EXHIBIT 1.1
UNDERWRITING AGREEMENT
4,071,000 Shares
COMPUTER GENERATED SOLUTIONS, INC.
Common Stock
(Par Value $0.001 per share)
[ ], 1997
OPPENHEIMER & CO., INC.
FURMAN SELZ LLC
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentleman:
Computer Generated Solutions, Inc., a Delaware corporation (the "Company"),
-------
proposes to issue and sell, and the persons named in Schedule II hereto (the
"Selling Stockholders") propose to sell, to the several Underwriters listed in
- ---------------------
Schedule I hereto (the "Underwriters"), for whom you are acting as
------------
representatives (the "Representatives"), an aggregate of 3,540,000 shares of
---------------
Common Stock, par value $0.001 per share, of the Company (the "Common Stock"),
------------
of which 2,900,000 shares are to be issued and sold by the Company and an
aggregate of 640,000 shares are to be sold by the Selling Stockholders
(collectively, the "Underwritten Shares"). In addition, for the sole purpose of
-------------------
covering over-allotments in connection with the sale of the Underwritten Shares,
the Company proposes to issue and sell to the Underwriters, at the option of the
Underwriters, up to an additional 531,000 shares of Common Stock (the "Option
------
Shares"). The Underwritten Shares and the Option Shares are herein referred to
- ------
as the "Shares."
------
- 2 -
On or prior to the Closing Date (as defined), the Company will declare and
pay dividends (collectively, the "Dividends") to its stockholders of record
---------
immediately prior to the offering of the Shares in the cumulative amount of its
undistributed earnings for the entire period that it was an S corporation under
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"). The
----
Company will terminate its S corporation status (the "S Termination") effective
-------------
as of the day before the Closing Date (the "S Termination Date"). The Company
------------------
will enter into an S Corporation Termination Agreement to be dated as of the S
Termination Date by and among the Company, Philip Friedman and Victor Friedman
(the "Tax Agreement").
-------------
On or prior to the Closing Date, the Company will (i) adopt an amended and
restated certificate of incorporation (the "Amended Certificate of
----------------------
Incorporation") and by-laws (the "Amended By-Laws") and (ii) declare and effect
- ------------- ---------------
a 1,300.42 for 1 stock split of its existing common stock (the "Stock Split").
-----------
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
----------
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
--------------
statement on Form S-1 (File No. 333-09297), including a prospectus, relating to
the Shares. The registration statement as amended at the time when it shall
become effective, or, if post-effective amendments are filed with respect
thereto, as amended by such post-effective amendments at the time of their
effectiveness, including in each case information (if any) deemed to be part of
the registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act, is referred to in this Agreement as the "Registration
------------
Statement"; the prospectus constituting a part of the Registration Statement in
- ---------
the form first used to confirm sales of Shares is hereinafter
referred to as the "Prospectus."
----------
1. On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
2,900,000 Underwritten Shares, and each Selling Stockholder, severally and not
jointly, agrees to sell the respective number of Underwritten Shares set forth
opposite such Selling Stockholder's name on Schedule II hereto, to the several
Underwriters, and each Underwriter, on the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees, severally and not jointly, to purchase from each of the Company and the
Selling Stockholders that number of Underwritten Shares to be
- 3 -
sold by the Company and each such Selling Stockholder which bears the same ratio
to the aggregate number of Underwritten Shares being purchased from the Company
and the Selling Stockholders by the several Underwriters as the number of
Underwritten Shares set forth opposite the name of such Underwriter on Schedule
I hereto (or such number increased as set forth in Section 10 hereof) bears to
the aggregate number of Underwritten Shares being purchased from the Company and
the Selling Stockholders by the several Underwriters subject, however, to such
adjustments to eliminate fractional shares as the Representatives in their sole
judgment shall make, at a purchase price of $[ ] per share (the "Purchase
--------
Price").
- -----
In addition, the Company agrees to issue and sell the Option Shares to the
several Underwriters as hereinafter provided, and the Underwriters, on the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from the Company up to an aggregate of 531,000 Option Shares at the
Purchase Price, for the sole purpose of covering over-allotments (if any) in the
sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each Underwriter shall be the number of Option Shares which bears
the same ratio to the aggregate number of Option Shares being purchased as the
number of Underwritten Shares set forth opposite the name of such Underwriter on
Schedule I hereto (or such number increased as set forth in Section 10 hereof)
bears to the aggregate number of Underwritten Shares being purchased from the
Company and the Selling Stockholders by the several Underwriters, subject,
however, to such adjustments to eliminate any fractional Shares as the
Representatives in their sole discretion shall make.
The Underwriters may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of the Prospectus, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate number of Option Shares as
to which the option is being exercised and the date and time when such Option
Shares are to be delivered and paid for, which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date nor later than the tenth full Business Day (as hereinafter defined)
after the date of such notice (unless such time and date are postponed in
accordance with the provisions of Section 10 hereof). Any
- 4 -
such notice shall be given at least two Business Days prior to the date and time
of delivery specified therein.
Pursuant to powers of attorney granted by each Selling Stockholder, Philip
Friedman will act as the representative of the Selling Stockholders. The
foregoing representative (the "Representative of the Selling Stockholders") is
------------------------------------------
authorized, on behalf of each Selling Stockholder, to execute any documents
necessary or desirable in connection with the sale of the Underwritten Shares to
be sold hereunder by each Selling Stockholder, to make delivery of the
certificates of such Underwritten Shares, to receive the proceeds of the sale of
such Underwritten Shares, to give receipts for such proceeds, to pay therefrom
the expenses, if any, to be borne by each Selling Stockholder in connection with
the sale and public offering of the Underwritten Shares, to distribute such
proceeds to the Selling Stockholders, to receive notices on behalf of each
Selling Stockholder and to take such other action as may be necessary or
desirable in connection with the transactions contemplated by this Agreement.
2. The Company and the Selling Stockholders understand that the
Underwriters intend (a) to make a public offering of the Shares as soon as the
Representatives deem advisable after the Registration Statement and this
Agreement have become effective as in the judgment of the Representatives is
advisable and (b) initially to offer the Shares upon the terms set forth in the
Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company, in the case of the
Underwritten Shares or the Option Shares to be sold by the Company, and to the
account specified by the Representative of the Selling Stockholders, in the case
of the Underwritten Shares to be sold by the Selling Stockholders, to the
Representatives no later than noon on the Business Day prior to the Closing
Date, in the case of the Underwritten Shares, or, in the case of the Option
Shares, on the date and time specified by the Representatives in the written
notice of the Underwriters' election to purchase such Option Shares. The time
and date of such payment for the Underwritten Shares are referred to herein as
the "Closing Date" and the time and date for such payment for the Option Shares,
------------
if other than the Closing Date, are herein referred to as the "Additional
----------
Closing Date". As used herein, the term "Business Day" means any day other than
- ------------ ------------
a day on which banks are permitted or required to be closed in New York City.
- 5 -
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company or the Selling
Stockholders, as the case may be. The certificates for the Shares will be made
available for inspection and packaging by the Representatives at the office of
Oppenheimer & Co., Inc. set forth above not later than 1:00 P.M., New York City
time, on the Business Day prior to the Closing Date or the Additional Closing
Date, as the case may be.
4A. The Company represents and warrants to each of the Underwriters that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary
prospectus filed as part of the Registration Statement, as originally filed
or as part of any amendment thereto, or filed pursuant to Rule 424 under
the Securities Act, complied when so filed in all material respects with
the Securities Act;
(b) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and the Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) comply, or will comply, as the case may be, in all
material respects with the Securities Act and as of the date of filing
thereof did not, and did not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as of
the date of the Prospectus and any amendment or supplement thereto, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, as amended or supplemented at the
Closing Date and the Additional Closing Date, as the case may be, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
- 6 -
therein, in the light of the circumstances under which they were made, not
misleading; provided that this representation and warranty shall not apply
--------
to statements or omissions in the Registration Statement or the Prospectus
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
expressly for use therein;
(c) the financial statements, and the related notes thereto, included
in the Registration Statement and the Prospectus present fairly in all
material respects (i) the financial position of the Company as of the dates
indicated and (ii) the results of its operations and changes in its cash
flows for the periods specified; such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout and the supporting schedules
included in the Registration Statement present fairly in all material
respects the information required to be stated therein; the pro forma
financial information (including the notes thereto) included in the
Registration Statement and Prospectus (i) presents fairly in all material
respects the information shown therein, (ii) was prepared in accordance
with the applicable requirements of Regulation S-X promulgated under the
Exchange Act, (iii) was prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and (iv) was
properly computed on the bases described therein; in the opinion of the
Company, the assumptions used in the preparation of any such pro forma
financial information (including, without limitation, the notes thereto)
were fair and reasonable and the adjustments used therein were appropriate
to give effect to the transactions or circumstances referred to therein;
and no pro forma financial statements or other pro forma financial
information is required to be included in the Registration Statement and
the Prospectus other than those included therein;
(d) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any change in
the capital stock (other than by reason of the Stock Split or Amended
Certificate of Incorporation) or any material change in the long-term debt
of the Company, or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, business, prospects, management, financial position,
stockholders' equity or
- 7 -
results of operations of the Company, and the Company has not entered into
any transaction or agreement (whether or not in the ordinary course of
business) material to the Company otherwise than as set forth or
contemplated in the Prospectus;
(e) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties, or conducts any business, so as to
require such qualification, other than where the failure to be so qualified
or in good standing would not have a material adverse effect on the general
affairs, business, prospects, management, financial position, stockholders'
equity or results of operations of the Company (a "Material Adverse
----------------
Effect");
------
(f) the Company has no subsidiaries;
(g) this Agreement has been duly authorized, executed and delivered by
the Company;
(h) as of the Closing Date (after giving effect to the adoption of the
Amended Certificate of Incorporation and the Stock Split), the Company will
have the authorized capital stock as set forth in the Prospectus and such
authorized capital stock will conform as to legal matters to the
description thereof set forth in the Prospectus, and all of the outstanding
shares of capital stock of the Company have been duly authorized and
validly issued, are fully-paid and non-assessable and are not subject to
any pre-emptive or similar rights; and, except as described in or expressly
contemplated by the Prospectus, there are no outstanding rights (including,
without limitation, pre-emptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital
stock or other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind relating to the
issuance of any capital stock of the Company, any such convertible or
exchangeable securities or any such rights, warrants or options; the Shares
to be sold by the Selling Stockholders hereunder conform to the description
thereof in the Prospectus;
- 8 -
(i) the Shares to be issued and sold by the Company hereunder have been
duly authorized, and, when issued and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be duly
issued and will be fully paid and non-assessable and will conform to the
descriptions thereof in the Prospectus; and the issuance of the Shares is
not subject to any preemptive or similar rights;
(j) the Company is not in violation of its Certificate of
Incorporation or By-Laws nor, as of the Closing Date, will it be in
violation of its Amended Certificate of Incorporation or Amended By-Laws,
and is not, nor with the giving of notice or lapse of time or both would it
be, in violation of or in default in the performance or observance of any
obligation, agreement, covenant or condition under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which it or any of its property is bound or of any
permit, order, decree, judgment, statute, rule or regulation applicable to
the Company, except for violations and defaults which individually and in
the aggregate could not reasonably be expected to have a Material Adverse
Effect; (i) the issue and sale of the Shares, (ii) the execution of this
Agreement and the performance by the Company of its obligations hereunder,
(iii) the consummation of the transactions contemplated herein, (iv) the
declaration and payment of the Dividends, (v) the S Termination, (vi) the
execution of the Tax Agreement and the performance by the parties thereto
of their respective obligations thereunder and the consummation of the
transactions contemplated therein, (vi) the adoption of the Amended
Certificate of Incorporation and the Amended By-Laws and (vii) the
declaration and consummation of the Stock Split will not 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, loan agreement or
other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the
Company is subject, nor will any such action result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the
Company or the Amended Certificate of Incorporation or the Amended By-Laws
or any applicable law or statute or any order, decree, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Company or any of its properties, except for conflicts, breaches, defaults
and violations which individually and in
- 9 -
the aggregate could not reasonably be expected to have a Material Adverse
Effect; and no consent, approval, authorization, order, license,
registration or qualification of or with any such court or governmental
agency or body is required for (i) the issue, sale and delivery of the
Shares, (ii) the consummation by the Company of the transactions
contemplated by this Agreement, (iii) the declaration and payment of the
Dividends, (iv) the S Termination, (v) the consummation of the transactions
contemplated by the Tax Agreement by the parties thereto, (vi) the adoption
of the Amended Certificate of Incorporated and By-Laws or (vii) the
declaration or consummation of the Stock Split, except such consents,
approvals, authorizations, orders, licenses, registrations or
qualifications as have been obtained and are in full force and effect under
the Securities Act, as may be required under the state securities or Blue
Sky Laws contemplated by Section 5(f) in connection with the purchase and
distribution of the Shares by the Underwriters or which individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect;
(k) other than as set forth in the Prospectus, there are no legal or
governmental investigations, actions, suits or proceedings pending against
or affecting the Company or any of its properties or to which the Company
is or may be a party or of which any property of the Company is or may be
the subject which could reasonably be expected to have a Material Adverse
Effect and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others; and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required;
(l) the Company has good and marketable title in fee simple to all
items of real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
materially interfere with the use made or proposed to be made of such
property by the Company; and any real property and buildings held under
lease by the Company are held by them under valid, existing and enforceable
leases with such exceptions as are not material and do not materially
- 10 -
interfere with the use made or proposed to be made of such property and
buildings by the Company;
(m) no relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company, on the other hand, which is required
by the Securities Act to be described in the Registration Statement or the
Prospectus which is not so described;
(n) no person has the right to require the Company to register any
securities for offering and sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission or the issue and
sale of the Shares;
(o) the Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
----------------------
(p) the Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing
business with the Government of Cuba or with any person or affiliate
located in Cuba;
(q) Ernst & Young LLP, who have certified certain financial statements
of the Company, are independent public accountants as required by the
Securities Act; BDO Seidman LLP, who have certified certain financial
statements of the Company, are independent public accountants as required
by the Securities Act;
(r) the Company has filed all federal, state, local and foreign tax
returns which have been required to be filed and have paid all taxes shown
thereon and all assessments received by it to the extent that such taxes
have become due and are not being contested in good faith; and, except as
disclosed in the Registration Statement and the Prospectus, there is no tax
deficiency which has been asserted or threatened against the Company; the
Company and its stockholders have maintained a valid election to be an S
corporation under Subchapter S of the Code from the Company's inception
through the S Termination Date;
(s) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that
- 11 -
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Common Stock;
(t) the Company owns, possesses or has obtained all licenses, permits,
certificates, consents, orders, approvals and other authorizations from,
and has made all declarations and filings with, all federal, state, local
and other governmental authorities (including foreign regulatory agencies),
all self-regulatory organizations and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be, and to
operate its properties and to carry on its business as conducted as of the
date hereof, except where the failure to so own, possess or obtain or make
such licenses, permits, certificates, consents, orders, approvals, other
authorizations, declarations or filings could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and
the Company has not received notice of any proceeding relating to
revocation or modification of any such license, permit, certificate,
consent, order, approval or other authorization, except as described in the
Registration Statement and the Prospectus or as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect;
and the Company is in compliance with all laws and regulations relating to
the conduct of its business, except where the failure to so be in
compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(u) there are no existing or, to the best knowledge of the Company,
threatened labor disputes with, or slowdowns, strikes or work stoppages by,
the employees of the Company which could reasonably be expected to have a
Material Adverse Effect;
(v) the Tax Agreement has been duly authorized by the Company and, as
of the S Termination Date, will have been duly executed and delivered by
each of the parties thereto, and is enforceable against each of the parties
thereto in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, moratorium or other similar laws
providing for the protection of creditors' rights generally and general
principles of equity;
(w) except as disclosed in the Prospectus, each employee benefit plan,
within the meaning of Section 3(3) of
- 12 -
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
that is maintained, administered or contributed to by the Company or any of
its affiliates for employees or former employees of the Company and its
affiliates has been maintained in compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code, except where the failure
to so maintain in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; except as
disclosed in the Prospectus, no prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect has occurred with respect to any such plan, excluding transactions
effected pursuant to a statutory or administrative exemption; except as
disclosed in the Prospectus, for each such plan which is subject to the
funding rules of Section 412 of the Code or Section 302 of ERISA, no
"accumulated funding deficiency" as defined in Section 412 of the Code
which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect has been incurred, whether or not waived,
and the fair market value of the assets of each such plan (excluding for
these purposes accrued but unpaid contributions) exceeded the present value
of all benefits accrued under such plan determined using reasonable
actuarial assumptions (except for any deficiency which could not reasonably
be expected to have a Material Adverse Effect);
(x) the statistical and market-related data included in the
Registration Statement and the Prospectus are based on or derived from
sources which are believed by the Company to be reliable;
(y) except for compensation to be paid to the Underwriters under this
Agreement, the Company does not know of any outstanding claims for
services, either in the nature of a finder's fee or origination fee, with
respect to any of the transactions contemplated hereby;
(z) the Company owns or possesses the patents, patent rights,
licenses, inventions, trademarks, service marks, trade names, copyrights
and know-how, including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures
(collectively, the "Intellectual Property"), reasonably
---------------------
- 13 -
necessary to carry on the business conducted by it, except to the extent
that the failure to own or possess such Intellectual Property would not
have a Material Adverse Effect and, except as described in the Registration
Statement and the Prospectus, the Company has no knowledge of infringement
of or conflict with asserted rights of others with respect to any
Intellectual Property, except for notices the content of which if accurate
would not have a Material Adverse Effect;
(aa) the declaration and payment of the Dividends have been duly
authorized by all requisite corporate action by the Company; and the
declaration and payment of the Dividends will comply with the General
Corporation Law of the State of Delaware.
4B. Each Selling Stockholder, severally and not jointly, represents
and warrants to each Underwriter that:
(a) such Selling Stockholder now is, and at the Closing Date will be,
the lawful owner of the number of Underwritten Shares to be sold by such
Selling Stockholder pursuant to this Agreement and has and, at the time of
delivery thereof, will have valid and marketable title to such Underwritten
Shares, and, upon delivery of and payment for such Underwritten Shares, the
Underwriters will acquire valid and marketable title to such Underwritten
Shares free and clear of any claim, lien, encumbrance, security interest,
restriction on transfer or other defect in title other than by reason of
the Custody Agreement or arising under federal or state securities laws;
(b) such Selling Stockholder has, and at the Closing Date will have,
full legal right, power and capacity, and any approval required by law or
otherwise (other than those imposed by the Securities Act and the
securities or blue sky laws of certain jurisdictions), to sell, assign,
transfer and deliver such Underwritten Shares in the manner provided in
this Agreement; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and the fulfillment of
the terms hereof will not conflict with or result in the breach of any of
the terms, provisions or conditions of, or constitute a default under, any
note, indenture, mortgage, deed or declaration of trust, agreement, will or
other instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound, or any existing law, order, rule,
regulation, writ, injunction, judgment or decree of any
- 14 -
government, governmental instrumentality, agency or body, arbitration
tribunal, or court, domestic or foreign, having jurisdiction over such
Selling Stockholder or such Selling Stockholder's property;
(c) this Agreement and the custody agreement among the Company, as
custodian, and such Selling Stockholder have been duly executed and
delivered by such Selling Stockholder (each, a "Custody Agreement");
-----------------
(d) when the Registration Statement becomes effective and at all times
subsequent thereto through the latest of the Closing Date, Additional
Closing Date or the termination of the offering of the Shares, such parts
of the Registration Statement and Prospectus, and any supplements or
amendments thereto, as relate to such Selling Stockholder will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(e) such Selling Stockholder has duly and irrevocably authorized the
Representative of the Selling Stockholders, on behalf of such Selling
Stockholder, to execute and deliver this Agreement and any other document
necessary or desirable in connection with the transactions contemplated
hereby and to deliver the Underwritten Shares to be sold by such Selling
Stockholder and receive payment therefor pursuant hereto; and
(f) the Registration Statement and the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) as of the date of filing thereof did not, and did not
and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the date of the Prospectus
and any amendment or supplement thereto, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented at the Closing Date and the
Additional Closing Date, as the case may be, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided
--------
that this representation and warranty shall not apply to statements or
omissions in the
- 15 -
Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by such Underwriter expressly for use therein.
4C. The Representatives represent and agree that (i) they have not
offered or sold and, prior to the expiry of the period of six months from the
Closing Date, will not offer or sell, any Shares to persons in the United
Kingdom except persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public within the meaning of the
Public Offers of Securities Regulations 1995, (ii) they have complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by them in relation to the Common Stock in, from or
otherwise involving the United Kingdom and (iii) they have only issued or passed
on, and will only issue and pass on, in the United Kingdom any document received
by them in connection with the offering of the Common Stock to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisement) (Exemptions) Order 1995 or is a person to whom such
document may otherwise lawfully be issued or passed on.
5. The Company covenants and agrees with the several Underwriters as
follows:
(a) to use its best efforts to cause the Registration Statement to
become effective (if the Registration Statement shall not have been
declared effective prior to the execution hereof) at the earliest possible
time and, if applicable, to file the Prospectus with the Commission within
the time periods specified by Rule 424(b) and Rule 430A under the
Securities Act and to furnish copies of the Prospectus to the Underwriters
in New York City prior to 2:00 p.m., New York City time, on the Business
Day next succeeding the date of this Agreement in the quantities as the
Representatives may reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
three signed copies of the Registration Statement (as originally filed) and
each amendment thereto, in each case including exhibits, and to each other
Underwriter a conformed copy of the Registration Statement (as originally
filed) and each amendment thereto, in each case without exhibits, and,
during the period mentioned in
- 16 -
paragraph (e) below, to each of the Underwriters and to dealers effecting
transactions in the Common Stock as many copies of the Prospectus
(including all amendments and supplements thereto) as the Underwriters and
such dealers may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Representatives
a copy of the proposed amendment or supplement for review and not to file
any such proposed amendment or supplement to which the Representatives
reasonably object;
(d) to advise the Representatives promptly after learning, and to
confirm such advice in writing, (i) when the Registration Statement shall
have become or becomes effective, (ii) when any amendment to the
Registration Statement shall have become effective, (iii) when any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representatives with copies thereof, (iv) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for any additional
information, (v) within the period referenced in paragraph (e) below, 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 the Prospectus or the
initiation or threatening of any proceeding for that purpose or the
occurrence of any event as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of material fact or omit
to state any material fact necessary in order to make the statements
therein, in light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, and (vi) of the receipt by the Company of any
notification with respect to any suspension of the qualification of the
Shares for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and to use its reasonable
best efforts to prevent the issuance of any such stop order, or of any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any order suspending any such qualification of the
Shares, or notification of any such order and, if issued, to obtain as soon
as reasonably possible the withdrawal thereof;
- 17 -
(e) if, during such period of time after the first date of the public
offering of the Shares as, in the reasonable opinion of counsel for the
Company or the Underwriters, a prospectus relating to the Shares is
required by law to be delivered in connection with sales by an Underwriter
or dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at the
expense of the Company, to the Underwriters and to the dealers (whose names
and addresses the Representatives will furnish to the Company) to which
Shares may have been sold by the Underwriters and to any other dealers upon
written request, such amendments or supplements to the Prospectus as may be
necessary so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply in all material respects with federal securities
laws and the securities or Blue Sky laws contemplated by Section 5(f);
(f) to use its best efforts to register or qualify the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
as the Representatives shall reasonably request and to continue such
registration or qualification in effect so long as reasonably required for
distribution of the Shares; provided that the Company shall not be required
--------
to file a general consent to service of process in any jurisdiction or
submit itself to taxation in any jurisdiction where it is not so subject;
(g) to make generally available to its security holders and to the
Underwriters as soon as practicable an earnings statement covering a period
of at least twelve months beginning with the first fiscal quarter of the
Company occurring after the effective date of the Registration Statement,
which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder;
(h) for a period of five years after the Closing Date, to furnish to
the Representatives copies of all reports or other communications
(financial or other) furnished to holders of the Shares, and copies of any
reports filed with
- 18 -
the Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or any national securities exchange;
-----
(i) The Company shall not offer, sell, contract to sell, pledge or
grant any option to purchase or otherwise dispose of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock, or file a registration statement with the Commission with respect to
such securities, for a period of 180 days after the date of the Prospectus
without the prior written consent of Oppenheimer & Co., Inc., which consent
may not be unreasonably withheld; provided that, without such prior written
--------
consent, the Company may grant options, restricted stock, stock
appreciation rights or other units of stock-based incentive compensation
under its director and employee stock option plan described in the
Prospectus and register such options, restricted stock, stock appreciation
rights or other units of stock-based incentive compensation and the shares
of Common Stock, if any, underlying them under the Securities Act;
(j) to file with the Commission reports on Form SR as may be required
by Rule 463 under the Securities Act;
(k) whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of its and the Selling
Stockholders' obligations hereunder, including without limiting the
generality of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution and delivery of the Shares, (ii) incident
to the preparation, printing, and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectuses
(including in each case all exhibits, amendments and supplements thereto),
(iii) incurred in connection with the registration or qualification of the
Shares under the laws of such jurisdictions as the Representatives may
designate pursuant to Section 5(f) (including reasonable fees of counsel
for the Underwriters and their disbursements related to such registration
or qualification), (iv) in connection with the qualification for quotation
of the Shares on the Nasdaq National Market, (v) related to any filing
with, and review by, the NASD, (vi) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, all other agreements relating to
- 19 -
underwriting and syndication arrangements, the Blue Sky Survey and the
furnishing to the Underwriters and dealers of copies of the Registration
Statement and the Prospectus, including mailing and shipping, as herein
provided, (vii) any expenses incurred by the Company in connection with a
"road show" presentation to potential investors, (viii) the cost of
preparing stock certificates and (ix) the cost and charges of any transfer
agent and any registrar;
(l) to cause the Common Stock to be qualified for quotation on the
Nasdaq National Market; and
(m) to use the net proceeds of the offering as set forth in the
Registration Statement and the Prospectus under the caption "Use of
Proceeds."
6. The several obligations of the Underwriters hereunder to purchase
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, are subject to the performance by each of the Company and the Selling
Stockholders in all material respects of their respective obligations hereunder
and to the following additional conditions:
(a) the Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act,
such post-effective amendment shall have become effective) not later than
5:00 P.M., New York City time, on the date hereof; and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing by the rules and regulations under the
Securities Act and in accordance with Section 5(a) hereof; and all requests
for additional information by the Commission shall have been complied with
to the reasonable satisfaction of the Representatives;
(b) the representations and warranties of the Company and the Selling
Stockholders contained herein and in the Custody Agreement shall be true
and correct in all material respects on and as of the Closing Date or the
Additional Closing Date, as the case may be, as if made on and as of the
Closing Date or the Additional Closing Date, as the case may be, and each
of the Company and the Selling Stockholders shall have complied in all
material respects with all
- 20 -
agreements and all conditions on their respective parts to be performed or
satisfied hereunder and under the Custody Agreement at or prior to the
Closing Date or the Additional Closing Date, as the case may be;
(c) since the respective dates as of which information is given in the
Prospectus, there shall not have been any change in the capital stock of
the Company (other than by reason of the Stock Split and the adoption of
the Amended Certificate of Incorporation) or any material change in the
long-term debt of the Company or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, business, prospects, management, financial
position, stockholders' equity or results of operations of the Company
otherwise than as set forth or contemplated in the Prospectus, the effect
of which in the judgment of the Representatives makes it impracticable to
proceed with the public offering or the delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the
terms and in the manner contemplated in the Prospectus; and the Company
shall not have sustained since the date of the latest audited financial
statements included in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(d) the Representatives shall have received on and as of the Closing
Date or the Additional Closing Date, as the case may be, a certificate of
each of (i) the chief executive officer of the Company and an executive
officer of the Company with specific knowledge about the Company's
financial matters and (ii) the Representative of the Selling Stockholders,
in each case satisfactory to the Representatives, to the effect set forth
in subsections (a) through (c) (with respect to the respective
representations, warranties, agreements and conditions of the Company or
the Selling Stockholders, as the case may be) of this Section;
(e) Chadbourne & Parke LLP, counsel for the Company and the Selling
Stockholders, shall have furnished to the Representatives their written
opinion, addressed to the Underwriters and dated the Closing Date or the
Additional Closing Date, as the case may be, in form satisfactory to the
Representatives and their counsel, to the effect that:
- 21 -
(i) the Company is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and
authority to own its properties and conduct its business as described
in the Prospectus; the Amended Certificate of Incorporation and
Amended By-Laws have been duly authorized and adopted by the Company,
are in full force and effect and are substantially in the forms
included as exhibits to the Registration Statement; the Stock Split
has been duly authorized by all requisite corporate action by the
Company and has been consummated in accordance with the General
Corporation Law of the State of Delaware;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of the jurisdictions listed on a schedule attached to
such opinion, which jurisdictions the Company shall have certified to
such counsel are the only jurisdictions in which the Company owns or
leases properties, or conducts any business;
(iii) the Company has no subsidiaries;
(iv) such counsel does not know of any (x) pending or
threatened action, suit or proceeding before any court or governmental
authority or body involving the Company or (y) statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or Prospectus or, with respect to any such
contracts or other documents, to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) the Shares to be issued and sold by the Company hereunder
have been duly authorized and, when delivered to and paid for the
Underwriters in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and, to such counsel's
knowledge, the issuance of such Shares is not subject to any
preemptive rights;
(vii) the statements in the Prospectus under "Description of
Capital Stock" and "Shares Eligible for Future Sale," and in the
Registration Statement in
- 22 -
Items 14 and 15, insofar as such statements constitute a summary of
the terms of the Common Stock, the "blank check" preferred stock,
legal matters, documents or proceedings referred to therein, fairly
present in all material respects the information required by the
Securities Act with respect to such terms, legal matters, documents or
proceedings;
(viii) (a) the issue and sale of the Shares being delivered
on the Closing Date or the Additional Closing Date, as the case may
be, (b) the execution of this Agreement and the performance by the
Company of its obligations hereunder, (c) the consummation of the
transactions contemplated herein, (d) the declaration and payment of
the Dividends, (e) the S Termination, (f) the execution and delivery
of the Tax Agreement and the performance by the parties thereto of
their respective obligations thereunder and the consummation of the
transactions contemplated therein, (g) the adoption of the Amended
Certificate of Incorporation and Amended By-Laws and (h) the
declaration and consummation of the Stock Split will not 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,
loan agreement or other agreement or instrument which is filed as an
exhibit to the Registration Statement, nor will any such action result
in any violation of the provisions of the Amended Certificate of
Incorporation or the Amended By-Laws of the Company or any applicable
law or statute or any order, decree, rule or regulation of any court
or governmental agency or body known by such counsel to have
jurisdiction over the Company or any of its properties;
(ix) to such counsel's knowledge, no consent, approval,
authorization, order, license, registration or qualification of or
with any court or governmental agency or body is required for (a) the
issue and sale of the Shares, (b) the consummation of the other
transactions contemplated by this Agreement, (c) the declaration and
payment of the Dividends, (d) the S Termination, (e) the consummation
of the transactions contemplated by the Tax Agreement, (f) the
adoption of the Amended Certificate of Incorporation and Amended By-
Laws or (g) the declaration or consummation of the Stock Split, except
such consents, approvals, authorizations, orders, licenses,
registrations or
- 23 -
qualifications as have been obtained under the Securities Act and as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters,
the rules of the NASD or any domestic relations or similar laws;
(x) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
(xi) the Registration Statement has been declared effective
under the Securities Act and, to such counsel's knowledge, no stop
order or proceedings with respect thereto are pending or threatened
under the Securities Act;
(xii) this Agreement and the Custody Agreement of the
applicable Selling Stockholder has been duly executed and delivered by
or on behalf of each of the Selling Stockholders;
(xiii) to such counsel's knowledge, each Selling Stockholder
has full legal right and power, and has obtained any authorization or
approval required by law (other than those imposed by the Securities
Act and the securities or Blue Sky laws of certain jurisdictions or
any domestic relations or similar law), to sell, assign, transfer and
deliver the Underwritten Shares to be sold by such Selling Stockholder
in the manner provided in this Agreement and the Custody Agreement of
such Selling Stockholder;
(xiv) upon delivery of the Underwritten Shares to be sold by
the Selling Stockholders hereunder and payment of the purchase price
therefor as herein contemplated, each of the Underwriters will receive
good and marketable title to its ratable share of the Underwritten
Shares purchased by it from each of such Selling Stockholders, free
and clear of any pledge, lien, security interest, encumbrance, claim
or equity, assuming the Underwriters acquire the Underwritten Shares
without notice of any adverse claim as such term is used in Section 8-
302 of the Uniform Commercial Code in effect in the State of New York;
- 24 -
(xv) the Representative of the Selling Stockholders has been
duly authorized by Victor Friedman to execute and deliver on his
behalf this Agreement and any other document necessary or desirable in
connection with the transactions contemplated hereby and to deliver
the Shares to be sold by Victor Friedman and receive payment therefor
pursuant hereto;
(xvi) the declaration and payment of the Dividends have been
duly authorized by all requisite corporate action by the Company; and
the declaration and payment of the Dividends will comply with the
General Corporation Law of the State of Delaware; and
(xvii) the Tax Agreement has been duly authorized by the
Company and has been duly executed and delivered by each of the
parties thereto, and is enforceable against each of the parties
thereto in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, moratorium or other
similar laws now or hereafter in effect providing for the protection
of creditors' rights generally and general principles of equity and
except that rights to indemnity and contribution may be limited by
public policy;
in addition, such counsel shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads such
counsel to believe that (i) the Registration Statement (other than the
financial statements and schedules and other financial and statistical data
included therein, as to which such counsel need make no statement nor
opinion), when it became effective, contained or, as of the date such
opinion is delivered, 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 not misleading or (ii) the
Prospectus (other than the financial statements and schedules and other
financial and statistical data included therein, as to which such counsel
need make no statement nor opinion) as of its date contained or, as of the
date such opinion is delivered, contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
- 25 -
in rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States,
the State of New York and General Corporation Law of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other counsel
reasonably acceptable to the Underwriters' counsel familiar with the
applicable laws; and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of the Company,
certificates of the Selling Stockholders and the Representative of the
Selling Stockholders and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company. The opinion of such
counsel shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon;
the opinion of Chadbourne & Parke LLP described above shall be
rendered to the Underwriters at the request of the Company and the Selling
Stockholders and shall so state therein;
(f) on the effective date of the Registration Statement (the
"Effective Date") and the effective date of the most recently filed post-
---------------
effective amendment, if any, to the Registration Statement and also on the
Closing Date or the Additional Closing Date, as the case may be, each of
Ernst & Young LLP and BDO Seidman LLP shall have furnished to the
Underwriters letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to the Representatives, containing
statements and information of the type customarily included in accountants'
"comfort letters" to underwriters with respect to certain financial
information relating to the Company contained in the Registration
Statement and the Prospectus;
(g) the Representatives shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel, counsel for the Underwriters, with
respect to the validity of the Shares, the Registration Statement, the
Prospectus and other related matters as the Representatives may reasonably
request, and such counsel shall have received such papers and information
as they may reasonably request to enable them to pass upon such matters;
- 26 -
(h) the Shares shall have been qualified for quotation on the Nasdaq
National Market, subject to official notice of issuance;
(i) on or prior to the Closing Date, the Company and the Selling
Stockholders shall have furnished to the Representatives such further
certificates and documents as the Representatives shall reasonably request.
The several obligations of the Underwriters to purchase Option Shares
are, only as so far as they relate to the Company, subject to the conditions set
forth in paragraphs (a)-(i) above on and as of the Additional Closing Date
(references therein to the Closing Date shall be deemed references to the
Additional Closing Date for this purpose), except that the certificates called
for by paragraph (d), the opinions called for by paragraphs (e) and (g) and the
letters called for by paragraph (f) shall be dated as of, and delivered on, the
Additional Closing Date.
7. Each of the Company and each Selling Stockholder agree, jointly
and severally, to indemnify and hold harmless each Underwriter, its officers and
directors, and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
------------
against any and all losses, claims, damages and liabilities (including, without
limitation, the legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted) caused by any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter, through the Representatives, expressly for use therein; provided,
--------
however, that the indemnity agreement contained in this paragraph with respect
- -------
to any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares which are the subject thereof (or to the benefit
of any person controlling such Underwriter) if at or prior to the
- 27 -
written confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
preliminary prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented), unless the failure is the result of noncompliance by
the Company with paragraph (b) of Section 5 hereof. Notwithstanding the
provisions of this Section 7, each Selling Stockholder shall not be liable under
this Section 7, or under any other provision of this Agreement, for any amount
in excess of the net proceeds received from the sale of Shares by such Selling
Stockholder.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act and the Selling
Stockholders to the same extent as the foregoing indemnity from the Company and
the Selling Stockholders to each Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
------------------
notify the person or persons against whom such indemnity may be sought (each an
"Indemnifying Person") in writing, and such Indemnifying Person, upon request
-------------------
of the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) such Indemnifying Person and
such Indemnified Person shall have mutually agreed to the contrary, (ii) such
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to such Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include an Indemnifying
Person and an Indemnified Person and
- 28 -
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that an
Indemnifying Person shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Underwriters and such control
persons of Underwriters shall be designated in writing by Oppenheimer & Co.,
Inc.; any such separate firm for the Company, its directors, its officers who
sign the Registration Statement and such control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, such Indemnifying Person agrees to indemnify each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the preceding sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for fees and expenses incurred by counsel as contemplated by the third
sentence of this paragraph, such Indemnifying Person agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders in the aggregate,
on the one hand, and the
- 29 -
Underwriters, on the other hand, from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholders in the aggregate, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders in the aggregate, on the one hand, and the
Underwriters, on the other hand, shall be deemed to be in the same respective
proportions as the net proceeds from the offering (before deducting expenses)
received by the Company and the Selling Stockholders in the aggregate and the
total underwriting discounts received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate public
offering price of the Shares. The relative fault of the Company and the Selling
Stockholders in the aggregate, on the one hand, and the Underwriters, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Stockholders or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
Each of the Company, the Selling Stockholders and the Underwriters
agrees that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Company and the
--- ----
Selling Stockholders, on the one hand, and the Underwriters, on the other hand,
were each 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 the immediately preceding paragraph. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such Indemnified Person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7, (i) in
no event shall an Underwriter be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such
- 30 -
untrue or alleged untrue statement or omission or alleged omission and (ii) in
no event shall a Selling Stockholder be required to contribute any amount in
excess of the amount by which the net proceeds received by it through the sale
of its Shares to the Underwriters exceeds the amount of any damages that such
Selling Stockholder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of shares of Common Stock constituting Underwritten Shares set
forth opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company and the Selling
Stockholders as set forth in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any other person who controls the Company or any Selling Stockholder and (iii)
acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement or the
obligations of the several Underwriters with respect to the Shares may be
terminated in the absolute discretion of the Representatives, by notice given to
the Company and the Representative of the Selling Stockholders, if after the
execution and delivery of this Agreement and prior to the Closing Date (or, in
the case of the Option Shares, prior to the Additional Closing Date) (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market, (ii) trading of any securities of or guaranteed by the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by Federal or New York State authorities or (iv) there
shall have occurred an outbreak of hostilities or an
- 31 -
escalation of hostilities or any change in financial markets or any calamity or
crisis that, in the judgment of the Representatives, is material and adverse and
which, in the judgment of the Representatives, makes it impracticable to market
the Shares being delivered on the Closing Date or the Additional Closing Date,
as the case may be, on the terms and in the manner contemplated in the
Prospectus.
9. If this Agreement shall be terminated by the Representatives
because of any failure or refusal on the part of the Company or any Selling
Stockholder to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company or any Selling Stockholder shall be
unable to perform its respective obligations under this Agreement or any
condition of the Underwriters obligations can not be fulfilled, the Company
agrees to reimburse the Underwriters or such Underwriters who have so terminated
this Agreement with respect to themselves, severally, for all out-of-pocket
expenses (including the fees and expenses of their counsel) reasonably incurred
by the Underwriters in connection with this Agreement or the offering
contemplated hereunder.
10. This Agreement shall become effective upon the later of (a)
execution and delivery hereof by the parties hereto and (b) the effectiveness of
the Registration Statement (or, if applicable, any post-effective amendment).
If, on the Closing Date or the Additional Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to purchase the
Shares which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
number of Shares to be purchased on such date, the other Underwriters shall be
obligated severally, in the proportions that the numbers of Underwritten Shares
set forth opposite their respective names in Schedule I hereto bears to the
aggregate number of Underwritten Shares set forth opposite the names of all such
nondefaulting Underwriters, or in such other proportions as the Representatives
may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
--------
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 10 by an
amount in excess of one-ninth of the number of Shares which such Underwriter is
obligated to purchase on such date hereunder without the written consent of such
Underwriter. If, on the Closing Date or the Additional Closing Date, as the
- 32 -
case may be, any Underwriter or Underwriters shall fail or refuse to purchase
Shares which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares with respect to which such default occurs is more
than one-tenth of the aggregate number of Shares to be purchased on such date,
and arrangements satisfactory to the Representatives, the Company and the
Selling Stockholders (in the case of the Underwritten Shares only) for the
purchase of such Shares are not made within 36 hours after such default, this
Agreement (or the obligations of the several Underwriters to purchase the Option
Shares, as the case may be) shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or any Selling Stockholder. In any such
case, either the Representatives or the Company shall have the right to postpone
the Closing Date (or, in the case of the Option Shares, the Additional Closing
Date), but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
11. Any action by the Representatives hereunder may be taken by the
Representatives jointly or by Oppenheimer & Co., Inc. alone on behalf of the
Representatives, and any such action taken by Oppenheimer & Co., Inc. alone
shall be binding upon the Representatives. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be given to the Representatives, c/o Oppenheimer & Co., Inc.,
Oppenheimer Tower, World Financial Center, New York, New York 10281 (facsimile
(212) 667-5851), Attention: Syndicate Department. Notices to the Company shall
be given to it at 1675 Broadway, New York, New York 10019, Attention: Alan
Kaplan, Esq. Notices to the Selling Stockholders shall be given to the
Representative of the Selling Stockholders c/o the Company at its address as set
forth above, Attention: President.
12. This Agreement shall inure to the benefit of and be binding upon
the Underwriters, the Company and the Selling Stockholders and any controlling
person referred to herein and their respective successors, heirs and legal
representatives. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any other person, firm or corporation, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No
- 33 -
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
- 34 -
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
COMPUTER GENERATED SOLUTIONS, INC.
By:
-------------------------------------
Name:
Title:
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE II HERETO
By:
-------------------------------------
Name:
Title: Attorney-in-Fact
Accepted: [ ], 1997
OPPENHEIMER & CO., INC.
FURMAN SELZ LLC
Each acting severally on behalf of
itself and as a Representative
of the several Underwriters
named in Schedule I hereto.
By: OPPENHEIMER & CO., INC.
By:
-------------------------------------
Name:
Title:
- 35 -
SCHEDULE I
Number of Shares of
Common Stock
Constituting
Underwritten Shares
Underwriter To Be Purchased
- ----------- ----------------------
Oppenheimer & Co., Inc............
Furman Selz LLC...................
Total............... _________
=========
- 36 -
SCHEDULE II
SELLING STOCKHOLDERS
Number of
Shares of
Common
Name Stock
- ---- ---------
Philip Friedman................................ 444,000
Victor Friedman................................ 196,000