EXHIBIT 1.1
4,000,000 Shares of Common Stock
AVERSTAR, INC.
UNDERWRITING AGREEMENT
_________ __ , 1999
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
AverStar, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 4,000,000 shares (the
"Firm Shares") of its common stock, par value $.001 per share (the "Common
Stock"), and, for the sole purpose of covering over-allotments in connection
with the sale of the Firm Shares, at the option of the Underwriters, up to an
additional 600,000 shares (the "Additional Shares") of Common Stock. The Firm
Shares and any Additional Shares purchased by the Underwriters are referred to
herein as the "Shares." The Shares are more fully described in the Registration
Statement referred to below.
1. Representations and Warranties of the Company. The Company represents
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and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
333-78517), and may have filed an amendment or amendments thereto, for the
registration of the Shares under the Securities Act of 1933, as amended
(the "Act"). Such registration statement, including the prospectus,
financial statements and schedules, exhibits and all other documents filed
as a part thereof, as amended at the time of effectiveness of the
registration statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule
430A or Rule 434 of the Rules and Regulations of the Commission under the
Act (the "Regulations"), is herein called the "Registration Statement" and
the prospectus, in the form first filed with the Commission pursuant to
Rule 424(b) of the Regulations or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing
is required, is herein called the "Prospectus." The term "preliminary
prospectus" as used herein means a preliminary prospectus as described in
Rule 430 of the Regulations.
(b) At the time of the effectiveness of the Registration Statement or
the effectiveness of any post-effective amendment to the Registration
Statement, when the Prospectus is first filed with the Commission pursuant
to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any (as hereinafter respectively
defined), the Registration Statement and the Prospectus and any amendments
thereof and supplements thereto complied or will comply in all material
respects with the applicable provisions of the Act and the Regulations and
do not or will not contain an untrue statement of a material fact and do
not or will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein (i) in the
case of the Registration Statement, not misleading and (ii) in the case of
the Prospectus, in light of the circumstances under which they were made,
not misleading. When the preliminary prospectus relating to the Shares was
first filed with the Commission (whether filed as part of the registration
statement for the registration of the Shares or any amendment thereto or
pursuant to Rule 424(a) of the Regulations) and when any amendment thereof
or supplement thereto was first filed with the Commission, such preliminary
prospectus and any amendments thereof and supplements thereto complied in
all material respects with the applicable provisions of the Act and the
Regulations and did not contain an untrue statement of a material fact and
did not omit to state any 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. No representation
and warranty is made in this subsection (b), however, with respect to any
information contained in or omitted from the Registration Statement or the
Prospectus or any related preliminary prospectus or any amendment thereof
or supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives as herein stated expressly for use in
connection with the preparation thereof. If Rule 434 is used, the Company
will comply with the requirements of Rule 434.
(c) Each of Ernst & Young LLP, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, who have certified certain financial statements and
supporting schedules included in the Registration Statement, are
independent public accountants as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, there has been no
material adverse change or any development involving a prospective material
adverse change in the business, prospects, properties, operations,
condition (financial or other) or results of operations of the Company and
its subsidiaries taken as a whole, whether or not arising from transactions
in the ordinary course of business ("Material Adverse Effect"), and since
the date of the latest balance sheet presented in the Registration
Statement and the Prospectus, neither the Company nor any of its
subsidiaries has incurred or undertaken any liabilities or obligations,
direct or contingent, whether or not arising from transactions in the
ordinary course of business, which are material to the Company and its
subsidiaries taken as a whole, except for liabilities or obligations that
are reflected in the Registration Statement and the Prospectus.
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(e) This Agreement and the transactions contemplated herein have been
duly and validly authorized by the Company and this Agreement has been duly
and validly executed and delivered by the Company.
(f) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective certificate of incorporation or by-laws (or
other organizational documents), (ii) in violation of any law, ordinance or
regulation applicable to it, its business as now being conducted and as
described in the Registration Statement or the ownership of its assets,
except such violations that would not have a Material Adverse Effect, or
(iii) in default in the performance of any obligation, agreement or
condition contained in any agreement, instrument, franchise, license,
permit, judgment, order or decree to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property or assets is bound, except such defaults that would not
have a Material Adverse Effect.
(g) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
(i) conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, any
agreement, instrument, franchise, license or permit to which the Company or
any of its subsidiaries is a party or by which any of such corporations or
their respective properties or assets may be bound or (ii) violate or
conflict with any provision of applicable law or the certificate of
incorporation or by-laws (or other organizational documents) of the Company
or any of its subsidiaries or any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or
permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets is required
for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, including the
issuance, sale and delivery of the Shares to be issued, sold and delivered
by the Company hereunder, except the registration under the Act of the
Shares and such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(h) All of the outstanding shares of Common Stock are duly and
validly authorized and issued, fully paid and nonassessable and were not
issued and are not now in violation of or subject to any preemptive or
similar rights. The Shares, when issued, delivered and sold in accordance
with this Agreement, will be duly and validly issued and outstanding, fully
paid and nonassessable, and will not have been issued in violation of or be
subject to any preemptive or similar rights. The Company had, at March 31,
1999, an authorized and outstanding capitalization as set forth in the
Registration Statement and
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the Prospectus. The Common Stock, the Firm Shares and the Additional Shares
conform to the descriptions thereof contained in the Registration Statement
and the Prospectus.
(i) Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation. Each of the Company and its subsidiaries
is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in
good standing which will not, individually or in the aggregate, have a
Material Adverse Effect. Each of the Company and its subsidiaries has all
requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
of and from all public, regulatory or governmental agencies and bodies, to
own, lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially
burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus. Each of the Company and its subsidiaries has
complied with all Federal, state, local and foreign laws, ordinances,
regulations and orders applicable to it, its business as now being
conducted and as described in the Registration Statement or the ownership
of its assets, except where the failure to be in compliance would not have
a Material Adverse Effect. All of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and nonassessable and were not issued in violation
of any preemptive or similar rights and are owned directly or indirectly by
the Company, free and clear of any lien, encumbrance, claim, security
interest, restriction on transfer, stockholder's agreement, voting trust or
other defect of title whatsoever, except as described in the Registration
Statement and the Prospectus.
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or any of its subsidiaries is
a party or to which any property of the Company or any of its subsidiaries
is subject or which is pending or, to the knowledge of the Company,
contemplated against the Company or any of its subsidiaries which might
result in a Material Adverse Effect or which is required to be disclosed in
the Registration Statement and the Prospectus, and there are no statutes,
regulations, contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as required.
(k) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(l) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company, Apollo Holding, Inc. ("Apollo"), Pacer
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Infotec, Inc. ("Pacer," Apollo and Pacer being collectively referred to
herein as the "Predecessor Companies") and Computer Based Systems, Inc., as
of the dates indicated and the results of their operations and changes in
cash flows for the periods specified; except as otherwise stated in the
Registration Statement, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein; and
the pro forma financial information included in the Registration Statement
and the Prospectus has been prepared in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements and the
assumptions used in the preparation thereof are, in the Company's opinion,
reasonable; and the other financial and statistical information and data
included in the Registration Statement and the Prospectus is, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(m) Except as described in the Prospectus, no holder of securities of
the Company has any rights to the registration of securities of the Company
because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby.
(n) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
(o) The Shares have been approved for quotation subject to notice of
issuance on the Nasdaq National Market System.
(p) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent; and
the Company is not aware of any existing, threatened or imminent labor
dispute or disturbance by the employees of any of its principal customers,
suppliers, contractors or providers of outsourced services that might have
a Material Adverse Effect.
(q) Except as described in the Registration Statement and the
Prospectus, the Company and its subsidiaries own or possess valid and
enforceable licenses or other rights to use all inventions, patents, patent
applications, trademarks, service marks, trade names, copyrights,
technology, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), proprietary techniques (including processes and substances)
and other intellectual property rights necessary to conduct the business
now conducted or presently contemplated to be conducted by the Company and
its subsidiaries, taken as a whole, as described in the Registration
Statement and the Prospectus ("Intellectual Property"), subject to such
exceptions as would not have a Material Adverse Effect. Other than as
described in the Registration Statement and the Prospectus: (i) there are
no third parties who have any rights in the Intellectual Property that
could preclude the Company or its subsidiaries from conducting its business
as currently conducted or as presently contemplated to be conducted as
described in the Registration Statement and the
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Prospectus; (ii) there are no pending or, to the Company's knowledge,
threatened actions, suits, proceedings, investigations or claims by others
challenging the rights of the Company, its subsidiaries or (if the
Intellectual Property is licensed) the licensor thereof in any Intellectual
Property owned or licensed to the Company or its subsidiaries; (iii) the
Company, its subsidiaries and (if the Intellectual Property is licensed) to
the Company's knowledge the licensor thereof has not infringed, or received
any notice of infringement of or conflict with, any rights of others with
respect to the Intellectual Property; and (iv) there is no dispute between
it or any licensor with respect to any Intellectual Property, subject, with
respect to any of (i), (ii), (iii) or (iv), to such exceptions,
individually or in the aggregate, as would not have a Material Adverse
Effect.
(r) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a Material Adverse Effect.
(s) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a Material Adverse
Effect.
(t) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, 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
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each
case except as described in or contemplated by the Prospectus.
(u) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary has been refused
any insurance coverage sought or applied for; and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such
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coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not result in a
Material Adverse Effect.
(v) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(w) Except as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), the Company has not sold, issued or distributed any shares of
Common Stock during the six-month period preceding the date hereof,
including any sales pursuant to Rule 144A under, or Regulation D or S of,
the Act, other than shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants.
(x) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers, suppliers or providers of outsourced
services of the Company or any of its subsidiaries on the other hand, which
is required by the Act to be described in the Registration Statement and
the Prospectus which is not so described.
2. Purchase, Sale and Delivery of the Shares.
-----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters and the
Underwriters, severally and not jointly, agree to purchase from the
Company, at a purchase price per share of $__________, the number of Firm
Shares set forth opposite the respective names of the Underwriters in
Schedule I hereto plus any additional number of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Shares shall be made at the offices of Proskauer Rose LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be
agreed upon by the Representatives and the Company, at 9:00 A.M. on the
third or fourth business day (as permitted under Rule 15c6-1 under the
Exchange Act) (unless postponed in accordance with the provisions of
Section 9 hereof), following the date of the effectiveness of the
Registration Statement (or, if the Company has elected to rely upon Rule
430A of the Regulations, the third or fourth business day (as permitted
under Rule 15c6-1 under the Exchange Act) after the determination of the
initial public offering price of the Shares), such time and date of payment
and delivery being herein called the "Closing Date". Payment shall be made
to
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the Company by certified or official bank check or checks drawn in federal
funds or similar same day funds payable to the order of the Company or by
wire transfer in same day funds at the option of the Underwriters, against
delivery to the Representatives for the respective accounts of the
Underwriters of certificates for the Shares to be purchased by them.
Certificates for the Shares shall be registered in such name or names and
in such authorized denominations as the Representatives may request in
writing at least two full business days prior to the Closing Date. The
Company will permit the Representatives to examine and package such
certificates for delivery at least one full business day prior to the
Closing Date.
(c) In addition, the Company hereby grants to the Underwriters options
to purchase up to an aggregate of 600,000 Additional Shares at the same
purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares as set forth in this Section 2, for the sole purpose of
covering over-allotments in the sale of Firm Shares by the Underwriters.
Such options may be exercised at any time and from time to time, in whole
or in part, on or before the thirtieth day following the date of the
Prospectus, by written notice by the Representatives to the Company. Each
such notice shall set forth the aggregate number of Additional Shares as to
which an option is being exercised and the date and time, as reasonably
determined by the Representatives, when the Additional Shares are to be
delivered (each such date and time being herein sometimes referred to as
the "Additional Closing Date"); provided, however, that no Additional
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Closing Date shall be earlier than the Closing Date or earlier than the
second full business day after the date on which the option shall have been
exercised nor later than the eighth full business day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 9 hereof).
Certificates for Additional Shares shall be registered in such name or
names and in such authorized denominations as the Representatives may
request in writing at least two full business days prior to the applicable
Additional Closing Date. The Company will permit the Representatives to
examine and package such certificates for delivery at least one full
business day prior to the applicable Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter on an
Additional Closing Date shall be the number which bears the same ratio to the
aggregate number of Additional Shares being purchased on such Additional Closing
Date as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to 4,000,000, subject, however, to such adjustments to
eliminate any fractional shares as the Representatives in their sole discretion
shall make.
Payment for the Additional Shares shall be made by certified or
official bank check or checks drawn in federal funds or similar same day funds,
payable to the order of the Company, or by wire transfer in same day funds at
the option of the Underwriters at the offices of Proskauer Rose LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as may be mutually
acceptable, upon delivery of the certificates for the Additional Shares to the
Representatives for the respective accounts of the Underwriters.
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3. Offering.
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(a) Upon the Representatives' authorization of the release of the Firm
Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus.
(b) The Company and the Underwriters hereby agree that up to _______
of the Firm Shares to be purchased by the Underwriters (the "Directed
Shares") shall be reserved for sale by the Underwriters to eligible
employees of and certain persons designated by the Company (the "Directed
Shares Purchasers"), as part of the distribution of the Offered Shares by
the Underwriters subject to the terms of this Agreement, the applicable
rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and
regulations, provided, however, that under no circumstances will Bear,
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▇▇▇▇▇▇▇ & Co. Inc. or any other Underwriter be liable to the Company or to
any of the Directed Shares Purchasers for any action taken or omitted in
good faith in connection with transactions effected with regard to the
Directed Shares Purchasers. To the extent that such Directed Shares are not
orally confirmed for purchase by such persons by the end of the first day
after the date of this Agreement, such Directed Shares will be offered to
the public as part of the underwritten offering contemplated hereby.
4. Covenants of the Company. The Company covenants and agrees with the
------------------------
Underwriters that:
(a) If the Registration Statement has not yet been declared effective,
the Company will use its best efforts to cause the Registration Statement
and any amendments thereto to become effective as promptly as possible, and
if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) or
Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If the Company elects to rely on
Rule 434, the Company will prepare and file a term sheet that complies with
the requirements of Rule 434.
The Company will notify you immediately (and, if requested by you will
confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information, (iii) of the mailing or the
delivery to the Commission for filing of any amendment of or supplement to
the Registration Statement or the Prospectus, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (v) of the
receipt of any comments from the Commission, and (vi) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for that purpose. If the Commission shall
propose or enter a stop order at any time, the Company will use its best
effort to prevent the issuance of any such stop order and, if issued, to
obtain the lifting of such order as soon as possible. The Company will not
file any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus (including the
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prospectus required to be filed pursuant to Rule 424(b) or Rule 434) that
differs from the prospectus on file at the time of the effectiveness of the
Registration Statement before or after the effective date of the
Registration Statement to which the Representatives shall reasonably object
in writing after being timely furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would, in
the judgment of the Representatives or the Company, include an untrue
statement of a material fact or omit to state any material fact required to
be stated therein, in light of the circumstances under which they were
made, not misleading, or if it shall be necessary, in the judgment of the
Representatives or the Company, at any time to amend or supplement the
Prospectus or the Registration Statement to comply with the Act or the
Regulations, the Company will notify you promptly and prepare and file with
the Commission an appropriate amendment or supplement (in form and
substance satisfactory to the Representatives) which will correct the
statement or omission and will use its best efforts to have any amendment
to the Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to you one signed copy of the
Registration Statement, including exhibits and all amendments thereto, and
the Company will promptly deliver to each of the Underwriters such number
of copies of any preliminary prospectus, the Prospectus, the Registration
Statement and all amendments of and supplements to such documents, if any,
as the Representatives may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating
to the offering or sale of the Shares of such jurisdictions as the
Representatives may designate and to maintain such qualification in effect
for so long as required for the distribution thereof; except that in no
event shall the Company be obligated in connection therewith to qualify as
a foreign corporation or to execute a general consent to service of
process.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter
in which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement (in form complying
with the provisions of Rule 158 of the Regulations) covering a period of at
least twelve consecutive months beginning after the effective date of the
Registration Statement.
(f) During the period of 180 days from the date of the Prospectus, the
Company will not, without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co.
Inc. (i) issue, sell, offer or agree to sell, grant any option for the sale
of, pledge, make any short sale, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities Exchange
Act of 1934, as amended), or otherwise dispose of, any Common Stock (or any
securities convertible into, exercisable for or exchangeable for Common
Stock) of the
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Company or of any of its subsidiaries or (ii) enter into any swap,
derivative transaction or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, provided that the foregoing shall not
apply to (A) the Shares to be sold hereunder, and (B) the issuance by the
Company of shares of Common Stock upon the exercise of any option or
warrant outstanding on the date hereof and disclosed in the Prospectus; and
the Company will obtain the undertaking of each of its officers and
directors and such of its stockholders as have been heretofore designated
by the Representatives and listed on Schedule II attached hereto not to
engage in any of the aforementioned transactions on their own behalf.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or
any national securities exchange.
(h) The Company will apply the proceeds from the sale of the Shares as
set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares to
continue to qualify for inclusion in the Nasdaq National Market System.
(j) The Company will use its best efforts to ensure that the Directed
Shares are restricted as required by the National Association of Securities
Dealers, Inc. or the National Association of Securities Dealers, Inc. rules
from sale, transfer, assignment, pledge or hypothecation for a period of
three (3) months following the date of this Agreement. The Underwriters
will notify the Company as to which persons will need to be so restricted.
At the request of the Underwriters, the Company will direct the transfer
agent to place a stop transfer restriction upon such securities for such a
period of time. Should the Company release, or seek to release, from such
restrictions any of the Directed Shares, the Company agrees to reimburse
the Underwriters for any reasonable expenses (including, without
limitation, legal expenses) they incur in connection with such release.
5. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
exhibits thereto), any preliminary prospectus, the Prospectus and any amendments
or supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), the underwriting documents (including this
Agreement and the Agreement Among Underwriters) and all other documents related
to the public offering of the Shares (including those supplied to the
Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer
and delivery of the Shares to the Underwriters, including any transfer or other
taxes payable thereon, (iii) the qualification of the Shares under state or
foreign securities or Blue Sky laws, including the costs
11
of printing and mailing a preliminary and final "Blue Sky Survey", (iv) the fees
of counsel for the Underwriters in connection with the qualification of the
Shares under state or foreign securities or Blue Sky laws and in connection with
the review and qualification of the offering of the Shares by the National
Association of Securities Dealers Inc., and such counsel's disbursements in
relation thereto, (v) quotation of the Shares on the Nasdaq National Market
System, (vi) filing fees of the Commission and the National Association of
Securities Dealers, Inc., (vii) the cost of printing certificates representing
the Shares and (viii) the cost and charges of any transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6, "Closing Date" shall refer to the
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence from any certificates, opinions,
written statements or letters furnished to you or to Proskauer Rose LLP
("Underwriters' Counsel"), pursuant to this Section 6 of any misstatement or
omission, to the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not later
than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the
date of this Agreement or, if pricing pursuant to a pricing amendment,
12:00 P.M., New York time on the date an amendment to the Registration
Statement containing the public offering price has been filed with the
Commission, or at such later time and date as shall have been consented to
in writing by the Representatives; if the Company shall have elected to
rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall
have been filed with the Commission in a timely fashion in accordance with
Section 4(a) hereof; and, at or prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment thereof shall have been issued and no proceedings
therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the opinion of ▇▇▇▇▇▇▇
Berlin Shereff ▇▇▇▇▇▇▇▇, LLP, counsel for the Company, dated the Closing
Date addressed to the Underwriters and in form and substance satisfactory
to Underwriters' Counsel, to the effect that:
(i) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the
Company and its subsidiaries is duly qualified and in good standing as
a foreign corporation in [list those states to be specified in such
opinion]. Each of the Company and its subsidiaries has all requisite
power and authority, and all consents, approvals, authorizations,
orders, registrations, qualifications, licenses and permits of and
from all public, regulatory or governmental agencies and bodies that
are material to the Company's business, to own, lease and operate its
respective properties and conduct its business as now being conducted
and as described in the Registration
12
Statement and the Prospectus. All of the issued and outstanding capital
stock of each subsidiary of the Company has been duly and validly
authorized and issued and is fully paid and nonassessable and was not
issued in violation of any statutory or, to such counsel's knowledge, other
preemptive rights and, is owned directly or indirectly by the Company, free
and clear of any encumbrance, claim, security interest, restriction on
transfer, stockholders' agreement, voting trust or, to such counsel's
knowledge, any lien, except as described in the Registration Statement and
the Prospectus.
(ii) The Company has authorized and outstanding capital stock as set
forth in the Registration Statement and the Prospectus. All of the
outstanding shares of Common Stock are duly and validly authorized and
issued, are fully paid and nonassessable and were not issued in violation
of or subject to any statutory or, to such counsel's knowledge, other
preemptive rights. The Shares to be delivered on the Closing Date have been
duly and validly authorized and, when delivered by the Company in
accordance with this Agreement, will be duly and validly issued, fully paid
and nonassessable and will not have been issued in violation of or subject
to any statutory or, to such counsel's knowledge, other preemptive rights.
The Common Stock, the Firm Shares and the Additional Shares conform to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(iii) The Common Stock is duly authorized for quotation on the
Nasdaq National Market System, subject to official notice of issuance.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by the Company.
(v) To such counsel's knowledge, there is no litigation or
governmental or other action, suit, proceeding or investigation before any
court or before or by any public, regulatory or governmental agency or body
pending or threatened against, or involving the properties or business of,
the Company or any of its subsidiaries, which is of a character required to
be disclosed in the Registration Statement and the Prospectus which has not
been properly disclosed therein and there are no statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(vi) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby by the Company do
not and will not (A) conflict with or result in a breach of any of the
terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, any agreement, instrument, franchise, license or permit known
to such counsel to which the Company or any of its subsidiaries is a party
or by which any of such corporations or their respective properties or
assets may be bound, subject to such exceptions that would not have a
Material
13
Adverse Effect, or (B) violate or conflict with any provision of applicable
law or the certificate of incorporation or by-laws (or other organizational
documents) of the Company or any of its subsidiaries, or, to the knowledge
of such counsel, any judgment, decree, order, statute, rule or regulation
of any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with
any court or any public, governmental, or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets is required for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for (1) such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters (as to which such counsel
need express no opinion) and (2) such as have been made or obtained under
the Act.
(vii) The statements (A) in the Prospectus under the captions "Risk
Factors--Most of our revenues are derived from contracts with agencies of
the United States government, and uncertainties in government contracts
could adversely affect our business,""Business--Contracts--Governement
Contracts," "--Certain Regulatory Matters,""--Legal Proceedings,"
"Management--Employment Severance and Other Agreements with Management,""--
Executive Officers and Directors," "--1998 Long Term Incentive Plan,"
"Description of Securities" and "Shares Eligible for Future Sale" and (B)
in the Registration Statement in Items 14 and 15, in each case insofar as
such statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein.
(viii) The Company is not, and upon consummation of the transactions
contemplated hereby, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(ix) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included therein, as to
which no opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and the Regulations.
(x) The Registration Statement is effective under the Act, and, to
the knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereof has
been issued and no proceedings therefor have been initiated or threatened
by the Commission and all filings required by Rule 424(b) of the
Regulations have been made.
(xi) To such counsel's knowledge, no holder of any security of the
Company has any right, not effectively satisfied or waived, to require
inclusion of
14
shares of Common Stock or any other security of the Company in the
Registration Statement.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and the Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any
amendment thereof made prior to the Closing Date as of the date of such
amendment, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules and other
financial data included therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States, the
General Corporation Law of the State of Delaware, the laws of the State of New
York and jurisdictions in which they are admitted, 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 Underwriters'
Counsel, familiar with the applicable laws; and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and certificates or other written statements of officers of departments
of various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying thereon.
The opinion of ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP described in this
Section 6(b) shall be rendered to the Underwriters at the request of the Company
and shall so state therein.
(c) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and
the Underwriters shall have received from said Underwriters' Counsel a
favorable opinion, dated as of the Closing Date with respect to the
issuance and sale of the Shares, the Registration Statement and the
Prospectus and such other related matters as the Representatives may
reasonably require, and the Company shall have furnished to Underwriters'
Counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
15
(d) At the Closing Date, you shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date, to the effect that (i) the condition set forth in
subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date, the representations and warranties of
the Company set forth in Section 1 hereof are accurate, (iii) as of the
Closing Date, the obligations of the Company to be performed hereunder on
or prior thereto have been duly performed and (iv) subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company and its subsidiaries have not
sustained any material loss or interference with their respective
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding, and there has not been any material
adverse change, or any development involving a material adverse change, in
the business, prospects, properties, operations, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries
taken as a whole, except in each case as described in or contemplated by
the Prospectus.
(e) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter, from Ernst & Young LLP, independent
public accountants for the Company and the Predecessor Companies, dated,
respectively, as of the date of this Agreement and as of the Closing Date
addressed to the Underwriters and in form and substance satisfactory to the
Representatives, to the effect that: (i) they are independent certified
public accountants with respect to the Company and the Predecessor
Companies within the meaning of the Act and the Regulations and stating
that the answer to Item 10 of the Registration Statement is correct insofar
as it relates to them; (ii) stating that, in their opinion, the financial
statements and schedules of the Company and the Predecessor Companies
included in the Registration Statement and the Prospectus and covered by
their opinion therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the applicable published
rules and regulations of the Commission thereunder; (iii) on the basis of
procedures consisting of a reading of the latest available unaudited
interim consolidated financial statements of the Company, and its
subsidiaries, a reading of the minutes of meetings and consents of the
stockholders and boards of directors of the Company and its subsidiaries
and the committees of such boards subsequent to December 31, 1998,
inquiries of officers and other employees of the Company and its
subsidiaries who have responsibility for financial and accounting matters
of the Company and its subsidiaries with respect to transactions and events
subsequent to December 31, 1998 and other specified procedures and
inquiries to a date not more than five days (three days in the case of the
letter delivered on the Closing Date) prior to the date of such letter,
nothing has come to their attention that would cause them to believe that:
(A) the unaudited consolidated financial statements and schedules of the
Company presented 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 applicable published rules and regulations
of the Commission thereunder or that such unaudited consolidated financial
statements are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited consolidated financial statements of the Company included in
the Registration Statement and the Prospectus; (B) with respect to the
period subsequent to
16
[ ], 1999, there were, as of the date of the most recent available monthly
consolidated financial statements of the Company and its subsidiaries, if
any, and as of a specified date not more than five days (three days in the
case of the letter delivered on the Closing Date) prior to the date of such
letter, any changes in the capital stock or long-term indebtedness of the
Company or any decrease in the net current assets or stockholders' equity
of the Company, in each case as compared with the amounts shown in the most
recent balance sheet presented in the Registration Statement and the
Prospectus, except for changes or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or which
are set forth in such letter or (C) that during the period from [ ], 1999
to the date of the most recent available monthly consolidated financial
statements of the Company and its subsidiaries, if any, and to a specified
date not more than five days (three days in the case of the letter
delivered on the Closing Date) prior to the date of such letter, there was
(1) any decrease, as compared with the corresponding period in the prior
fiscal year, in total revenues, or any increase, as compared with the
corresponding period in the prior fiscal year, in operating loss or the
total or per share net loss or (2) any decrease, as compared with the
corresponding period in the prior fiscal quarter, in revenues, except in
any such case for decreases or increases which the Registration Statement
and the Prospectus disclose have occurred or may occur or which are set
forth in such letter; (iv) nothing has come to their attention that would
cause them to believe that the pro forma financial information included in
the Registration Statement do not comply in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such financial information; and (v) stating
that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, and other financial information
pertaining to the Company and its subsidiaries set forth in the
Registration Statement and the Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting and financial records of the Company and its subsidiaries or
from schedules furnished by the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries, and other
appropriate procedures specified by you set forth in such letter, and found
them to be in agreement.
(f) Prior to the Closing Date, the Company shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
(g) You have shall received from each person who is a director or
officer of the Company or such stockholder as have been heretofore
designated by the Representatives and listed on Schedule II hereto an
agreement to the effect that such person will not, directly or indirectly,
without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co. Inc., offer, sell,
offer or agree to sell, grant any option to purchase, pledge, make any
short sale, establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended), or
otherwise dispose of, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock) of the Company or of any
of its subsidiaries or (ii) enter into any swap, derivative transaction or
other arrangement that transfers to another, in whole or in part, any of
the
17
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise,
for a period of 180 days after the date of the Prospectus.
(h) At the Closing Date, the Shares shall have been approved for
quotation on the Nasdaq National Market System.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to the Representatives
and to their counsel, all obligations of the Underwriters hereunder may be
cancelled by the Representatives at, or at any time prior to, the Closing Date
and the obligations of the Underwriters to purchase the Additional Shares may be
cancelled by the Representatives at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing, or by telephone, telex or telegraph, confirmed in writing.
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including
but not limited to attorneys' fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts
paid in settlement of any claim or litigation), joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Shares, as originally
filed or any amendment thereof, or any related preliminary prospectus or
the Prospectus, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the Company will
-------- -------
not be liable in any such case to the extent but only to the extent that
any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives expressly for use
therein. This indemnity agreement will be in addition to any liability
which the Company may otherwise have including under this Agreement.
18
(b) Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of the directors of the Company, each
of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation),
jointly or several, to which they or any of them may become subject under
the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Shares, as originally filed or any amendment
thereof, or any related preliminary prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein;
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder. This
indemnity will be in addition to any liability which any Underwriter may
otherwise have including under this Agreement. The Company acknowledges
that the statements set forth in the fifth, seventh, eleventh and twelfth
paragraphs under the caption "Underwriting" in the Prospectus constitute
the only information furnished in writing by or on behalf of any
Underwriter expressly for use in the Registration Statement relating to the
Shares as originally filed or in any amendment thereof, any related
preliminary prospectus or the Prospectus or in any amendment thereof or
supplement thereto, as the case may be.
(c) In connection with the offer and sale of the Directed Shares, the
Company agrees, promptly upon a request in writing, to indemnify and hold
harmless the Underwriters from and against any and all losses, liabilities,
claims, damages and expenses incurred by them as a result of the failure of
the Directed Shares Purchasers to pay for and accept delivery of the
Directed Shares which, by the end of the day following the date of this
Agreement, were subject to a properly confirmed agreement to purchase such
Directed Shares.
(d) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not
relieve it from any liability which it may have under this Section 7). In
case any such
19
action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by one of the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
retained counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case
the indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent; provided, however, that such
-------- ---------
consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in circumstances in
------------
which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company and the Underwriters from the offering of the Shares or,
if such allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 7 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company and the Underwriters in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same proportion
as (x) the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material
20
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 8
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 which does not
take account of the equitable considerations referred to above. Notwithstanding
the provisions of this Section 8, (i) in no case shall any Underwriter be liable
or responsible for any amount in excess of the underwriting discount applicable
to the Shares purchased by such Underwriter hereunder, and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall 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 untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 8. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
-------- -------
9. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default
relates do not (after giving effect to arrangements, if any, made by you
pursuant to subsection (b) below) exceed in the aggregate 10% of the number
of Firm Shares or Additional Shares, to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of
Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, the Representatives
may in their discretion arrange for yourself or for another party or
parties (including any non-defaulting Underwriter or
21
Underwriters who so agree) to purchase such Firm Shares or Additional
Shares, as the case may be, to which such default relates on the terms
contained herein. In the event that within five calendar days after such a
default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as
provided in this Section 9, this Agreement or, in the case of a default
with respect to the Additional Shares, the obligations of the Underwriters
to purchase and of the Company to sell the Additional Shares shall
thereupon terminate, without liability on the part of the Company with
respect thereto (except in each case as provided in Section 5, 7(a) and 8
hereof) or the Underwriters, but nothing in this Agreement shall relieve a
defaulting Underwriter or Underwriters of its or their liability, if any,
to the other Underwriters and the Company for damages occasioned by its or
their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
the default relates are to be purchased by the non-defaulting Underwriters,
or are to be purchased by another party or parties as aforesaid, the
Representatives or the Company shall have the right to postpone the Closing
Date or the applicable Additional Closing Date, as the case may be, for a
period, not exceeding five business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' Counsel,
may thereby be made necessary or advisable. The term "Underwriter" as used
in this Agreement shall include any party substituted under this Section 9
with like effect as if it had originally been a party to this Agreement
with respect to such Firm Shares and Additional Shares.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective, upon the later of when (i)
the Representatives and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or the purchase
price per Share has not been agreed upon prior to 5:00 P.M., New York time,
on the fifth full business day after the Registration Statement shall have
become effective, this Agreement shall thereupon terminate without
liability to the Company or the Underwriters except as herein expressly
provided. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by
22
notifying you or by the Representatives notifying the Company.
Notwithstanding the foregoing, the provisions of this Section 11 and of
Section 1, 5, 7 and 8 hereof shall at all times be in full force and
effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to
purchase Additional Shares at any time prior to the applicable Additional
Closing Date, as the case may be (A) if any domestic or international event
or act or occurrence has materially disrupted, or in the opinion of the
Representatives will in the immediate future materially disrupt, the market
for the Company's securities or securities in general; or (B) if trading on
the New York or American Stock Exchanges or the Nasdaq shall have been
suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required, on
the New York or American Stock Exchanges or the Nasdaq by the New York or
American Stock Exchanges, the National Association of Securities Dealers,
Inc. or by order of the Commission or any other governmental authority
having jurisdiction; or (C) if a banking moratorium has been declared by a
state or federal authority or if any new restriction materially adversely
affecting the distribution of the Firm Shares or the Additional Shares, as
the case may be, shall have become effective; or (D) (i) if the United
States becomes engaged in hostilities or there is an escalation of
hostilities involving the United States or there is a declaration of a
national emergency or war by the United States or (ii) if there shall have
been such change in political, financial or economic conditions if the
effect of any such event in (i) or (ii) as in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm Shares or the Additional Shares, as
the case may be, on the terms contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by the
Representatives as provided in Section 11(a) hereof or (ii) Section 9(b) or
11(b) hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Underwriters
set forth herein is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or
comply with any provision hereof, the Company will, subject to demand by
the Representatives, reimburse the Underwriters for all out-of-pocket
expenses (including the fees and expenses of their counsel), incurred by
the Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: [ ] with copies to
Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇, Esq.; if sent to the Company, shall be mailed, delivered, or telegraphed
and confirmed in writing to the Company, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
23
Financial Officer, with copies to ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
24
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
AverStar, Inc.
By ___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board and Chief Executive
Officer
Accepted as of the date first above written
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated
on behalf of themselves and the other
Underwriters named in Schedule I hereto
BY: BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By __________________________
Name:
Title:
25
SCHEDULE I
----------
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- ----------------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated
Total............. _________________
26
SCHEDULE II
-----------
[To be provided]
27
