may agree to in writing; (ii) if
required, the Prospectus shall have been filed with the Commission pursuant to
Rules 424(b)(1) or (4) of the Rules and Regulations within the applicable time
period prescribed for such filing thereunder and in accordance with the
provisions of Section 7(b) hereof; (iii) at or prior to the Closing Time, no
stop order suspending the effectiveness of the Registration Statement or the
qualification or registration of the Shares under the blue sky laws of any
jurisdiction (whether or not a jurisdiction which you shall have specified)
shall have been issued and no proceeding for that purpose shall have been
initiated or shall be threatened or contemplated by the Commission or the
authorities of any such jurisdiction; (iv) any request for additional
information on the part of the Commission or any such authorities shall have
been complied with to the satisfaction of the Commission or such authorities and
counsel for the Underwriters; (v) the NASD, upon review of the terms of the
public offering of Shares, shall not have objected to such offering, such terms,
or the Underwriters' participation in the same; and (vi) after the date hereof,
no amendment or supplement to the Registration Statement or the Prospectus shall
have been filed without your prior consent.
(b) You shall not have advised the Company, and the Selling
Stockholder shall not have advised any Underwriter or the Company, that the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto contains an untrue statement of a fact which is material, or omits to
state a fact which is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Time, there shall be no litigation instituted against
the Company or the Subsidiary or any of their respective officers or directors,
and between such dates there shall be no proceeding instituted or threatened
against the Company or the Subsidiary or any of their respective officers or
directors before or by any federal, state, county or local commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding could materially adversely affect the Company and its Subsidiary taken
as a whole, or their businesses, business prospects or properties, or materially
adversely affect the financial condition or results of operations of the Company
and its Subsidiary taken as a whole.
-23-
24
(d) Each of the representations and warranties of the Company
and the Selling Stockholder contained herein and in each certificate and
document contemplated under this Agreement to be delivered shall be true and
correct at the Closing Time as if made at the Closing Time, and all covenants
and agreements contained herein, and in each such certificate and document, to
be performed on the part of the Company or the Selling Stockholder and all
conditions contained herein and in each such certificate and document to be
fulfilled or complied with by the Company or the Selling Stockholder at or prior
to the Closing Time shall have been duly performed, fulfilled or complied with.
(e) Counsel for the Company and the Selling Stockholder shall
furnish to you opinions, in form and substance reasonably satisfactory to you,
dated the Closing Date, as follows:
(i) Epstein Becker & Green, P.C. shall furnish an
opinion in the form of Exhibit 1 annexed hereto; and
(ii) Kressel, Rothlein & Roth, Esqs. shall furnish an
opinion in the form of Exhibit 2 annexed hereto.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, and
representatives of the independent public accountants for the Company at which
conferences the officers, representatives and accountants discussed the contents
of the preliminary prospectus, the Registration Statement, the Prospectus, and
related matters and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus, on the basis
of the foregoing, nothing has come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Prospectus or any amendment or supplement thereto as of its date or the date of
such opinions contained or contains any untrue statement of a material fact or
omitted or omits 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 (it being understood that such counsel need
express no opinion with respect to the financial statements and other financial
or accounting data included in the Registration Statement or Prospectus).
Such opinions shall be to such further effect with respect to
other legal matters relating to this Agreement and the sale of the Shares
hereunder as counsel for the Underwriters may reasonably request. In rendering
the opinions set forth above, such counsel may rely upon, inter alia,
representations and warranties contained herein and certificates of the officers
of the Company and the Selling Stockholder and public officials as to matters of
fact. In rendering such opinions, such counsel may state that no opinions are
expressed therein concerning any laws other than those of the State of New York
and Federal laws.
-24-
25
(f) Concurrently with the execution and delivery of this
Agreement and at the Closing Time, the Company's accountants shall have
furnished to you a letter, dated as of the date of its delivery, addressed to
you and in form and substance satisfactory to you, to the effect that:
(i) Such accountants are independent certified public
accountants with respect to the Company and the Subsidiary as
required by the Act and the Rules and Regulations, and the
answer to Item 10 of the Registration Statement is correct
insofar as it relates to them.
(ii) In their opinion the consolidated financial
statements and schedules and notes examined by them and
included in the Registration Statement and the Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and
Regulations with respect to registration statements on Form
S-1.
(iii) On the basis of inquiries and procedures
conducted by them, including a reading of the latest available
unaudited interim financial statements of the Company and the
Subsidiary, inquiries of officials of the Company and the
Subsidiary responsible for operational, financial and
accounting matters, a reading of the minute books of the
Company and the Subsidiary and other specified procedures and
inquiries, nothing has come to their attention that caused
them to believe that (A) any unaudited financial statements of
the Company and the Subsidiary set forth in the Registration
Statement and the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the
audited financial statements, and (B) during the period from
July 31, 1996 to a specified date not more than five days
prior to the date of such letter there was any change in the
consolidated capital stock or consolidated debt of the Company
and its Subsidiary, or any decrease in the consolidated total
assets or consolidated shareholders' equity of the Company and
its Subsidiary, each as compared with the amounts shown in the
balance sheet as of July 31, 1996 included in the Registration
Statement or any decrease from August 1, 1996 to the specified
date, on a proportional basis with the fiscal year ended July
31, 1996, in revenues, earnings from operations, net earnings,
pro forma net earnings and pro forma net earnings per share,
except in all instances for changes, decreases or increases
which the Registration Statement and the Prospectus disclose
have occurred or may occur and except for such other changes,
decreases or increases which you shall in your sole discretion
accept.
(iv) In addition to their examination referred to in
their reports included in the Registration Statement and the
Prospectus and the inquiries and limited
-25-
26
procedures referred to in clause (iii) above, they have
performed other procedures, not constituting an audit, with
respect to certain numerical data and financial information
appearing in the Registration Statement and the Prospectus,
requested by you and specified in such letter and have
compared such data and information with the accounting records
of the Company and found them to be in agreement.
(v) On the basis of a reading of the pro forma
consolidated financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified
procedures that would not necessarily reveal matters of
significance with respect to the comments set forth in this
clause (v), inquiries of certain officials of the Company and
its consolidated subsidiaries who have responsibility for
financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma consolidated
financial statements, nothing came to their attention that
caused them to believe that the pro forma consolidated
financial statements do not comply in form in all material
respects with the applicable accounting requirements of
Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation
of such statements.
(g) At the Closing Time, there shall be furnished to you, on
behalf of the Company, an accurate certificate, dated the date of its delivery,
signed by each of the chief executive officer and the chief financial officer of
the Company, in form and substance satisfactory to you, to the effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus and (A)
to his knowledge, as of the date of such certificate, the
statements in the Registration Statement and the Prospectus
are and were true and correct in all material respects and
neither the Registration Statement nor the Prospectus omits to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(B) in the case of a certificate delivered after the date of
this Agreement, since the Effective Date, no event has
occurred of which he has knowledge and which was required by
the Act or the Rules and Regulations to be set forth in a
supplement to or amendment of the Prospectus but which has not
been so set forth; and (C) since the dates as of which and the
periods for which information is given in the Registration
Statement and the Prospectus, there has not been to his
knowledge any material adverse change, in the financial
condition or business prospects of the Company from that set
forth in the Registration Statement and the Prospectus, other
than changes which the Registration Statement and the
Prospectus specifically disclose have occurred or may occur
subsequent to the Effective Date.
-26-
27
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings
for such purpose have been commenced or are, to the knowledge
of each signer of such certificate, threatened or contemplated
by the Commission.
(iii) No stop order suspending the qualification or
registration of any of the Shares under the blue sky laws of
any jurisdiction (whether or not a jurisdiction you shall have
specified) has been issued, and no proceedings for such
purpose have been commenced or are, to the knowledge of each
signer of such certificate, threatened or contemplated by any
jurisdiction.
(iv) The conditions, separately set forth in such
certificate, contained in subsections (a), (c) and (j) of this
Section 9 have been complied with.
(v) There has been no breach of any of the terms or
provisions of the agreements referred to in Section 7(a)(xi)
hereof.
(vi) Each of the representations and warranties of
the Company contained in this Agreement and in each
certificate and document contemplated under this Agreement to
be delivered to you was, when originally made and is, at the
time such certificate is dated, true and correct.
(vii) Each of the covenants required herein to be
performed by the Company on or prior to the date of such
certificate has been duly, timely and fully performed and each
condition herein required to be complied with by the Company
on or prior to the date of such certificate has been duly,
timely and fully complied with by the Company.
(h) The Selling Stockholder shall have performed all of the
covenants contained herein and in any certificate or document contemplated under
this Agreement to be delivered to you and required to be performed by the
Selling Stockholder at or prior to the Closing Time, and you shall have received
at the Closing Time, to the effect that the representations and warranties of
the Selling Stockholder contained in this Agreement and in each such certificate
and document are true and correct in all respects on and as of the date of such
certificate as if made on and as of such date, and each of the covenants and
conditions required to be performed or complied with by the Selling Stockholder
on or prior to the date of such certificate has been duly, timely and fully
performed or complied with.
(i) The Company and the Selling Stockholder shall have
furnished to you such certificates, in addition to those specifically mentioned
herein, as you may have reasonably requested in a timely manner as to the
accuracy and completeness, at the Closing Time, of any statement in the
Registration Statement or the Prospectus; as to the accuracy, at the Closing
Time, of the representations and warranties of the Company and the Selling
Stockholder herein
-27-
28
and in each certificate and document contemplated under this Agreement to be
delivered to you; as to the performance by the Company and the Selling
Stockholder of their respective obligations hereunder and under each such
certificate and document; or as to the fulfillment of the conditions concurrent
and precedent to your obligations hereunder.
(j) Except as contemplated by the Registration Statement and
the Prospectus, since the date hereof, there shall not have been any change in
the capitalization of the Company or any material adverse change in the
business, business prospects, financial condition or results of operations of
the Company or in the value of the assets of the Company, or any material
change, without your consent, in the conduct of the business of the Company,
arising for any reason whatsoever.
(k) Each of the agreements referred to in Section 7(a)(xi)
hereof shall have been delivered to you and there shall have been no breach of
any such agreement.
(l) All corporate proceedings and other legal matters relating
to the sale and transfer of the Shares, this Agreement, the Warrants, the
Registration Statement, the Prospectus and other related matters shall be
reasonably satisfactory in all material respects to counsel for the
Underwriters, who shall have furnished to you at the Closing Time such opinion,
in form and substance reasonably satisfactory to you, with respect to the
sufficiency of the aforementioned corporate proceedings and other legal matters
as you may reasonably require; and the Company shall have furnished to such
counsel such records and documents as such counsel may have reasonably requested
in a timely manner for the purpose of enabling them to pass upon such matters.
(m) The Common Stock shall be authorized for quotation on the
National Market.
All of the opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel for the Underwriters. You reserve the right
to waive any condition hereinabove set forth. Each opinion, certificate, letter
or other document required to be delivered at the Closing Time shall also be
required to be delivered at each Option Exercise Time.
Section 10. Indemnification and Contribution. (a) The Company and the
Selling Stockholder, jointly and severally, agree to indemnify and hold harmless
each Underwriter and each person who controls an Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and each and all of
them, from and against any and all losses, claims, damages, liabilities or
actions, joint or several (including any reasonable investigation, legal or
other expense incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which an Underwriter
or they or any of them may become subject under the Act, the Exchange Act or
otherwise but only insofar as such
-28-
29
losses, claims, damages, liabilities or actions arise out of, or are based upon,
(i) any untrue statement or alleged untrue statement made by the Company or the
Selling Stockholder in Section 3 of this Agreement; (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto or in any application or other document executed by the
Company or the Selling Stockholder based upon written information furnished by
or on behalf of the Company or the Selling Stockholder filed in any jurisdiction
in order to register or qualify the Shares under the securities laws thereof or
filed with the Commission, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (iii) the employment by the Company or the Selling
Stockholder of any device, scheme or artifice to defraud, or the engaging by the
Company or the Selling Stockholder in any act, practice or course of business
which operates or would operate as a fraud or deceit, or any conspiracy with
respect thereto, in which the Company or the Selling Stockholder shall
participate, in connection with the issuance and sale of any of the Shares;
provided, however, that (i) the indemnity agreement contained in this subsection
(a) shall not extend to any Underwriter in respect of any such losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement or any such omission or alleged omission,
if such statement or omission was made in reliance upon information furnished in
writing to the Company through you or on behalf of any Underwriter specifically
for use in connection with the preparation of the Registration Statement, any
preliminary prospectus or the Prospectus or any such amendment or supplement
thereto; and (ii) the obligations of the Selling Stockholder to indemnify the
Underwriters and the aforementioned controlling persons under the provisions of
subsection (a) shall be limited to the product of the number of Shares sold by
the Selling Stockholder and the initial public offering price set forth on the
cover page of the Prospectus (net of underwriting discounts and commissions but
before deducting expenses); and provided, further, that if any preliminary
prospectus or the Prospectus contained any alleged untrue statement or allegedly
omitted to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and such statement or
omission shall have been corrected in a revised preliminary prospectus or in the
Prospectus or in an amended or supplemented Prospectus, neither the Company nor
the Selling Stockholder shall be liable to any Underwriter under this subsection
(a) with respect to such alleged untrue statement or alleged omission to the
extent that any such loss, claim, damage or liability of such Underwriter
results from the fact that such Underwriter sold Shares to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, such revised preliminary prospectus or Prospectus or amended or
supplemented Prospectus. The Company and the Selling Stockholder, jointly and
severally, agree to pay any legal and other expenses for which it is liable
under this subsection (a) from time to time (but not more frequently than
monthly) within 30 days after its receipt of a bill therefor.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company, its directors, its officers who shall
have signed the Registration Statement, each person, if any, who controls the
Company within the meaning of Section 15 of
-29-
30
the Act or Section 20 of the Exchange Act and the Selling Stockholder to the
same extent as the foregoing indemnity from the Company and the Selling
Stockholder to such Underwriter, but in each case to the extent, and only to the
extent, that any statement in or omission from or alleged omission from the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto was made in reliance upon information furnished
in writing to the Company by such Underwriter specifically for use in connection
with the preparation of the Registration Statement, any preliminary prospectus
or the Prospectus or any such amendment or supplement thereto; provided,
however, that the obligation of each Underwriter to indemnify the Company and
the Selling Stockholder under the provisions of this subsection (b) shall be
limited to the product of the number of Shares purchased by such Underwriter and
the initial public offering price set forth on the cover page of the Prospectus.
Each Underwriter agrees to pay any legal and other expenses for which it is
liable under this subsection (b) from time to time (but not more frequently than
monthly) within 30 days after receipt of a bill therefor.
(c) If any action is brought against a person entitled to
indemnification pursuant to the foregoing subsections (a) or (b) (an
"indemnified party") in respect of which indemnity may be sought against a
person granting indemnification (an "indemnifying party") pursuant to such
subsections, such indemnified party shall promptly notify such indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party of any such action shall not release the indemnifying party
from any liability it may have to such indemnified party otherwise than on
account of the indemnity agreement contained in subsection (a) or (b) of this
Section 10. In case any such action is brought against an indemnified party and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party against which a claim is to be made will be entitled to participate
therein at its own expense and, to the extent that it may wish, to assume at its
own expense the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that (i) if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded based upon advice of counsel
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party shall have the right to select
separate counsel to assume such legal defenses and otherwise to participate in
the defense of such action on behalf of such indemnified party or parties; and
(ii) in any event, the indemnified party shall be entitled to have counsel
chosen by such indemnified party participate in, but not conduct, the defense.
Upon receipt of notice from the indemnifying party to such indemnified party of
its election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with proviso (i)
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel); or (ii) the indemnifying party shall not have employed
counsel
-30-
31
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action. An
indemnifying party shall not be liable for any settlement of any action or
proceeding effected without its written consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in subsection (a) or
(b) of this Section 10 is judicially determined (by entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) to be unenforceable in accordance
with its terms, the Company, the Selling Stockholder and, subject to the
limitations set forth below, the Underwriters shall contribute to the aggregate
losses, claims, damages and liabilities, of the nature contemplated by said
indemnity agreement, incurred by the Company, the Selling Stockholder and one or
more Underwriters, in such proportions as are applicable to reflect the relative
benefits received by the Company and the Selling Stockholder, on the one hand,
and the Underwriters, on the other hand, from the offering of the Shares;
provided, however, that if such allocation is not permitted by applicable law or
if the indemnified party failed to give the notice required under subsection (c)
of this Section 10, then the relative fault of the Company and the Selling
Stockholder, on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages and liabilities and other relevant equitable considerations will
be considered together with such relative benefits. The relative benefits
received by the Company and the Selling Stockholder, on the one hand, and the
Underwriters, on the other hand, shall be deemed to be in such proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and the Selling
Stockholder bear to the total underwriting discount received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus and in the notes thereto. The relative fault of the Company and the
Selling Stockholder and of the Underwriters, on the other, shall be determined
by reference to, among other things, whether in the case of an untrue statement
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact, such statement or omission relates to
information supplied by the Company or the Selling Stockholder, on the one hand,
or by the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro-rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in this subsection (d). The amount paid or payable by the
indemnified party as a result of the losses, claims, damages or liabilities
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending against or appearing as a third-party witness in any
such action or claim. Notwithstanding the provisions of this subsection (d), (i)
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares purchased by it were offered
to the public exceeds the amount of any damages which such Underwriter has
otherwise
-31-
32
been required to pay in respect of any loss, claim, damage, liability or action
covered by this Section; (ii) the Selling Stockholder shall not be required to
contribute any amount in excess of the amount by which the proceeds of the
Shares sold by him (net of underwriting discounts and commissions but before
deducting expenses) exceeds the amount of any damages which the Selling
Stockholder has otherwise been required to pay in respect to any loss, claim,
damage, liability or action covered by this Section; 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 is not guilty of such
fraudulent misrepresentation. For purposes of this subsection (d), each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter. The Underwriters' obligations to contribute pursuant to this
subsection (d) are several in proportion to their respective underwriting
commitments and not joint.
(e) The respective indemnity and contribution agreements by
the Underwriters, the Selling Stockholder and the Company contained in
subsections (a), (b), (c) and (d) of this Section 10, and the covenants,
representations and warranties of the Company and the Selling Stockholder set
forth in Sections 2, 3, 4, 5, 6, 7 and 8 hereof, shall remain operative and in
full force and effect regardless of (i) any investigation made by any
Underwriter, on its behalf or by or on behalf of any person who controls an
Underwriter, the Company or any controlling person of the Company or any
director or officer of the Company or the Selling Stockholder; or (ii)
acceptance of any of the Shares and payment therefor; and shall survive the
delivery of the Shares, and any successor of any Underwriter or the Company, or
of any person who controls any Underwriter or the Company, as the case may be,
shall be entitled to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by the
Underwriters, the Company and the Selling Stockholder contained in subsections
(a), (b), (c) and (d) of this Section 10 shall be in addition to any liability
which the Underwriters, the Company and the Selling Stockholder may otherwise
have.
Section 11. Termination. This Agreement (except for the provisions of
Sections 8 and 10 hereof) may be terminated by you by notifying the Company and
the Selling Stockholder at any time:
(a) prior to the earliest of (i) 11:00 a.m., New York City
time, on the business day immediately following the date hereof, (ii) the time
of release by the Representatives for publication of the first newspaper
advertisement which subsequently is published with respect to the Shares or
(iii) the time when the Shares are first generally offered by the
Representatives to dealers by letter or telegram;
(b) at or prior to the Closing Time if any of the conditions
specified in Section 9 hereof shall not have been fulfilled when and as required
by this Agreement to be fulfilled or if any of the covenants, representations or
warranties contained herein or in any certificate or document contemplated under
this Agreement to be delivered to you shall not have
-32-
33
been satisfied or fulfilled in all material respects within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by you in writing; or
(c) at or prior to the Closing Time if any one or more of the
following shall have occurred or have been established between the time of your
execution of this Agreement and the Closing Time and in your judgment the same
has made or makes it inadvisable or impracticable for you generally to proceed
with the offering, sale, delivery, or collection of payment for, the Shares
pursuant to the public offering contemplated by this Agreement (i) a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange, American Stock Exchange, National Market or in the
over-the-counter market; (ii) any new legal or regulatory restriction affecting
the distribution of securities generally or of the Shares; (iii) a material
adverse change in general market or economic conditions, either domestic or
foreign, from such conditions on the date hereof; (iv) a declaration of a
banking moratorium by Federal or New York State authorities; (v) any outbreak of
major hostilities or other national or international calamity; (vi) a material
interruption in the mail service or other means of communications within the
United States; (vii) an action by any government in respect of its monetary
affairs which, in your opinion, has a material adverse effect on the United
States securities markets; or (viii) any material adverse change or any material
adverse development involving a prospective change not contemplated in the
Registration Statement and affecting particularly the business or properties of
the Company or the Subsidiary.
Your right to terminate will not be waived or otherwise
relinquished because you do not give the required notice of termination prior to
the time that the event stated in this Section 11(c) giving rise to the right to
terminate shall have ceased to exist, provided that you give the required notice
prior to the Closing Time. Any termination of this Agreement pursuant to this
Section 11 shall be without liability of the Company or the Selling Stockholder
to the Underwriters, except as otherwise provided in Sections 8 and 10 hereof.
Section 12. Default of Underwriters. If any Underwriter or Underwriters
default in their obligation to take and pay for Firm or Option Shares and the
aggregate number of Firm or Option Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the aggregate
number of Firm or Option Shares, as the case may be, the other Underwriters
shall be obligated severally in proportion to their respective commitments
hereunder to purchase the Firm or Option Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so default and the aggregate number of Firm or Option Shares with
respect to which such default or defaults occur is more than 10% of the
aggregate number of Firm or Option Shares, as the case may be, and arrangements
satisfactory to you for the purchase of such Firm or Option Shares by other
persons (who may include one or more of the non-defaulting Underwriters
including you) are not made within 36 hours after such default, this Agreement
may be terminated by you without liability on the part of any non-defaulting
Underwriter or the
-33-
34
Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Section 8 and except for the provisions of Section 10 hereof. In the
event of any default by one or more Underwriters as described in this Section
12, the Representatives shall have the right to postpone the Closing Time or the
Option Exercise Time, as the case may be, established as provided in Section 4
hereof for not more than seven business days in order that any necessary changes
may be made in the arrangements or documents for the purchase and delivery of
the Firm Shares or Option Shares, as the case may be. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section 12. Nothing herein shall relieve a defaulting Underwriter from
liability for its default.
Section 13. Notice. Except as otherwise expressly provided in this
Agreement, whenever advice or a notice, objection, designation, request or
report is given or is required by the provisions of this Agreement to be given,
such advice, notice, objection, designation, request or report shall be in
writing and shall be delivered by first-class mail, postage prepaid, nationally
recognized courier or by telecopy, (a) if to the Company, or the Selling
Stockholder, addressed to it or him and delivered at 160 Oser Avenue, Hauppauge,
New York 11788 (telecopier number 516/435-1044), Attention: Barry R. Steinberg,
with a copy to (i) Epstein Becker & Green, P.C. (telecopier number
212/661-0989), Attention: Seth I. Truwit, Esq. and (ii) Stebel & Paseltiner,
P.C. (telecopier number 516/496-8112), Attention: Bernard Stebel, Esq.; and (b)
if to you or the Underwriters, addressed to Ladenburg Thalmann & Co. Inc., and
delivered at 590 Madison Avenue, New York, New York 10022 (telecopier number
212/872-1730), Attention: Ronald Kramer, with a copy to Fulbright & Jaworski
L.L.P., 666 Fifth Avenue, New York, New York 10103 (telecopier number
212/752-5958), Attention: Richard H. Gilden, Esq., or at such other address or
telecopier number as a party hereto may give notice in accordance herewith.
Section 14. Miscellaneous. (a) This Agreement is made solely for the
benefit of the Underwriters, the Selling Stockholder, and the Company, the
Company's directors, the Company's officers who shall have signed the
Registration Statement and any controlling person referred to in Section 10
hereof, and their respective successors and assigns, and no other person,
partnership, association or corporation shall acquire or have any right under or
by virtue of this Agreement. The term "successor" or the term "successors and
assigns" as used in this Agreement shall not include any buyer, as such, of any
of the Shares from the Underwriters. All of the obligations of the Underwriters
hereunder are several and not joint.
(b) The information in the Prospectus under the section
"Underwriting" with respect to (i) the names of, and number of Shares to be
purchased by, each of the Underwriters and (ii) the amounts of the selling
concession and reallowance shall constitute the only information furnished in
writing by or on behalf of the several Underwriters for use in connection with
the preparation of the Registration Statement as originally filed or in any
amendment thereto, any preliminary prospectus or the Prospectus as the case may
be.
-34-
35
(c) This Agreement shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company, the
Selling Stockholder and you relating to the sale of any of the Shares.
(d) No change, amendment or supplement to, or waiver of, this
Agreement or any term, provision or condition contained herein, shall be valid
or of any effect unless in writing and signed by the party against whom such is
asserted.
(e) This Agreement shall be governed by and construed in
accordance with the law of the State of New York applicable to contracts made
and to be performed therein without giving effect to the principles of conflicts
of law thereof. If any action or proceeding shall be brought by any of the
Underwriters in order to enforce any right or remedy under this Agreement, the
Company and the Selling Stockholder hereby consent to and submit to the
jurisdiction of the courts of the State of New York and of any federal court
sitting in the Borough of Manhattan, City of New York.
(f) This Agreement may be signed in two or more counterparts
with the same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of
this Agreement.
(g) Wherever, in this Agreement, reference is made to the
acknowledgment, agreement, approval, consent, demand, determination, election or
request by a party or parties hereto, the same must be in writing.
(h) Descriptive headings are for convenience only and shall in
no way define, limit or affect this Agreement.
-35-
36
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Stockholder, and you.
Very truly yours,
MANCHESTER EQUIPMENT CO., INC.
By:_______________________________________
__________________________________________
Barry R. Steinberg
Accepted as of the date
first above written
LADENBURG THALMANN & CO. INC.
CRUTTENDEN ROTH INCORPORATED
By: LADENBURG THALMANN & CO., INC.
By:_________________________________
Acting on behalf of itself and as
the Representatives of the other
Underwriters named in Schedule
A attached hereto.
-36-
37
SCHEDULE A
Number
Name of Underwriter of Shares
- ------------------- ---------
Ladenburg Thalmann & Co. Inc.
Cruttenden Roth Incorporated
---------
Total 2,500,000
=========
38
EXHIBIT 1
FORM OF OPINION OF EPSTEIN BECKER & GREEN, P.C.
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation. The Company
has the corporate power and authority to own or lease all of the assets owned or
leased by it, and conduct its business as described in the Registration
Statement and the Prospectus.
(ii) Based upon such counsel's review of statutes, rules and
regulations which, in such counsel's experience, are normally applicable to
transactions of the type provided for in this Agreement, but without such
counsel having made any special investigation concerning any other statutes,
rules and regulations, authorization, approval, consent or license of any
governmental or regulatory body, except as may be required under the Act or the
securities or blue sky laws of any jurisdictions, is required in connection with
the (A) authorization, issuance, transfer, sale or delivery of the Shares to be
sold by the Company; (B) authorization, issuance or delivery of the Warrants or
issuance of shares of Common Stock upon exercise of the Warrants; (C) transfer,
sale or delivery of the Shares to be sold by the Selling Stockholder; (D)
execution, delivery and performance of this Agreement by the Company and the
Selling Stockholder; or (E) taking of any action contemplated herein, or if so
required all such authorizations, approvals, consents and licenses, have been
obtained.
(iii) The Company has an authorized capital stock and authorized and
outstanding stock options and warrants as set forth in the Registration
Statement and the Prospectus. All of the Shares (including the Shares to be sold
by the Selling Stockholder) will, upon payment therefor, be duly authorized,
validly issued, fully paid and nonassessable, to the knowledge of such counsel
are not subject to pre-emptive rights and have not been issued in violation of
any statutory pre-emptive rights or, to the best of such counsel's knowledge,
similar contractual rights.
(iv) To such counsel's knowledge, no holder of any securities of the
Company has the right to require registration of shares of the Common Stock or
other securities of the Company because of the filing or effectiveness of the
Registration Statement. The description of the Common Stock and the Shares
contained in the Registration Statement and the Prospectus conforms to the
rights set forth in the instruments defining the same and is in conformity in
all material respects with the requirements of Item 9 of the Registration
Statement.
(v) The Company is not an "investment company" as defined in Section
3(a) of the Investment Company Act and, if the Company conducts its business as
set forth in the Registration Statement and the Prospectus, will not become an
"investment company" and will not be required to register under the Investment
Company Act; the Company has not been
-1-
39
required to make any filings pursuant to the Exchange Act, other than the
registration statement on Form 8-A.
(vi) The Company has full corporate power and authority to enter into
the Warrants. The Warrants have been duly authorized, executed, issued and
delivered and constitute the valid and legally enforceable obligation of the
Company, except as the indemnification and contribution provisions thereunder
may be limited by applicable law and the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and by general principles of equity. The shares of
Common Stock required to be sold or issued by the Company upon exercise of the
Warrants have been duly authorized and reserved for sale or issuance, and, when
sold or issued and delivered upon payment of the exercise price therefor as
provided in the Warrants, will be duly and validly issued, fully paid and
nonassessable.
(vii) The Company has full corporate power and authority to enter into
this Agreement, and this Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Registration Statement and the Prospectus, and each
amendment thereof or supplement thereto, comply as to form in all material
respects with the requirements of the Act and the Rules and Regulations (except
that no opinion need be expressed as to financial statements and other financial
or accounting data contained in the Registration Statement or the Prospectus).
(ix) Such counsel does not know of any contracts or documents required
to be summarized or disclosed in the Registration Statement or the Prospectus or
filed as exhibits thereto which have not been so summarized or disclosed or so
filed, and such counsel does not know of any pending or threatened legal or
governmental proceedings required to be disclosed in the Prospectus which have
not been described as required.
(x) The Registration Statement has become effective under the Act, and,
to the knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement or use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are threatened, pending or
contemplated. The opinion delivered at the Closing Time shall state that all
filings required by Rules 424 and 430A of the Rules and Regulations have been
made.
(xi) The execution and delivery of this Agreement and the Warrants by
the Company, the consummation by the Company of the transactions herein or
therein contemplated and the compliance with the terms of this Agreement and the
Warrants do not and will not conflict with or result in a breach of any of the
terms or provisions of or violate or constitute a default under, the certificate
of incorporation or by-laws of the Company, or any indenture, mortgage or other
agreement or instrument known to such counsel (as a result of being an exhibit
to the Registration Statement or identified in response to counsel's due
diligence checklist) to which
-2-
40
the Company or the Selling Stockholder is a party or by which the Company or the
Selling Stockholder or any of its or his respective properties is bound.
(xii) Upon delivery of the certificates for the Shares to be sold by
the Selling Stockholder and payment therefor in accordance with the terms
hereof, each of the Underwriters will have the status of a "bona fide purchaser"
of such Shares under Article 8 of the Uniform Commercial Code as currently in
effect in the State of New York and will take free of any adverse claims
assuming that such Underwriter purchased such Shares in good faith and without
notice of any adverse claims.
-3-
41
EXHIBIT 2
FORM OF OPINION OF KRESSEL, ROTHLEIN & ROTH, ESQS.
(i) The Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The
Subsidiary has the corporate power and authority to own or lease all of the
assets owned or leased by it, and conduct its business as described in the
Registration Statement and the Prospectus, and each of the Company and the
Subsidiary is duly licensed or qualified to do business and in good standing as
a foreign corporation in all jurisdictions in which the nature of the activities
conducted by it and/or the character of the assets owned and leased by it makes
such qualification or license necessary, except for such jurisdictions in which
the failure to be so licensed or qualified or in good standing would not have a
material adverse effect upon the Company and the Subsidiary taken as a whole. To
the knowledge of such counsel, each of the Company and the Subsidiary is in
compliance in all material respects with all laws, regulations and orders
applicable to it or its business, the violation of which would have a material
adverse effect upon its legal existence or its business, business prospects,
financial condition, results of operations, earnings or properties. The Company
and the Subsidiary have, to the knowledge of such counsel, all necessary
authorizations, approvals, consents, licenses, certificates and permits of and
from all Federal and state governmental or regulatory bodies or officials, to
conduct all the activities conducted by them, to own or lease all the assets
owned or leased by them and to conduct their businesses, as described in the
Registration Statement and the Prospectus, except where failure to have any such
authorization, approval, consent, license, certificate or permit would not have
a material adverse effect upon the Company and the Subsidiary taken as a whole.
(ii) The Company has outstanding capital stock as set forth in the
Registration Statement and the Prospectus. The outstanding shares of the Common
Stock (including the Shares to be sold by the Selling Stockholder) have been
duly authorized, validly issued, fully paid and nonassessable, to the knowledge
of such counsel are not subject to pre-emptive rights and have not been issued
in violation of any statutory pre-emptive rights or, to the best of such
counsel's knowledge, similar contractual rights.
(iii) All of the issued and outstanding shares of the capital stock of
the Subsidiary are validly issued, fully paid and nonassessable and, to the best
of such counsel's knowledge, all of the issued and outstanding shares of stock
of the Subsidiary are owned by the Company free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements, charges,
encumbrances and restrictions of every nature.
(iv) To such counsel's knowledge, no holder of any securities of the
Company has the right to require registration of shares of the Common Stock or
other securities of the Company because of the filing or effectiveness of the
Registration Statement.
-1-
42
(v) Such counsel does not know of any contracts or documents required
to be summarized or disclosed in the Registration Statement or the Prospectus or
filed as exhibits thereto which have not been so summarized or disclosed or so
filed, and such counsel does not know of any pending or threatened legal or
governmental proceedings required to be disclosed in the Prospectus which have
not been described as required.
(vi) Upon delivery of the certificates for the Shares to be sold by the
Selling Stockholder and payment therefor in accordance with the terms hereof,
each of the Underwriters will have the status of a "bona fide purchaser" of such
Shares under Article 8 of the Uniform Commercial Code as currently in effect in
the State of New York and will take free of any adverse claims assuming that
such Underwriter purchased such Shares in good faith and without notice of any
adverse claims.
-2-