1,500,000 Units
RADYNE COMSTREAM, INC.
1,500,000 UNITS
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND
ONE REDEEMABLE COMMON STOCK WARRANT
UNDERWRITING AGREEMENT
---------------, ----
HD ▇▇▇▇▇ & Co., Inc.
As Representative of the Several
Underwriters referred to herein
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Radyne ComStream, Inc., a New York corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representative (the
"Representative") an aggregate of 1,500,000 units (the "Units"), each Unit
consisting of one share of Common Stock (the "Common Stock") and one redeemable
common stock warrant (the "Warrant") (together, the "Firm Securities"). The
respective amounts of the Firm Securities to be so purchased by the several
Underwriters are set forth opposite their names in Schedule I hereto. The
Company also proposes to sell, at the Underwriters' option, an aggregate of up
to 225,000 additional units (the "Option Securities") as discussed more fully in
Section 2 below. The Company further agrees to issue, upon the Closing Date as
hereafter defined in Section 2, the Representative's Purchase Option more fully
discussed in Section 4(o) below (the "Representative's Purchase Option").
The Representative has advised the Company that (a) it is authorized to
enter into this Agreement on behalf of the several Underwriters; and (b) the
several Underwriters are willing, acting severally and not jointly, to purchase
the numbers of Firm Securities set forth opposite their respective names in
Schedule 1, plus their pro rata portion of the Option Securities if the
Representative elects to exercise the over-allotment option in whole or in part
for the accounts of the several Underwriters. The Firm Securities, the Option
Securities (to the extent the
aforementioned option is exercised), the shares of Common Stock issuable upon
exercise of the Warrants, the Representative's Purchase Option and the shares of
Common Stock issuable upon exercise of the Representative's Purchase Option are
herein collectively called the "Securities."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and agrees as follows:
(a) FILING OF REGISTRATION STATEMENT. A registration statement on
Form S-2 (File No. ________) with respect to the Securities has been prepared by
the Company in conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission under the Act. Copies of such
registration statement, including any pre-effective and post-effective
amendments thereto, the preliminary prospectuses (meeting the requirements of
Rule 430A of the Rules and Regulations) contained therein and the exhibits,
financial statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to the Representative. Such
registration statement, herein referred to as the "Registration Statement,"
after effectiveness and upon filing of the Prospectus referred to below with the
Commission, if required, shall be deemed to include all information incorporated
therein by reference and omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below and also any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations with
respect to the Securities (a "Rule 462(b) Registration Statement"). The
Registration Statement has been declared effective by the Commission under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. The form of prospectus first filed by the
Company with the Commission pursuant to Rule 424(b) (or if no such filing is
required, the form of final prospectus included in the Registration Statement on
the effective date) and Rule 430A is herein referred to as the "Prospectus."
Each preliminary prospectus included in the Registration Statement prior to the
time it becomes effective is herein referred to as a "Preliminary Prospectus."
(b) ORGANIZATION AND QUALIFICATION. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of New York, with full corporate power and authority to
conduct all activities conducted by it, to own or lease its properties, and to
conduct its business as described in the Registration Statement and Prospectus.
The Company is duly qualified to transact business in all jurisdictions in which
the conduct of its business requires such qualification, except where the
failure to qualify would not have a material adverse effect upon the business or
property of the Company.
(c) NO SUBSIDIARIES. The Company does not have any subsidiaries,
does not control, directly or indirectly, or have any direct or indirect
interest or investment in any corporation, firm, partnership, association,
limited liability company, business trust or other business organization, and
does not own any shares of stock or any other securities of (other than bank
certificates of deposit, shares or units of interest in "money market" funds, or
as set forth in the Prospectus) and the Company has not made any loans (other
than advances to employees in
2
the ordinary course of business, none of which are material or made to officers
or directors) to or guaranteed any obligations of, any other corporation, firm,
partnership, association, limited liability company, business trust or other
business organization.
(d) CAPITALIZATION AND LEGALITY OF SECURITIES. The Company has
authorized and outstanding capital stock as set forth under the heading
"Capitalization" in the Prospectus; the outstanding shares of Common Stock of
the Company have been duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance with all applicable federal and
state securities laws; all of the Securities to be issued and sold by the
Company pursuant to this Agreement have been duly authorized and, when issued
and paid for as contemplated herein, will be validly issued, fully paid and
nonassessable; no preemptive rights of stockholders exist with respect to any of
the Securities or the issue and sale thereof; no stockholder of the Company has
any right pursuant to any agreement which has not been waived or honored to
require the Company to register the sale of any shares owned by such stockholder
under the Act in the public offering contemplated herein except as disclosed in
the Registration Statement; and all necessary and proper corporate proceedings,
including the reservation of a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants and the Representative's Purchase Option,
have been taken to validly authorize the issuance and sale of such Securities
and no further approval or authority of the stockholders or the Board of
Directors of the Company is required for the issuance and sale of the Securities
to be sold by the Company as contemplated herein.
(e) DESCRIPTION OF SECURITIES; RIGHTS TO ACQUIRE SHARES. The
Securities conform with the statements concerning them in the Registration
Statement in all material respects. Except as specifically disclosed in the
Registration Statement and the financial statements of the Company and the
related notes thereto, the Company does not have outstanding any options or
warrants to purchase, any preemptive rights or other rights to subscribe for or
to purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell shares of its capital stock or any such options,
warrants, rights, convertible securities or obligations. The descriptions of the
Company's stock option and other stock-based plans, and of the options or other
rights granted and exercised thereunder, as set forth in the Prospectus, are
accurate summaries and fairly present the information required to be shown with
respect to such plans and rights in all material respects. The Company and its
affiliates are not currently offering any securities other than the Securities,
nor have they offered or sold any of the Company's securities except as
described in the Registration Statement.
(f) USE AND ACCURACY OF REGISTRATION STATEMENT, PRELIMINARY
PROSPECTUSES, AND PROSPECTUS. The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Securities nor instituted or, to the best knowledge of the
Company, threatened or contemplated instituting proceedings for that purpose.
The Registration Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements that are required to be stated
or incorporated by reference therein by the Act and the Rules and Regulations
and in all respects conform or will conform, as the case may be, to the
requirements of the Act and the Rules and Regulations. Neither the Registration
Statement nor any amendment thereto, and neither the Prospectus nor any
supplement thereto, contains or will contain, as the case may be,
3
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative specifically for use in
the preparation thereof.
(g) FINANCIAL STATEMENTS. The financial statements of the Company,
together with related notes and schedules, as set forth in or incorporated by
reference into the Registration Statement or the Prospectus present fairly in
all material respects the financial position and the results of operations and
cash flows of the Company at the indicated dates and for the indicated periods.
Such financial statements, schedules, and related notes have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary and
selected financial and statistical data and schedules included in or
incorporated by reference into the Registration Statement or the Prospectus
present fairly the information shown or incorporated by reference therein and
have been compiled on a basis consistent with the financial statements presented
therein. No other financial statements or schedules are required to be included
in or incorporated by reference into the Registration Statement.
(h) LITIGATION. There is no action, suit, investigation or
proceeding pending or, to the best knowledge of the Company, after due inquiry,
threatened against the Company or any of its officers in their capacity as such,
before any arbitrator, court or regulatory, governmental or administrative
agency, authority or body that might result in a material adverse change in
the business, assets or condition of the Company, except as set forth in the
Registration Statement. The Company is not subject to the provisions of any
injunction, judgment, decree or order of any court, regulatory body,
administrative agency, or other governmental body or arbitral forum that might
result in a material adverse change in the business, assets or condition of
the Company.
(i) TITLE TO PROPERTY. The Company has good and marketable title to,
and valid and enforceable leasehold estates in, all items of property described
in the Registration Statement or Prospectus as owned or leased by it, as the
case may be, or that are material to the conduct of the Company's business, free
and clear of all liens, encumbrances, claims, security interests, and other
restrictions, other than those described in the Prospectus and those that,
individually or in the aggregate, would not have a material adverse effect on
the Company. The leases, licenses or other contracts or instruments under which
the Company leases, holds or is entitled to use any property, real or personal,
are valid, subsisting, and enforceable with only such exceptions as are not
material and do not interfere with the use of such property made, or proposed to
be made, by the Company, and all rentals, royalties or other payments accruing
thereunder that became due prior to the date of this Agreement have been duly
paid, and neither the Company nor, to the best of its knowledge, any other party
is in default thereunder and, to the best of the Company's knowledge, no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a default thereunder. The Company has not received notice of
any violation of any applicable law, ordinance, regulation, order or requirement
4
relating to its owned or leased properties except any such violation that would
not have a material adverse effect on the Company.
(j) TAXES. The Company has filed all federal, state, local, and
foreign income tax returns that have been required to be filed and has paid all
taxes indicated by said returns and has paid all tax assessments received by it.
There is no income, sales, use, transfer or other tax deficiency or assessment
that has been or might reasonably be expected to be asserted or threatened
against the Company which might result in a material adverse change in the
business or condition of the Company. The Company has paid all sales, use,
transfer and other taxes applicable to it and its business and operations.
(k) MATERIAL LOSS. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, as they
may be amended or supplemented, and except as set forth or contemplated in the
Prospectus (i) there has not been and will not have been any adverse change or
any development involving the likelihood of a future material adverse change in
or affecting the condition, financial or otherwise, of the Company or the
earnings, business affairs, management, or business prospects of the Company,
whether or not occurring in the ordinary course of business, (ii) there has not
been and will not have been any transaction entered into by the Company, other
than transactions in the ordinary course of business or transactions
specifically described in the Registration Statement and Prospectus as it may
be amended or supplemented, (iii) the Company has not sustained any material
loss or interference with its businesses or properties from strike, fire, flood,
windstorm, accident or other calamity, (iv) the Company has not paid and will
not have paid or declared any dividends or other distribution with respect to
its capital stock and the Company is not in default in the payment of principal
of or interest on any outstanding debt obligations, and (v) there has not been
and will not have been any change in the capital stock (other than the sale of
the Securities or the exercise of outstanding stock options or warrants as
described in the Registration Statement) or material increase in indebtedness
of the Company. The Company does not have any material contingent obligation
that is not disclosed in the Registration Statement and Prospectus (or
contained or incorporated by reference in the financial statements or related
notes thereto), as such may be amended or supplemented.
(l) COMPLIANCE WITH CORPORATE DOCUMENTS AND CONTRACTS. The Company
is not in violation or default under any provision of its Certificate of
Incorporation or Bylaws or any of its agreements, leases, license, contracts,
franchises, mortgages, permits, deeds of trust, indentures or other instruments
or obligations to which the Company is a party or by which it or any of its
properties is bound or may be affected (collectively, "Contracts").
(m) AUTHORIZATION OF AGREEMENTS. The Company has the legal right,
corporate power, and authority to enter into this Agreement, the Warrant
Agreement with respect to the Warrants (the "Warrant Agreement"), and the
Representative's Purchase Option and to perform the transactions contemplated
hereby and thereby. Each of this Agreement, the Warrant Agreement, and the
Representative's Purchase Option has been duly authorized, executed, and
delivered by the Company and each is legally binding upon and enforceable
against the Company in accordance with its terms. The execution, delivery,
and performance of this Agreement, the Warrant Agreement, and the
Representative's Purchase Option and the consummation of the transactions
herein and therein contemplated do not and will not conflict
5
with or result in a breach of, or violation of, any of the terms or provisions
of, or constitute, either by itself or upon notice or the passage of time or
both, a default under, any Contract to which the Company is a party or by which
the Company or any of its property may be bound or affected, except where such
breach, violation or default would not have a material adverse effect on the
business or financial condition of the Company, or violate any of the provisions
of the Certificate of Incorporation or Bylaws of the Company, or violate any
order, judgment, statute, rule or regulation applicable to the Company of any
court or of any regulatory, administrative or governmental body or agency or
arbitral forum having jurisdiction over the Company or any of its property.
(n) APPROVALS AND CONSENTS. Each approval, registration,
qualification, license, permit, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body or agency necessary in connection with the execution and
delivery by the Company of this Agreement, the Warrant Agreement, and the
Representative's Purchase Option and the consummation of the transactions herein
or therein contemplated (except such additional actions as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or as may be
necessary to qualify the Securities for public offering under state securities
or Blue Sky laws) has been obtained or made and each is in full force and
effect.
(o) INTELLECTUAL PROPERTIES. The Company owns or possesses adequate
and sufficient rights by license agreement or otherwise to use and enjoy the
full rights in and to all patents, patent rights, trade secrets, license or
royalty arrangements, trademarks and trademark rights, service marks, trade
names, copyrights, know how or proprietary techniques or rights thereto of
others, and governmental, regulatory or administrative authorizations, orders,
permits, certificates and consents necessary for the conduct of the business of
the Company, including, without limitation, for each of the technologies
described in the Prospectus. The Company is not aware of any pending or
threatened action, suit, proceeding or claim by others, either domestically or
internationally, that the Company is violating any patents, patent rights,
copyrights, trademarks or trademark rights, inventions, service marks, trade
names, licenses or royalty arrangements, trade secrets, know how or proprietary
techniques or rights thereto of others, or governmental, regulatory or
administrative authorizations, orders, permits, certificates and consents. The
Company is not aware, after due diligence, of any rights of third parties to, or
any infringement of, any of the Company's patents, patent rights, trademarks or
trademark rights, copyrights, licenses or royalty arrangements, trade secrets,
know how or proprietary techniques (including but not limited to the
technologies described in the Prospectus) as well as processes and substances,
or rights thereto of others, which could materially adversely affect the use
thereof by the Company or which would have a material adverse affect on the
Company. The Company is not aware, after due diligence, of any pending or
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any of such patents, patent rights, trademarks or trademark rights,
copyrights, licenses or royalty arrangements, trade secrets, know how, or
proprietary techniques or rights thereto of others. The Company possesses those
patents that have been previously disclosed to the Representative in writing,
and such patents remain in full force and effect.
6
(p) DESCRIPTION OF CONTRACTS. There are no Contracts or other
documents required to be described in the Registration Statement or to be filed
as exhibits to the Registration Statement by the Act or by the Rules and
Regulations which have not been described or filed as required.
(q) COMPLIANCE WITH LAW. The Company is conducting its business in
compliance with all applicable laws, rules, and regulations of the jurisdictions
in which it is conducting its business, including, without limitation, all
applicable local, state, federal, and foreign environmental laws and
regulations, except where the failure to so comply would not have a material
adverse effect on the business or financial condition of the Company. The
Company possesses adequate certificates or permits issued by the appropriate
federal, state, local, and foreign regulatory authorities necessary to conduct
its business and to retain possession of its properties. The Company has not
received any notice of any proceeding relating to the revocation or modification
of any of these certificates or permits.
(r) TRANSACTIONS WITH AFFILIATES. All transactions among the Company
and the officers, directors, and affiliates of the Company have been accurately
disclosed in the Prospectus, to the extent required to be disclosed in the
Prospectus in accordance with the Act and the Rules and Regulations. Except as
disclosed in the Prospectus, the Company does not have outstanding any
indebtedness to any officer, director, or beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of 5% or more of the Company's Common Stock. As used in this Agreement,
the term "affiliate" shall mean a person or entity controlling, controlled by
or under common control with any specified person or entity, or the ability to
direct, directly or indirectly, the management or policies of the controlled
person or entity, whether through the ownership of voting securities, by
contract, positions of employment, family relationships, service as an officer,
director or partner of the person or entity, or otherwise.
(s) PROHIBITED PAYMENTS. Neither the Company nor any of its
directors or officers acting in any capacity on behalf of the Company nor, to
the Company's knowledge after due inquiry, any of its foreign sales agents,
directly or indirectly, has (i) used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; (iv) made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment or (v) failed to disclose
any such contributions, gifts, or other payments in violation of applicable law.
(t) INDEPENDENT ACCOUNTANTS. Each of KPMG Peat Marwick, LLP,
Deloitte & Touche LLP, and Ernst & Young, LLP, who have certified the financial
statements filed with the Commission as part of or incorporated by reference
into the Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(u) INTERNAL ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls which, taken as a whole, is 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
7
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. Except as specifically disclosed in the Prospectus, neither the
Company nor any of its employees or agents has made any payment or transfer of
any funds or assets of the Company, conferred any personal benefit by the use of
the assets of the Company or received any funds, assets, or personal benefit in
violation of any law, rule, or regulation, which is required to be stated in the
Prospectus or necessary to make the statements therein not misleading.
(v) INSURANCE. The Company maintains insurance of the types and in
the amounts that it deems adequate for its business and which is customary for
companies in its industry, including, but not limited to, general liability
insurance and insurance covering all real and person property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
(w) LOCK-UP AGREEMENTS. The Company has taken all appropriate steps
reasonably necessary or appropriate to assure that no offering, sale or other
disposition of any Common Stock of the Company or securities exercisable or
convertible into Common Stock of the Company will be made for a period of
__________ after the date of this Agreement, directly or indirectly, by the
Company, or any of its affiliates, directors or executive officers, otherwise
than hereunder or with the prior written consent of the Representative.
(x) BOARD OF DIRECTORS. The Company's Board of Directors consists of
those persons listed in the Prospectus. Except as disclosed in the Prospectus,
none of such persons is employed by the Company nor is any of them affiliated
with the Company, except for service on its Board of Directors.
(y) ELIGIBILITY TO USE FORM S-2. The Company is eligible to use Form
S-2 for the registration of the Securities.
(z) DIRECTED OFFERS. Neither the Company, nor to its knowledge,
after due and diligent inquiry, any person other than any Underwriter, has made
any representation, promise or warranty, whether verbal or in writing, to
anyone, whether an existing shareholder or not, that any of the Securities will
be reserved for or directed to them during the proposed public offering.
(aa) STABILIZATION. Neither the Company nor any person that controls,
is controlled by or is under common control with the Company has taken or will
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in the stabilization or manipulation of the
price of any security in order to facilitate the sale or resale of any of the
Securities.
(bb) UNAUTHORIZED ARRANGEMENTS. The Company has not, since the filing
of the Registration Statement (i) sold, bid for, purchased, attempted to induce
any person to purchase, or paid anyone any compensation for soliciting purchases
of, its capital stock, or (ii)
8
paid or agreed to pay to any person any compensation for soliciting another
person to purchase any securities of the Company, except for the sale of
Securities under this Agreement.
(cc) FINDER OR BROKER. The Company has not retained or dealt with any
broker or finder with respect to the transactions contemplated hereby, and the
Company knows of no outstanding claims for services in the nature of a finder's
fee or origination fee with respect to the sale of the Securities. The Company
will indemnify and hold harmless the Underwriters with respect to any claim for
a finder's fee by any party claiming to be owed such fee based on contacts,
conversations or arrangements with the Company.
(dd) EMPLOYMENT AGREEMENTS. The employment agreements between the
Company and its officers named under the caption "Management -- Employment
Agreements" in the Prospectus are binding and enforceable obligations upon the
respective parties thereto in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws or arrangements affecting creditors' rights
generally and subject to principles of equity, and public policy considerations.
Except for such employment agreements, the Company does not have any employment,
severance or similar agreement with any officers, directors or employees.
(ee) CLASSIFICATION AS A "C" CORPORATION. The Company is classified
as a "C" corporation with the Internal Revenue Service.
(ff) NASD AFFILIATIONS. Except as previously disclosed in writing by
the Company to the Representative or in the Registration Statement, no officer,
director or stockholder of the Company has any NASD affiliation and the Company
has no management or financial consulting agreement with any third party.
(gg) COMPANY NOT AN INVESTMENT COMPANY. The Company is not, and upon
receipt of the proceeds from the sale of the Securities will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
(hh) OFFERING MATERIALS. The Company has not distributed and will not
distribute prior to the Closing Date or the Option Closing Date, as the case may
be, any offering material in connection with the offering and sale of the
Securities other than the Registration Statement, any Preliminary Prospectus,
the Prospectus, and the other materials permitted by the Act.
(ii) EXCHANGE ACT REGISTRATION AND NASDAQ LISTING. As of the
Effective Date (as defined in Section 6(a)) each of the Units, the Common Stock,
and the Warrants have been or will be registered under Section 12(g) of the
Exchange Act and have been or will be approved for listing and trading on The
Nasdaq Stock Market Inc. ("Nasdaq") SmallCap Market.
9
2. PURCHASE, SALE, AND DELIVERY OF THE SECURITIES.
(a) PURCHASE AND SALE OF THE FIRM SECURITIES. On the basis of the
representations, warranties, and covenants herein contained, and subject to the
conditions herein set forth, the Company agrees to sell to the Underwriters and
each Underwriter agrees, severally and not jointly, to purchase on the Closing
Date (as defined in Section 2(c)), at the gross price per Unit indicated in the
Prospectus (the "Initial Price") less the Underwriters' discount of nine percent
(9%) of the Initial Price, the number of Firm Securities set forth opposite the
name of each Underwriter in Schedule I hereof, subject to adjustments in
accordance with Section 9 hereof.
(b) PURCHASE AND SALE OF THE OPTION SECURITIES. In addition, on the
basis of the representations and warranties herein contained and subject to the
terms and conditions herein set forth, the Company grants an option to the
several Underwriters to purchase the Option Securities at the Initial Price,
less the Underwriters' discount of nine percent (9%) of the Initial Price. The
maximum number of Option Securities to be sold by the Company is equal to
225,000 Units, subject to adjustment as provided in Section 9. The option
granted hereby may be exercised in whole or in part, but only once, and at any
time upon written notice given within 45 days after the Effective Date by the
Representative on behalf of the several Underwriters, to the Company setting
forth the number of Option Securities as to which the several Underwriters are
exercising the option, the names and denominations in which the Option
Securities are to be registered, and the time and date at which such
certificates are to be delivered. The closing for the Option Securities shall
occur no earlier than either the Closing Date or the second business day after
the exercise of such option and no later than the tenth business day after the
date of such exercise (such date being herein referred to as the "Option Closing
Date"). Except as otherwise agreed by the Underwriters in writing, the number of
Option Securities to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Securities being purchased as the
number of Firm Securities being purchased by such Underwriter bears to the total
number of the Firm Securities, adjusted by the Representative in such manner as
to avoid fractional shares. The option with respect to the Option Securities
granted hereunder may be exercised solely to cover over-allotments in the sale
of the Firm Securities by the Underwriters or to permit purchases by the
Underwriters to the extent permitted by law. The Representative, on behalf of
the several Underwriters, may cancel such option at any time, in whole or in
part, prior to its expiration, by giving written notice of such cancellation to
the Company.
(c) PAYMENT FOR AND DELIVERY OF THE SECURITIES. Payment for the Firm
Securities to be sold hereunder is to be made by certified or bank cashier's
check(s) drawn to the order of the Company and payable in New York clearing
house funds or similar next day funds, or by wire transfer of next day funds to
an account specified in writing by the Company, against delivery of certificates
for the Firm Securities to the Representative for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m.,
Eastern time, on ___________, ____, or at such other time and date as the
Representative shall designate, such time and date being herein referred to as
the "Closing Date." As used herein, the term "business day" means a day on which
the New York Stock Exchange, Inc. is open for trading and on which banks in
10
New York are open for business and not permitted by law or executive order to
be closed. The certificates for the Firm Securities shall be in definitive form
with engraved borders and will be delivered in such denominations and in such
registrations as the Representative requests in writing not later than the two
business days prior to the Closing Date, and will be made available for
inspection by the Representative not later than 2:00 p.m., Eastern time, on the
business day immediately preceding the Closing Date at the offices of ▇▇▇▇▇▇▇▇▇
Traurig noted above. To the extent, if any, that the option described in Section
2(b) is exercised, payment for and delivery of the Option Securities shall be
made on the Option Closing Date in the manner and at the times and places
described above for the Closing Date with respect to the Firm Securities.
3. OFFERING BY THE UNDERWRITERS. It is understood that the several
Underwriters are to make a public offering of the Firm Securities as soon as the
Representative deems it advisable to do so. The Firm Securities are to be
initially offered to the public at the Initial Price set forth in the
Prospectus. The Representative may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Securities are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
It is further understood that the Representative will act on behalf of
the Underwriters in the offering and sale of the Securities, in accordance with
a Agreement Among Underwriters entered into by the Representative and the
several other Underwriters on or prior to the date hereof. The Representative
shall have the right to associate with other underwriters and dealers as it may
determine and shall have the right to grant to such persons such concessions out
of the underwriting discount to be received by the Underwriters as it may
determine, under and pursuant to a Selected Dealers' Agreement.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
several Underwriters that:
(a) RULE 424(b) PROSPECTUS AND AMENDMENTS TO REGISTRATION STATEMENT.
The Company shall (i) prepare and timely file with the Commission under Rule
424(b) of the Rules and Regulations a prospectus containing information
previously omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A of the Rules and Regulations and (ii) not file any
amendment to the Registration Statement or supplement to the Prospectus of which
the Representative shall not previously have been advised and furnished with a
copy or to which the Representative shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(b) NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT AND STOP
ORDERS. The Company shall advise the Representative promptly and shall confirm
such advice in writing (i) when the Registration Statement has become effective,
(ii) of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information,
or (iii) of the issuance by the Commission or any state securities commission of
any stop order suspending the effectiveness of the Registration Statement or the
use of the Prospectus or of the institution of any proceedings for that purpose,
and the Company shall use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain as
soon as possible the lifting thereof, if issued.
11
(c) BLUE SKY QUALIFICATIONS. The Company shall cooperate with the
Representative in endeavoring to qualify the Securities for sale under the
securities laws of such jurisdictions as the Representative may have designated
in writing and shall make such applications, file such documents, furnish such
information and take such other actions as may be required by federal or state
securities laws or regulations (including but not limited to complying with any
stock escrow requirements and appointing additional independent directors)
whether before, during or after the offering. The Company shall, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may request for distribution of the Securities.
(d) FILINGS UNDER THE ACT AND EXCHANGE ACT. The Company shall file
such registration statements and take such other action as may be necessary to
register the Units, the Common Stock, and the Warrants pursuant to Section 12(g)
of the Exchange Act, such registration statement to become effective
simultaneously with the effectiveness of the Registration Statement, and shall
thereafter keep such registration effective. The Company shall file such
amendments or supplements to the Registration Statement or such subsequent
registration statements as may be necessary to maintain, at all times during the
term of the Warrant Agreement, a current and effective registration statement
covering the issuance of the shares of Common Stock upon exercise of the
Warrants. The Company shall comply with the Act, the Rules and Regulations, the
Exchange Act, the rules and regulations promulgated under the Exchange Act, the
applicable rules and regulations of Nasdaq, and applicable state securities laws
so as to permit the continuance of sales of and dealings in the Securities in
compliance with applicable provisions of such laws, rules, and regulations,
including the filing with the Commission and Nasdaq of all reports required to
be so filed, and the Company will deliver to the holders of the Securities all
reports required to be provided to such holders pursuant to such laws, rules, or
regulations.
(e) NASDAQ LISTING. The Company shall qualify the Securities,
including the Units, the Common Stock, and the Warrants, for trading on the
Nasdaq SmallCap Market and shall use its best efforts to maintain such
qualification for not less than five (5) years, unless the Securities are
subsequently listed on the Nasdaq National Market, the American Stock Exchange,
or the New York Stock Exchange.
12
(f) COPIES OF PROSPECTUSES AND REGISTRATION STATEMENT. The Company
will deliver to, or upon the order of, the Representative, from time to time, as
many copies of any Preliminary Prospectus as the Representative may request. The
Company will deliver to, or upon the order of, the Representative, during the
period when delivery of a Prospectus is required under the Act, as many copies
of the Prospectus in final form, or as thereafter amended or supplemented, as
the Representative may request. The Company will deliver to the Representative,
at or before the Closing Date, five signed copies of the Registration Statement
and all amendments thereto, including all exhibits filed therewith, and any
information incorporated by reference therein, and will deliver to the
Representative such number of copies of the Registration Statement, without
exhibits, but including any information incorporated by reference, and of all
amendments thereto, as the Representative may request.
(g) COMPLIANCE WITH THE ACT AND THE EXCHANGE ACT. Within the time
during which a Prospectus relating to the Securities is required to be delivered
under the Act, the Company shall use its best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as such acts may
from time to time be hereafter amended, and by the rules and regulations
promulgated under such acts, as from time to time in force to permit the
continuance of sales of or dealings in the distribution of the Securities as
contemplated by the provisions therein, in this Agreement, and in the
Prospectus. If during such period any event as to which the Company has
knowledge occurs as a result of which the Prospectus as then amended or
supplemented includes an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or to supplement the Prospectus to
comply with the Act, the Company shall notify the Representative promptly and
shall amend the Registration Statement or supplement the Prospectus (at the
expense of the Company) so as to comply with the Act or to correct such
statement or omission or otherwise to effect such compliance, and will furnish
without charge to the Representative as many copies of such amended or
supplemented Prospectus as the Representative may from time to time reasonably
request.
(h) LISTING IN SECURITIES MANUAL; INVESTOR RELATIONS FIRM. The
Company shall, as soon as practicable after the Closing Date, use its reasonable
best efforts to obtain listing on an expedited basis in Standard and Poor's
Corporation Records or such other recognized securities manuals for which it may
qualify for listing, and the Company shall use its reasonable best efforts to
maintain such listings for at least five (5) years after the Closing Date. The
Company further agrees at any time during the five (5) year period following the
Closing Date, to engage within sixty (60) days of a written request by the
Representative, the services of an investor relations firm reasonably acceptable
to the Representative, which will act as investor relations liaison during such
five (5) year period, which spokesperson is not required to be the same person
during the duration of the five (5) year period, to consult with and advise the
Company regarding communications and relations with stockholders and the
financial and investment communities.
(i) SECTION 11(a) EARNINGS STATEMENT. The Company will make
generally available to its stockholders, as soon as it is practicable to do so,
but in any event not later than 15 months after the effective date of the
Registration Statement, an earnings statement in reasonable detail covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise the Representative in writing when such statement
has been so made available and will furnish the Representative with a true and
correct copy thereof.
(j) INFORMATION TO THE REPRESENTATIVE. The Company will, for a
period of five years from the Closing Date, deliver to the Representative copies
of annual reports and copies of all other documents, reports and information
furnished by the Company to its stockholders or filed with any securities
exchange or Nasdaq pursuant to the requirements of such exchange or Nasdaq or
with the Commission pursuant to the Act or the Exchange Act. The Company will
deliver to the Representative similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which are
not consolidated in
13
the Company's financial statements. The Company will also use its best efforts
to cause its officers, directors and beneficial owners of 10% or more of any of
its registered securities to deliver to the Representative a copy of any of the
Commission Forms 3, 4, and 5 filed with the Commission and the Company shall
deliver to the Representative copies of all such forms received by it.
(k) USE OF PROCEEDS. The Company shall apply the net proceeds of the
sale of the Securities sold by it in accordance with the statements under the
caption "Use of Proceeds" in the Prospectus. The Company shall not apply any
portion of the proceeds of the offering to pay any amount to any officer,
director, or 5% stockholder of the Company.
(l) RESTRICTIONS ON SALES. For a period of _________ from the
Effective Date the Company shall not sell or otherwise dispose of any Common
Stock (or securities convertible into or exercisable for Common Stock) of the
Company or any subsidiary of the Company without the Representative's prior
written consent. The Company shall cause each of its officers, directors, and
five percent (5%) stockholders listed on Schedule II hereto to agree in writing
that such person (i) will not, during the _________ period immediately following
the Effective Date, offer, pledge, sell (which term includes a short sale or
sale against the box), contract to sell, grant any option for the sale of, or
otherwise transfer or dispose of, directly or indirectly, any shares of the
Company's Common Stock, without the Representative's prior written approval. The
Company shall furnish the Representative with an executed copy of each such
agreement in the form attached as Exhibit "A" hereto (the "Lock-up Agreements").
(m) INSPECTION OF DOCUMENTS. The Company shall make original
documents and other information relating to the Company's affairs available upon
request to the Underwriters and to their counsel at the Company's office for
inspection and copies of any such documents will be furnished upon request to
the Underwriters and to their counsel. Included within the documents made
available have been at least the Certificate of Incorporation and all amendments
thereto, the Bylaws and all amendments thereto, minutes of all of the meetings
of the incorporators, directors and stockholders, all financial statements and
copies of all Contracts to which the Company is a party or in which the Company
has an interest.
(n) TRANSFER AND WARRANT AGREEMENT. The Company has appointed
Continental Stock Transfer & Trust Company as the Company's transfer and warrant
agent. Unless the Representative otherwise consents in writing, the Company will
continue to retain a transfer and warrant agent reasonably satisfactory to the
Representative for a period of five years following the Closing Date. The
Company will make arrangements to have available at the office of the transfer
and warrant agent sufficient quantities of the Company's common stock and
warrant certificates as may be needed for the quick and efficient transfer of
the Securities as contemplated hereunder and for the five-year period following
the Closing Date.
(o) REPRESENTATIVE'S PURCHASE OPTION. At the Closing, the Company
shall, for an aggregate of $100, deliver to the Representative the
Representative's Purchase option in the form attached hereto as Appendix "B" to
purchase in the aggregate of 150,000 shares of Common Stock. The
Representative's Purchase Option will be exercisable for a four-year term,
commencing one year from the Effective Date of the offering, at an exercise
price
14
equal to 125% of the Initial Price of the Firm Securities. The Representative's
Purchase Option shall not be redeemable by the Company.
(p) INDEPENDENT DIRECTORS. The Company shall, for a period of two
years after the Effective Date, cause at least three persons who are reasonably
acceptable to the Representative and who are not otherwise "affiliated" with the
Company to serve as directors of the Company (the "Outside Directors").
Furthermore, for a period of two years after the Closing Date the Company shall
cause at least one Outside Director to serve as the chair of each committee of
the Company's Board of Directors. For purposes of this Section 4(p), a person
shall be deemed to be "affiliated" with the Company if (i) that person is an
employee or officer (other than Chairman of the Board of the Company) of the
Company or (ii) that person, directly or indirectly, beneficially owns (as
defined in Rule 13d-3 under the Exchange Act) 5% or more of the Company's Common
Stock or (iii) that person is an employee, officer, director, or any
beneficial owner of 5% or more of any person that, directly or indirectly,
beneficially owns 5% or more of the Company's Common Stock.
(q) UNDERTAKINGS. The Company will comply with the provisions of all
undertakings contained in the Registration Statement or made in connection with
any application to register or qualify any of the Securities under state
securities or Blue Sky laws.
(r) KEY PERSON LIFE INSURANCE. The Company shall use its best
efforts to obtain on or before the Closing Date and to maintain thereafter for
the greater of (i) three years, or (ii) the term of their respective employment
with the Company, key person life insurance policies insuring the lives of
▇▇▇▇▇▇ ▇. Fitting and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with the Company named as sole
beneficiary, in a policy amount of not less than $1,000,000 and $500,000,
respectively.
5. COSTS AND EXPENSES. The Company will pay all costs, expenses, and
fees in connection with the offering or incident to the performance of the
obligations of the Company under this Agreement, including, without limiting the
generality of the foregoing, the following: (a) all expenses (including any
transfer taxes) incurred in connection with the delivery to the several
Underwriters of the Securities sold hereunder; (b) all fees and expenses
(including, without limitation, fees, disbursements, and expenses of the
Company's accountants, counsel, and other experts, but excluding fees and
expenses of counsel for the Underwriters) in connection with the preparation,
printing, filing, delivery, and shipping of the Registration Statement
(including the financial statements included or incorporated by reference
therein and all amendments and exhibits thereto), Preliminary Prospectuses, and
the Prospectus as amended or supplemented, this Agreement, the Warrant
Agreement, the Representative's Purchase Option, and other underwriting
documents including Underwriters' Questionnaires, Underwriters' Power of
Attorney, Blue Sky Memoranda, Agreement Among Underwriters, Selected Dealers'
Agreement, Invitation Telecopy, and any letters transmitting the offering
materials to the Underwriters or selling group members (including costs of
mailing and shipment), the stock and warrant certificates, and any supplements
or amendments thereto; (c) all Blue Sky and other regulatory filing fees and
fees and disbursements of counsel to the Company and counsel to the Underwriters
incurred in connection with the qualification of the Securities and their
components under the applicable state securities laws; (d) filing and listing
fees of the Commission, NASD, Nasdaq, and any other similar entity in connection
with the offering; (e) the cost of printing
15
certificates representing the Securities comprising the Units and issuable upon
the exercise of the Warrants; (f) the fees, disbursements, costs, and charges of
any transfer agent, warrant agent, and registrar; (g) the costs of advertising
(such as "tombstone ads"), including but not limited to the Wall Street Journal,
as well as any other advertising undertaken at the Company's request; (h) the
costs of preparing, printing, and distributing two bound volumes to each of the
Representative and its counsel; (i) all costs of holding informational meetings
and "road shows;" and (j) all other costs and expenses incident to the
performance of its obligations under this Agreement that are not otherwise
provided for in this Section 5. The Company shall use a printer and warrant
agent acceptable to the Representative. Any transfer taxes imposed on the sale
of the Securities to the several Underwriters will be paid by the Company. The
Company shall pay to the Representative a non-accountable expense allowance of
three percent (3%) of the gross amount to be raised hereunder, including upon
the sale of any Option Securities, payable at the closing(s). The Company has
advanced, on a nonaccountable basis, Ten Thousand Dollars ($10,000.00) to the
Representative on or before the date hereof (the "Deposit"), which shall be
credited to the allowance noted above. This expense allowance is in addition to
the Underwriters' discount. The Underwriters shall be responsible for the fees
and disbursements of their counsel, except as noted otherwise in this Section 5.
The Company shall not be required to pay for any of the Underwriters' other
expenses, except that if this offering shall not be consummated because the
conditions in Section 7 hereof are not satisfied, or because this Agreement is
terminated by the Representative pursuant to Section 6 hereof, or by reason of
any failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on its part to be performed, then the Company shall reimburse
the several Underwriters for out-of-pocket expenses, including fees and
disbursements of counsel, incurred in connection with investigating, marketing,
and proposing to market the Securities or in contemplation of performing their
obligations hereunder, up to a maximum of Thirty Thousand Dollars ($30,000.00).
In the event that this offering shall not be consummated or this Agreement is
terminated as described in the preceding sentence and the Deposit exceeds the
Underwriters' out-of-pocket expenses, the Representative shall promptly refund
such excess to the Company.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several
obligations of the Underwriters to purchase the Firm Securities on the Closing
Date and the Option Securities, if any, on the Option Closing Date are subject
to the accuracy, as of the Closing Date or the Option Closing Date, as the case
may be, of the representations and warranties of the Company contained herein,
and to the performance by the Company of its covenants and obligations hereunder
and to the following additional conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 5:30 p.m., Eastern time, on
the date of this Agreement, or such later date and time as may be consented to
in writing by the Representative (the "Effective Date"). No stop order
suspending the effectiveness of the Registration Statement, as amended from time
to time, shall have been issued and no proceedings for that purpose shall have
been taken or, to the best knowledge of the Company, after due inquiry, shall be
contemplated by the Commission or any state securities commission. Any request
of the Commission or any such authorities for additional information to be
included in the Registration
16
Statement or Prospectus or otherwise shall have been complied with to the
reasonable satisfaction of counsel for the Representative.
(b) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH AGREEMENT. The
representations and warranties of the Company in this Agreement shall be true
and correct on and as of the Closing Date or the Option Closing Date, as the
case may be, with the same effect as if made on the Closing Date or the Option
Closing Date, as the case may be, and the Company shall have complied with all
the agreements and satisfied all the obligations required to be performed or
satisfied by it at or prior to the Closing Date or the Option Closing Date, as
the case may be.
(c) NO UNTRUE STATEMENTS. The Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated or incorporated by reference
therein by the Act and the Rules and Regulations and in all respects shall
conform to the requirements of the Act and the Rules and Regulations. The
Registration Statement and the Prospectus and any amendments or supplements
thereto shall 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 light of the circumstances under which they
were made, not misleading, and, since the Effective Date, there shall not
have occurred any event required to be set forth in an amended or supplemented
Prospectus that has not been so set forth (except any such statement or
omission based upon information furnished in writing by or on behalf of any
Underwriter through the Representative for inclusion in the Registration
Statement).
(d) NO MATERIAL CHANGE. Subsequent to the respective dates as of
which information is given in the Registration Statement and Prospectus, as
they have been amended or supplemented, and except as set forth or contemplated
in the Prospectus, (i) there has not been any adverse change or any development
involving the likelihood of a future material adverse change in or affecting
the condition, financial or otherwise, of the Company or the earnings, business
affairs, management, or business prospects of the Company, whether or not
occurring in the ordinary course of business, (ii) there has not been any
transaction entered into by the Company, other than the transactions in the
ordinary course of business or transactions specifically described in the
Registration Statement and Prospectus as it may be amended or supplemented,
(iii) the Company has not sustained any material loss or interference with
its business or properties from strike, fire, flood, windstorm, accident or
other calamity, (iv) the Company has not paid or declared any dividends or
other distribution with respect to its capital stock and the Company is not in
default in the payment of principal of or interest in any outstanding debt
obligations, (v) there has not been any change in the capital stock (other
than the sale of the Securities or the exercise of outstanding stock options
or warrants as described in the Registration Statement) or material increase
in indebtedness of the Company, and (vi) except as set forth in the Prospectus,
there have been no actions, suits, proceedings or investigations pending
before any arbitrator, court or regulatory, governmental or administrative
agency, authority or body or, to the knowledge of the Company, threatened,
to which the Company is a party or of which the business or property of the
Company is the subject and which, if adversely decided, could have a material
adverse affect on the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company, and there shall have
been no material adverse development in any such suits, actions, proceedings
or investigations. The Company does not have any material contingent obligation
that is not disclosed in the Registration Statement and Prospectus (or
contained or incorporated by reference in the financial statements or related
notes thereto), as such may be amended or supplemented.
(e) NASD. The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of the Securities by the
Underwriters. No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
or the Option Closing Date, as the case may be,
17
for any member firm of the NASD to execute transactions (as principal or as
agent) in the Securities and no proceedings for the purpose of taking such
action shall have been instituted or shall be pending, or, to the best of the
Underwriters' or the Company's knowledge, shall be contemplated by the
Commission or the NASD. The Company represents at the date of this Agreement,
and shall represent as of the Closing Date or Option Closing Date, as the case
may be, that it has no knowledge that any such action is in fact contemplated by
the Commission or the NASD.
(f) OPINION OF COMPANY COUNSEL. The Representative shall have
received on the Closing Date or the Option Closing Date, as the case may be, the
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Company, dated the Closing Date
or the Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(i) The Company (A) has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with full corporate
power and corporate authority to own or lease its properties
and conduct its business as described in the Registration
Statement and Prospectus, and (B) is duly qualified as a
foreign corporation to transact business in all jurisdictions
in which the conduct of its business requires such
qualification, except where the failure to qualify would not
have a material adverse affect upon the business or financial
condition of the Company.
(ii) The Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the
Prospectus; all of the outstanding shares of Common Stock of
the Company (A) have been duly authorized and validly issued
and are fully paid and nonassessable, (B) conform to the
description set forth in the Prospectus, (C) do not have any,
and were not issued in violation of any, preemptive rights
under the Company's Certificate of Incorporation or Bylaws or
any other agreement known to such counsel, and (D) have been
issued in compliance with all federal and state securities
laws.
(iii) The Company has authorized and reserved for issuance
the shares of Common Stock issuable (A) upon exercise of all
outstanding options or warrants (other than the Warrants) in
accordance with the terms of the applicable options or
warrants, (B) upon exercise of the Warrants, pursuant to the
terms of the Warrants and the Warrant Agreement, and (C) upon
exercise of the Representative's Purchase Option. All of the
Securities to be issued and sold by the Company pursuant to
this Agreement, the Warrant Agreement, and the
Representative's Purchase Option have been duly authorized
and, when issued and paid for as contemplated herein or upon
exercise of the Warrants or the Representative's Purchase
Option, will be validly issued, fully paid and nonassessable.
Further, (X) no preemptive rights of stockholders exist with
respect to any of the Securities or the issue and sale or
exercise thereof; (Y) no stockholder of the Company has any
right pursuant to any agreement which has not been waived or
honored to require the Company to register the sale of any
shares owned by such stockholder under the Act in the public
offering
18
contemplated herein; and (Z) no further approval or authority
of the stockholders or the Board of Directors of the Company
is required for the issuance and sale of the Securities to be
sold by the Company as contemplated herein.
(iv) The certificates evidencing the Securities to be
delivered hereunder are in due and proper form under New York
law and the Securities conform in all material respects to the
description thereof contained in the Prospectus.
(v) Except as specifically disclosed in the Registration
Statement and the financial statements of the Company and the
related notes thereto, to the best of such counsel's
knowledge, after due inquiry, the Company does not have
outstanding any options or warrants to purchase, or any
preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or
any contracts or commitments, to issue or sell shares of its
capital stock or any such options, or warrants, rights,
convertible securities or obligations. The descriptions of the
Company's stock option and other stock-based plans, and any
other options or warrants heretofore granted by the Company,
set forth in the Prospectus are accurate summaries and fairly
present the information required to be shown with respect to
such plans and rights in all material respects.
(vi) The Registration Statement has become effective under
the Act and no stop order proceedings with respect thereto
have been instituted or are pending or threatened under the
Act and nothing has come to such counsel's attention to lead
them to believe that such proceedings are contemplated; any
required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) of the Rules and Regulations has been
made in the manner and within the time period required by such
Rule 424(b).
(vii) The Registration Statement, all Preliminary
Prospectuses, the Prospectus and each amendment or supplement
thereto comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except
that such counsel need express no opinion as the financial
statements, schedules, and other financial and statistical
information included or incorporated by reference therein).
(viii) Such counsel does not know of any Contracts or
other documents required to be filed as exhibits to the
Registration Statement or described in the Registration
Statement or the Prospectus which are required to be filed or
described, which are not so filed or described as required,
and such Contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized
in all material respects.
(ix) To the best of such counsel's knowledge, there is no
action or suit pending before any court of the United States
or any foreign jurisdiction of a character required to be
disclosed in the Prospectus pursuant to the Act and the Rules
and Regulations; there is no action, suit or proceeding
threatened against the Company before any U.S. or foreign
court or regulatory, governmental or
19
administrative agency or body or arbitral forum of a character
required to be disclosed in the Prospectus pursuant to the Act
and the Rules and Regulations; to the best of such counsel's
knowledge, the Company is not a party or subject to the
provisions of any injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other
governmental body or agency or arbitral forum. During the
course of its ordinary due diligence, which does not include
knowledge of the Company's day-to-day operations, nothing has
come to the attention of such counsel that would suggest that
the Company is not conducting business in compliance with all
applicable laws, statutes, rules, and regulations of the State
of New York of the United States of America, or any other
jurisdiction in which the Company conducts its business,
except where the failure to so comply would not have a
material adverse effect on the business or financial condition
of the Company.
(x) The execution and performance of this Agreement, the
Warrant Agreement, and the Representative's Purchase Option
and the consummation of the transactions herein and therein
contemplated do not and will not conflict with or result in
the breach of, or violation of, any of the terms or provisions
of, or constitute, either by itself or upon notice or the
passage of time or both, a default under, any Contract to
which the Company is a party or by which the Company or any of
its property may be bound or affected, except where such
breach, violation or default would not have a material adverse
effect on the business or financial condition of the Company,
or violate any of the provisions of the Certificate of
Incorporation or Bylaws of the Company or, to the best of such
counsel's knowledge, violate any statute, judgment, decree,
order, rule or regulation known to such counsel or any court
or of any governmental, regulatory or administrative body or
agency or arbitral forum having jurisdiction over the Company
or any its property.
(xi) The Company is not in violation or default under any
provision of any of its Certificate of Incorporation or
Bylaws, and, to the best of such counsel's knowledge, the
Company is not in violation or of default under any Contracts
to which the Company is a party or by which it or any of its
properties is bound or may be affected, except where such
violation or default would not have a material adverse effect
on the business or financial condition of the Company.
(xii) The Company has the legal right, power, and authority
to enter into this Agreement, the Warrant Agreement, and the
Representative's Purchase Option on behalf of itself and to
perform the transactions contemplated hereby and thereby. Each
of this Agreement, the Warrant Agreement, and the
Representative's Purchase Option has been duly authorized,
executed, and delivered by the Company. Each of this
Agreement, the Warrant Agreement, and the Representative's
Purchase Option is the legal, valid, and binding obligation of
the Company, enforceable in accordance with its terms, subject
to customary exceptions for bankruptcy, insolvency, and
equitable principles, except to the
20
extent that the enforceability of the indemnification
provisions of this Agreement and the Representative's Purchase
Option may be limited by consideration of public policy under
federal and state securities laws.
(xiii) To the best of such counsel's knowledge, all
approvals, consents, orders, authorizations, designations,
registrations, permits, qualifications, licenses, declarations
or filings by or with any regulatory, administrative or
governmental body necessary in connection with the execution
and delivery by the Company of this Agreement, the Warrant
Agreement, and the Representative's Purchase Option and the
consummation of the transactions herein and therein
contemplated (other than as may be required by the NASD, as to
which such counsel need express no opinion) have been obtained
or made and are in full force and effect.
(xiv) To the extent described in the Prospectus, the
Company owns or possesses adequate and sufficient rights by
license agreements or otherwise to use and enjoy the full
rights in and to all patents, patent rights, trade secrets,
licenses or royalty arrangements, trademarks and trademark
rights, service marks, trade names, copyrights, know how or
proprietary techniques, or rights thereto of others, including
without limitation for each of the technologies described in
the Prospectus, and governmental, regulatory or administrative
authorizations, orders, permits, certificates, and consents
necessary for the conduct of the business of the Company,
except where the failure to possess the same would not have a
material adverse effect on the business or financial condition
of the Company; to the best of such counsel's knowledge, the
Company possesses all governmental, regulatory or
administrative authorizations, orders, permits, certificates
and consents necessary for the conduct of the business of the
Company, except where the failure to possess the same would
not have a material adverse effect on the business or
financial condition of the Company; such counsel is not aware
of any pending or threatened action, suit, proceeding or claim
by others, either domestically or internationally, that the
Company is violating any patents, patent rights, copyrights,
trademarks or trademark rights, service marks, trade names,
licenses or royalty arrangements, trade secrets, know how or
proprietary techniques, or rights thereto of others, such
counsel is not aware of any rights of third parties to, or any
infringement of, any of the Company's patents, patent rights,
trademarks or trademark rights, copyrights, licenses or
royalty arrangements, trade secrets, know how or proprietary
techniques (including, without limitation, each of the
technologies described in the Prospectus), the existence of
which would have a material adverse affect on the business or
financial condition of the Company; and such counsel is not
aware of any pending or threatened action, suit, proceeding or
claim by others challenging the validity or scope of any of
such patents, patent rights, trademarks or trademark rights,
copyrights, license or royalty arrangements, trade secrets,
know how, or proprietary techniques or rights thereto of
others, the existence of which would have a material adverse
effect on the business or financial condition of the Company.
The Company has the patents disclosed to the Representative,
and such patents remain in full force and effect.
21
(xv) No transfer taxes are required to be paid under any
applicable state law in connection with the sale and delivery
of the Securities to the Underwriters hereunder.
(xvi) Upon the Closing, the Company will be classified as a
"C" corporation with the Internal Revenue Service.
In rendering such opinion such counsel may rely as to matters governed
by the laws of states other than New York and federal laws of the United States
of America on local counsel in such jurisdictions, provided that such counsel
shall state that they believe that they and the Underwriters are justified in
relying on such other counsel. As to factual matters, such counsel may rely on
certificates obtained from directors and officers of the Company, its
stockholders, and from public officials. Matters stated to counsel's knowledge
shall be made after due and diligent inquiry, and the opinion shall so note that
requirement. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that they have participated in the preparation
of the Registration Statement and the Prospectus and nothing has come to the
attention of such counsel which leads them to believe that the Registration
Statement, or any amendment thereto, at the time the Registration Statement or
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or the Prospectus or any amendment or
supplement thereto, at the time it was filed pursuant to Rule 424(b) or at the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial information and statistical data and information included or
incorporated by reference therein). Such counsel shall permit ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
to rely upon such opinion in rendering its opinion under Section 6(g).
(g) OPINION OF REPRESENTATIVE'S COUNSEL. The Representative shall
have received from ▇▇▇▇▇▇▇▇▇ Traurig, counsel for the Representative, an opinion
dated the Closing Date or the Option Closing Date, as the case may be,
substantially to the effect that: (i) the Company is a validly organized and
existing corporation under the laws of the State of New York; (ii) to the best
of such counsel's knowledge, the Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus; to the
best of such counsel's knowledge, the outstanding shares of the Company's Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable; all of the Securities conform to the description thereof
contained in the Prospectus; the Securities to be sold by the Company pursuant
to this Agreement have been duly authorized and will be validly issued, fully
paid and nonassessable when issued and paid for as contemplated by this
Agreement; and to the best of such counsel's knowledge, no preemptive rights of
stockholders exist with respect to any of the Securities or the issue and sale
thereof; (iii) the Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act; (iv) the Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act
22
and the applicable Rules and Regulations thereunder (except that such counsel
need express no opinion as to the financial statements, schedules, and other
financial or statistical information included or incorporated by reference
therein); and (v) this Agreement has been duly authorized, executed and
delivered by the Company. In rendering such opinion, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ may rely
as to all matters governed other than by federal laws on the opinion of counsel
referred to in Section 6(f). In addition to the matters set forth above, such
opinion shall also include a statement to the effect that they have participated
in the preparation of the Registration Statement and the Prospectus and nothing
has come to the attention of such counsel which leads them to believe that the
Registration Statement, the Prospectus or any amendment thereto contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or the Prospectus or any amendment or supplement thereto, at the time it was
filed pursuant to Rule 424(b) or at the Closing Date or the Option Closing Date,
as the case may be, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (except that such counsel need express no view as to financial
statements, schedules, and other financial information included or incorporated
by reference therein). With respect to such statement, ▇▇▇▇▇▇▇▇▇ Traurig may
state that their belief is based upon the procedures set forth therein, but is
without independent check and verification.
(h) BLUE SKY MEMORANDUM. The Representative and the Company shall
have received from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, at or prior to the Closing Date, a
memorandum or summary, in form and substance satisfactory to the Representative,
with respect to the qualification for offering and sale by the Underwriters of
the Securities under the state securities or Blue Sky laws of such jurisdictions
as the Representative may have designated to the Company.
(i) ACCOUNTANTS' LETTER. The Representative shall have received on
the date hereof and on the Closing Date and the Option Closing Date, as the case
may be, a signed letter from each of KPMG Peat Marwick, LLP, Deloitte & Touche
LLP, and Ernst & Young, LLP, auditors for the Company, dated the date hereof,
the Closing Date, and the Option Closing Date, as the case may be, which shall
confirm, on the basis of a review in accordance with the procedures set forth in
the letter signed by such firm and dated and delivered to the Representative on
the date noted above the following matters:
(i) They are independent public accountants with respect
to the Company within the meaning of the Act and the
applicable Rules and Regulations.
(ii) The financial statements and schedules included in
the Registration Statement and Prospectus or incorporated by
reference therein and covered by their reports therein set
forth comply as to form in all material respects with the
applicable accounting requirements of the Act and the
applicable Rules and Regulations.
(iii) On the basis of procedures (but not an examination
in accordance with generally accepted auditing standards)
consisting of a reading of the minutes
23
of meetings and consents of the stockholders and Board of
Directors of the Company and the committees of such board
subsequent to __________, as set forth in the minute books of
the Company, inquiries of officers and other employees of the
Company who have responsibilities for financial and accounting
matters with respect to transactions and events subsequent to
__________, and such other specified procedures and inquires
to a date not more than five days prior to the date of such
letter, nothing has come to their attention which in their
judgment would indicate that (A) with respect to the period
subsequent to ___________________, there were, as of the date
of the most recent available monthly consolidated financial
statements of the Company and, as of a specified date not more
than five days prior to the date of such letter, any changes
in the capital stock or long-term indebtedness of the Company
or payment or declaration of any dividend or other
distribution, or decrease in net current assets, total assets
or net stockholder's equity, in each case as compared with the
amounts shown in the most recent audited consolidated
financial statements included in or incorporated by reference
into 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 (B) during the period from
__________, to the date of the most recent available monthly
unaudited consolidated financial statements of the Company and
to a specified date not more than five days prior to the date
of such letter, there was any decrease, as compared with the
corresponding period in the prior fiscal year, in total
revenues or total or per share net income, except for
decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in
such letter.
(iv) Stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings and other financial information pertaining to the
Company set forth in or incorporated by reference into the
Registration Statement and the Prospectus, which have been
specified by the Representative, to the extent that such
amounts, numbers, and 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 reasonings, inquiries, and
other appropriate procedures specified by the Representative
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set
forth in such letter heretofore delivered, and found them to
be in agreement.
(v) Such other matters as may be reasonably requested by
the Underwriters. All such letters shall be in form and
substance satisfactory to the Representative and its counsel.
24
(j) OFFICERS' CERTIFICATES. The Representative shall have received
on the Closing Date or the Option Closing Date, as the case may be, a
certificate or certificates of the Chief Executive Officer and the Chief
Financial Officer of the Company to the effect that, as of the Closing Date or
the Option Closing Date, as the case may be, each of them jointly and severally
represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for
such purpose have been taken or are, to the best of their
knowledge, after due inquiry, contemplated or threatened by
the Commission or any state securities commissions.
(ii) They do not know of any investigation, litigation, or
proceeding instituted or threatened against the Company of a
character required to be disclosed in the Registration
Statement which is not so disclosed; they do not know of any
Contract or other document required to be filed as an exhibit
to the Registration Statement which is not so filed; and the
representations and warranties of the Company contained in
Section 1 hereof are true and correct in all material respects
as of the Closing Date or the Option Closing Date, as the case
may be, as if such representations and warranties were made as
of such date.
(iii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion, as of the
effective date of the Registration Statement, the statements
contained in the Registration Statement were and are correct,
in all material respects, and such Registration Statement and
Prospectus do not omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading and, in their opinion, since the
effective date of the Registration Statement, no event has
occurred which should be set forth in a supplement to or an
amendment of the Prospectus which has not been so set forth in
such supplement or amendment.
(k) EXCHANGE ACT REGISTRATION AND NASDAQ LISTING. On each of the
Effective Date, the Closing Date, and the Option Closing Date, each of the
Units, the Common Stock, and the Warrants shall be (i) registered under Section
12(g) of the Exchange Act, and (ii) listed for trading on the Nasdaq SmallCap
Market.
(l) LOCK-UP AGREEMENTS. The Representative shall have received the
Lock-up Agreements, in form and substance satisfactory to the Representative, as
required by Section 4(l) of this Agreement.
(m) OTHER AGREEMENTS. The Company shall have executed and delivered
to the Representative the Warrant Agreement and the Representative's Purchase
Option.
(n) FURTHER ASSURANCES. The Company shall have furnished to the
Representative such further certificates and documents confirming the
representations, warranties and covenants contained herein and related matters
as the Representative may reasonably have requested.
25
The opinions, certificates, and other documents described in this
Agreement shall be deemed to be in compliance with the provisions hereof only if
they are in all respects satisfactory to the Representative and to ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, counsel for the Representative.
If any of the conditions herein provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be. In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to sell and deliver the Securities required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and in
effect or proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Underwriter and its respective affiliates, directors,
officers, partners, employees, agents, counsel, and representatives,
(collectively, "Underwriter Parties") against any losses, claims, damages or
liabilities to which such Underwriter Parties or any one or more of them may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any failure by the Company or any of its affiliates,
directors, officers, employees, agents, counsel, and representatives
(collectively, the "Company Parties") to perform any obligation hereunder or any
other agreement among any of the Company Parties and any of the Underwriter
Parties, (ii) any untrue statement or alleged untrue statement of any material
fact contained in or incorporated by reference in the Registration Statement,
any Preliminary Prospectus, the Prospectus, any Rule 462(b) Registration
Statement, or any amendment or supplement thereto, or (iii) 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 light of the
circumstances under which they were made, and will reimburse each Underwriter
Party for any legal or other expenses incurred by such Underwriter Party in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that (X) the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement, or alleged
untrue statement, or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, any Rule 462(b)
Registration Statement, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through the
Underwriters specifically for use in the preparation thereof (which the parties
hereto agree is limited solely to that information contained on the cover page
of the Prospectus or Preliminary Prospectus and in the section thereof entitled
"Underwriting"), and (Y) such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter Party from whom the
person asserting any such loss, claim, damage or liability
26
purchased the Securities which are the subject thereof if such person did not
receive a copy of the Prospectus (or the Prospectus as amended or supplemented)
at or prior to the confirmation of the sale or such Securities to such person in
any case where such delivery is required by the Act 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). This
indemnity agreement will be in addition to any liability that the Company may
otherwise have.
(b) INDEMNIFICATION BY THE UNDERWRITERS. Each Underwriter will
severally indemnify and hold harmless the Company Parties against any losses,
claims, damages or liabilities to which the Company Parties or any one or more
of them may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any failure by the Underwriter Parties to
perform any obligations hereunder or any other agreement among any of the
Underwriter Parties and any of the Company Parties, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, any Rule 462(b)
Registration Statement, or any amendment or supplement thereto, or (iii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and will reimburse any
legal or other expense reasonably incurred by the Company Parties in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, any Rule
462(b) Registration Statement, or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by or
through such Underwriter specifically for use in the preparation thereof (which
the parties hereto agree is limited solely to that information contained on the
cover page of the Prospectus or Preliminary Prospectus and in the section
thereof entitled "Underwriting"). This indemnity agreement will be in addition
to any liability that such Underwriter may otherwise have.
(c) CLAIMS. In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or 8(b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to give such notice,
but the failure to give such notice shall not relieve the indemnifying party or
parties from any liability that it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section 8(a) or
8(b). In case any such proceeding shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such
27
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred the fees and expenses of the counsel
retained by the indemnified party in the event (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by the Representative in the case of
parties indemnified pursuant to Sections 8(a) and by the Company in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party 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, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 is unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting fees and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to above in this Section 8(d).
28
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 8(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Subsection 8(d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Securities purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) CONSENT TO VENUE AND SERVICE OF PROCESS. In any proceeding
relating to the Registration Statement, any Preliminary Prospectus, the
Prospectus or any supplement or amendment thereto, each party against whom
contribution may be sought under this Section 8 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing party,
agrees that process issuing from such court may be served upon him, her, or it
by any other contributing party, and consents to the service of such process and
agrees that any other contributing party may join him, her, or it as an
additional defendant in any such proceeding in which such other contributing
party is a party.
9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and pay
for the portion of the Securities that such Underwriter has agreed to purchase
and pay for on such date (otherwise than by reason of any default on the part of
the Company or the failure to occur of a condition precedent to the closing),
the Representative on behalf of the Underwriters, shall use its best efforts to
procure as soon as possible but not later than five business days thereafter one
or more of the other Underwriters, or any others, to purchase from the Company
such amounts as may be agreed upon and upon the terms set forth herein, the Firm
Securities or Option Securities, as the case may be, that the defaulting
Underwriter or Underwriters failed to purchase. If during such period the
Representative shall not have procured such other Underwriters, or any others,
to purchase the Firm Securities or Option Securities, as the case may be, agreed
to be purchased by the defaulting Underwriter or Underwriters then (a) if the
aggregate number of Securities with respect to which such default shall occur
does not exceed 10% of the Firm Securities or Option Securities, as the case may
be, covered hereby, the other Underwriters shall be obligated, severally, to
take up and pay for (in the respective proportions that the aggregate amount of
Securities set forth opposite their respective names in Schedule I hereto bears
to the aggregate amount of Securities set forth opposite the names of all the
remaining Underwriters) the Firm Securities or Option Securities, as the case
may be, that such defaulting Underwriter or Underwriters failed to purchase, or
(b) if the aggregate number of Securities with respect to which such default
shall occur exceeds 10% of the Firm Securities or Option Securities, as the case
may be, covered hereby, the Company or the Representative on behalf of the
Underwriters will have the right, by written notice given within the next
24-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the nondefaulting Underwriters of the Company,
except to the extent provided in Section 8 and Section 5 hereof. In the event of
a default by any Underwriter or Underwriters, as set forth in this Section 9,
the
29
Closing Date or Option Closing Date, as the case may be, may be postponed for
such period, not exceeding seven days, as the Representative may determine in
order that the required changes in the Registration Statement or in the
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered, telecopied, or
telegraphed and confirmed as follows: if to the Underwriters, to HD ▇▇▇▇▇ & Co.,
Inc., ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇;
Fax: (▇▇▇) ▇▇▇-▇▇▇▇; Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇;
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇; Fax: (▇▇▇) ▇▇▇-▇▇▇▇; Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.;
if to the Company, to Radyne ComStream, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇; Fax: (▇▇▇) ▇▇▇-▇▇▇▇; Attention: ▇▇▇▇▇▇
▇. Fitting, Chief Executive Officer, with a copy to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇; Fax: (212)
▇▇▇-▇▇▇▇; Attention: ▇▇▇▇ ▇. ▇▇▇▇, III, Esq.
11. TERMINATION. This Agreement may be terminated by the Representative
by notice to the Company as follows:
(a) at any time prior to the earlier of (i) the time the Securities
are released by the Representative for sale by notice to the Underwriters, or
(ii) 11:30 a.m., New York time, on the first business day following the date of
this Agreement; or
(b) at any time prior to the Closing itself if any of the following
has occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company, or the earnings, business
affairs, management or business prospects of the Company, whether or not arising
in the ordinary course of business, including a material decline in the price of
Company's Common Stock on or prior to the Closing Date; (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change on the financial markets or economic conditions would, in
reasonable judgment of the Representative, make the offering or delivery of the
Securities impracticable; (iii) suspension of trading in securities on the New
York Stock Exchange, Inc. or the Nasdaq Stock Market, Inc. or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on such exchange or trading market; (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority that in the reasonable
opinion of the Representative materially and adversely affects or will
materially or adversely affect the business or operations of the Company; (v)
declaration of a banking moratorium by either federal or New York authorities;
or (vi) the taking of any action by any federal, state, local, or foreign
government or agency in respect of its monetary or fiscal affairs that in the
reasonable opinion of the
30
Representative has a material adverse effect on the securities markets in the
United States or the prospects of the Company; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by the Representative, by notice
to the Company, as to any obligation of the Underwriters to purchase the Option
Securities, upon the occurrence at any time at or prior to the Option Closing
Date of any of the events described in Section 11(b) above or as provided in
Sections 6 and 9 of this Agreement.
12. SUCCESSORS. This Agreement has been and is made solely for the
benefit of the Underwriters and the Company and their respective successors,
executors, administrators, heirs and assigns, and the Underwriter Parties and
Company Parties referred to herein, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Securities merely because of such purchase.
13. MISCELLANEOUS. The reimbursement, indemnification, and contribution
agreements contained in Sections 5 and 8 of this Agreement and the
representations and warranties contained in Section 1 of this Agreement shall
remain in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigation made by or on behalf of any Underwriter Party,
or by or on behalf of any Company Party, and (c) delivery of and payment for the
Securities under this Agreement.
This Agreement and any notices delivered hereunder may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement and
any and all notices may be delivered by telecopy and shall be effective upon
receipt, with the original of such document to be deposited promptly in the U.S.
Mail.
This Agreement and all disputes and controversies relating hereto or in
connection with the transactions contemplated hereby shall be governed by, and
construed in accordance with, the laws of the State of Arizona.
If the foregoing agreement is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
RADYNE COMSTREAM, INC.
By:_________________________________
▇▇▇▇▇▇ ▇. Fitting,
Chief Executive Officer
31
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
____________, ____.
HD ▇▇▇▇▇ & Co., Inc.
As Representative of the
several Underwriters listed
on Schedule I
HD ▇▇▇▇▇ & Co., Inc.
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chairman
32
SCHEDULE I
SCHEDULE OF UNDERWRITERS
UNDERWRITER NUMBER OF FIRM SECURITIES TO BE PURCHASED
----------- -----------------------------------------
HD ▇▇▇▇▇ & Co., Inc.
---------
Total 1,500,000
SCHEDULE II
OFFICERS, DIRECTORS, AND STOCKHOLDERS WHO
SHALL SIGN LOCK-UP AGREEMENTS
▇▇▇▇▇▇ ▇. Fitting
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
Ming ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[▇▇▇▇ ▇▇▇▇▇▇]
[▇▇▇▇ ▇▇▇▇▇▇▇▇▇]
[▇▇▇▇ Restiuo]
[▇▇▇▇▇ ▇▇▇▇▇▇]
Singapore Technologies Pte Ltd
Stetsys Pte Ltd
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
_______________, 1999
HD ▇▇▇▇▇ & Co., Inc.
As Representative of the Several Underwriters
c/o HD ▇▇▇▇▇ & Co., Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
RE: RADYNE COMSTREAM, INC. (THE "COMPANY")
Ladies & Gentlemen:
The undersigned is or may become an owner of record or beneficially of
certain shares of Common Stock of the Company ("Common Stock") or securities
convertible into or exchangeable or exercisable for Common Stock. The Company
proposes to carry out a public offering of Units consisting of Common Stock and
Warrants (the "Offering") for which you will act as the representative of the
underwriters. The undersigned recognizes that the Offering will be of benefit to
the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you and
the other underwriters are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not, without the prior written consent of HD ▇▇▇▇▇ & Co.,
Inc. (which consent may be withheld in its sole discretion), directly or
indirectly, sell, offer, contract, or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for, or convertible into, shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date after the date of the Prospectus. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock,
or securities convertible into, or exchangeable or exercisable for Common Stock
held by the undersigned except in compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any
Common Stock owned either of record or beneficially by the undersigned,
including any rights to receive notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned.
By:______________________________________________
(Print name of stockholder)
Signature:_______________________________________
Indicate how shares held:________________________
_________________________________________________
_________________________________________________
_________________________________________________
(indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
EXHIBIT B
FORM OF
REPRESENTATIVE'S PURCHASE OPTION
Void after 5:00 p.m. New York Time, on ______________, 2005.
Option to Purchase 150,000 Shares of Common Stock.
REPRESENTATIVE'S PURCHASE OPTION
OF
RADYNE COMSTREAM, INC.
This is to certify that, FOR VALUE RECEIVED, HD ▇▇▇▇▇ & CO.,
INC., or assigns (the "Holder"), is entitled to purchase, subject to the
provisions of this Option, from RADYNE COMSTREAM, INC., a New York corporation
(the "Company"), 150,000 fully paid, validly issued, and nonassessable shares of
the Company's Common Stock, par value $.002 per share ("Common Stock") at a
price of $__________ per share at any time or from time to time during the
period from ____________, 2001 to ____________, 2005, but not later than 5:00
p.m. New York City Time, on ____________, 2005. The number of shares of Common
Stock to be received upon the exercise of this Option and the price to be paid
for each share of Common Stock may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Option
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price." This Option, together with options of like tenor, constituting
in the aggregate options (the "Options") to purchase 150,000 shares of Common
Stock, was originally issued pursuant to an underwriting agreement between the
Company and HD ▇▇▇▇▇ & Co., Inc. ("▇▇▇▇▇"), in connection with a public offering
through ▇▇▇▇▇ of 1,500,000 shares of Common Stock and warrants to purchase
1,500,000 shares of Common Stock, in consideration of $100 for the Options.
1. EXERCISE OF OPTION.
(a) This Option may be exercised in whole or in part at any time or
from time to time on or after ____________, 2001 and until ____________, 2005
(the "Exercise Period"), subject to the provisions of Section 10(b) hereof;
provided, however, that (i) if either such day is a day on which banking
institutions in the State of New York are authorized by law to close, then
on the next succeeding day which shall not be such a day, and (ii) in the
event of any merger, consolidation or sale of substantially all the assets
of the Company as an entirety, resulting in any distribution to the Company's
stockholders, prior to ____________, 2005, the Holder shall have the right
to exercise this Option commencing at such time through ____________, 2005
into the kind and amount of shares of stock and other securities and property
(including cash) receivable by a holder of the number of shares of Common Stock
into which this Option might have been exercisable immediately prior thereto.
This Option may be exercised by presentation and surrender hereof to the Company
at its principal office, or at the
office of its stock transfer agent, if any, with the Purchase Form attached as
Exhibit A hereto duly executed and accompanied by payment of the Exercise Price
for the number of Option Shares specified in such form. As soon as practicable
after each such exercise, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a certificate
or certificate for the Option Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Option should be exercised in
part only, the Company shall, upon surrender of this Option for cancellation,
execute and deliver a new Option evidencing the rights of the Holder thereof to
purchase the balance of the Option Shares purchasable thereunder. Upon receipt
by the Company of this Option at its office, or by the stock transfer agent of
the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be physically delivered to the Holder.
(b) At any time during the Exercise Period, the Holder may, at its
option, exchange this Option, in whole or in part (an "Option Exchange"), into
the number of Option Shares determined in accordance with this Section 1(a),
by surrendering this Option at the principal office of the Company or at the
office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Option Shares to be
exchanged, and the date on which the Holder requests that such Option Exchange
occur (the "Notice of Exchange"). The Option Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Option Exchange and, if applicable, a new Option of
like tenor evidencing the balance of the shares remaining subject to this
Option, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any Option
Exchange, this Option shall represent the right to subscribe for and acquire the
number of Option Shares (rounded to the next highest integer) equal to (i) the
number of Option Shares specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Option Shares equal to the quotient
obtained by dividing (A) the product of the Total Number and the existing
Exercise Price by (B) the current market value of a share of Common Stock.
Current market value shall have the meaning set forth Section 3 below, except
that for purposes hereof, the date of exercise, as used in such Section 3,
shall mean the Exchange Date.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Option such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Options.
3. FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Option. With respect
to any fraction of a share called for upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the current market value of a share, determined as follows:
(a) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq
2
National Market, the current market value shall be the last reported sale price
of the Common Stock on such exchange or market on the last business day prior to
the date of exercise of this Option or if no such sale is made on such day, the
average closing bid and asked prices for such day on such exchange or market; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq Small Cap Market, the current
Market Value shall be the average of the closing bid and asked prices for such
day on such market and if the Common Stock is not so traded, the current market
value shall be the mean of the last reported bid and asked prices reported by
the OTC Bulletin Board or the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Option; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Option, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF OPTION. This Option is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Option is not transferable (other than by will or
pursuant to the laws of descent and distribution) and may not be assigned or
hypothecated for a period of one year from ____________, 2000, except to and
among the officers of ▇▇▇▇▇, any member of the selling group, or to and among
the officers or partners of any member of the selling group. Commencing on
____________, 2001, this Option and the securities issuable upon exercise of
this Option may be transferred without restriction as long as such transfer is
in compliance with applicable federal and state securities laws. Upon surrender
of this Option to the Company at its principal office or at the office of its
stock transfer agent, if any, with the Assignment Form attached as Exhibit B
hereto duly executed and funds sufficient to pay any transfer tax, the Company
shall, without charge, execute and deliver a new Option in the name of the
assignee named in such instrument of assignment and this Option shall promptly
be cancelled. This Option may be divided or combined with other Options that
carry the same rights upon presentation hereof at the principal office of
the Company or at the office of its stock transfer agent, if any, together with
a written notice specifying the names and denominations in which new Options are
to be issued and signed by the Holder hereof. The term "Option" as used herein
includes any Options into which this Option may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Option, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Option, if mutilated, the Company will execute and deliver
a new Option of like tenor and date. Any such new Option executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not this Option so lost, stolen, destroyed, or mutilated
shall be at any time enforceable by anyone.
3
5. RIGHTS OF THE HOLDER. Until the Holder exercises this Option
pursuant to Section 1, the Holder shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Option and are not
enforceable against the Company except to the extent set forth herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise of the
Options shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such action, and the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) Whenever the Exercise Price payable upon exercise of each Option
is adjusted pursuant to Section 6(a) above, the number of Option Shares
purchasable upon exercise of this Option shall simultaneously be adjusted by
multiplying the number of Option Shares initially issuable upon exercise of this
Option by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one cent
($0.01) in such price; provided, however, that any adjustments which by reason
of this Section 6(c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section 6 to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section 6, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any federal income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Options).
(d) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Shares issuable upon exercise of each
Option, and, if requested, information describing the transactions giving rise
to such adjustments, to be mailed to the Holders at their last addresses
appearing in the Option Register, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a firm of
independent certified public
4
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 6, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Section 6(a) above, the Holder of this Option thereafter shall
become entitled to receive any shares of capital stock of the Company other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Option shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Sections 6(a) to 6(d), inclusive above.
(f) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Option, Options
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Options initially
issuable pursuant to this Agreement.
7. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted
as required by the provisions of the foregoing Section 6, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the holder or
any holder of a Option executed and delivered pursuant to Section 1 and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
8. NOTICES TO OPTION HOLDERS. So long as this Option shall be
outstanding, (a) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (b) if the Company shall offer to the holders of Common
Stock for subscription or purchase by them any share of any class or any other
rights or (c) if any capital reorganization of the Company, reclassification of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least 15 days prior the date specified in (x)
or (y) below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock
5
of the Company, or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Option) or in case
of any sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Option at any time prior to the
expiration of the Option, to purchase the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been purchased
upon exercise of this Option immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Option. The foregoing
provisions of this Section 9 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Section 6 hereof.
10. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) The Company shall advise the Holder of this Option or of the Option
Shares or any then holder of Options or Option Shares (such persons being
collectively referred to herein as "Holders") by written notice at least thirty
(30) days prior to the filing of any post-effective amendment to the Company's
Registration Statement No. 000-_____ on Form S-2 ("Registration Statement"),
declared effective by the Securities and Exchange Commission on ____________,
2000 or of any new registration statement or post-effective amendment thereto
under the Securities Act of 1933 (the "Act") covering securities of the Company
and will for a period of six years, commencing one year from the effective date
of the Registration Statement, upon the request of any such Holder, include in
any such post-effective amendment or registration statement such information as
may be required to permit a public offering of the this Option and/or the Option
Shares. The Company shall supply prospectuses and other documents as the Holder
may reasonably request in order to facilitate the public sale or other
disposition of this Option and/or the Option Shares, qualify this Option and/or
the Option Shares for sale in such states as any such Holder designates and do
any and all other acts and things which may be necessary or desirable to enable
such Holders to consummate the public sale or other disposition of this Option
and/or the Option Shares, and furnish indemnification in the manner as set forth
Section 10(c)(iii). Such Holders shall furnish information and indemnification
as set forth in Section 10(c)(iv), except that the maximum amount which may be
recovered from the Holder shall be limited to the amount of net proceeds
received by the Holder from the sale of this Option and/or the Option Shares.
6
(b) If any majority holder (as defined in Section 10(d) below) shall
give notice to the Company at any time during the four-year period commencing
one year from the effective date of the Registration Statement to the effect
that such holder contemplates (i) the transfer of this Option and/or all or any
part of his, her, or its Option Shares, or (ii) the exercise and/or conversion
of all or any part of his, her, or its Options and the transfer of this Option
and/or all or any part of the Option Shares under such circumstances that a
public offering (within the meaning of the Act) of this Option and/or Option
Shares will be involved, and desires to register under the Act this Option
and/or the Option Shares, then the Company shall, within thirty (30) days after
receipt of such notice, file a post-effective amendment to the Registration
Statement or a new registration statement on Form ▇-▇, ▇-▇ or such other form as
the holder requests, pursuant to the Act, to the end that this Option and/or the
Option Shares may be sold under the Act as promptly as practicable thereafter
and the Company will use its best efforts to cause such registration to become
effective and continue to be effective (current) (including the taking of such
steps as are necessary to obtain the removal of any stop order) until the holder
has advised the Company that this Option and/or all of the Option Shares have
been sold; provided that such Holders shall furnish the Company with appropriate
information (relating to the intentions of such Holders) in connection therewith
as the Company shall reasonably request in writing. Subject to applicable state
law, in the event the registration statement is not declared effective under the
Act within 150 days after the majority holder first gives notice to the Company
of his, her, or its desire to register this Option and/or Option Shares under
the Act, then at the Holders' request, the Company shall purchase the Options
from the Holders for a per share price equal to the fair market value of the
Common Stock less the per share Exercise Price. The Holder may, at its option,
request the registration of this Option and/or the Option Shares in a
registration statement made by the Company as contemplated by Section 10(a) or
in connection with a request made pursuant to this Section 10(b) prior to the
acquisition of the Option Shares upon exercise of the Options and even though
the Holder has not given notice of exercise of the Options. If the Company
determines to include securities to be sold by it in any registration statement
originally requested pursuant to this Section 10(b), such registration shall
instead be deemed to have been a registration under Section 10(a) and not under
this Section 10(b). The Holder may thereafter at its option, exercise the
Options at any time or from time to time subsequent to the effectiveness under
the Act of the registration statement in which the Option Shares were included.
(c) The following provision of this Section 10 shall also be
applicable:
(i) Within ten days after receiving any such notice pursuant to
Section 10(b), the Company shall give notice to the other Holders of Options and
Option Shares, advising that the Company is proceeding with such post-effective
amendment or registration statement and offering to include therein Option
Shares of such other Holders, provided that they shall furnish the Company with
such appropriate information (relating to the intentions of such Holders) in
connection therewith as the Company shall reasonably request in writing.
Following the effective date of such post-effective amendment or registration,
the Company shall upon the request of any owner of Options and/or Option Shares
forthwith supply such a number of prospectuses meeting the requirements of the
Act, as shall be requested by such owner to permit such Holder to make a public
offering of all Options and/or Option Shares from time to time offered or sold
to such Holder, provided that such Holder shall from time to time furnish the
7
Company with such appropriate information (relating to the intentions of such
Holder) in connection therewith as the Company shall request in writing. The
Company shall also use its best efforts to qualify the Option Shares for sale in
such states as such majority Holder shall designate.
(ii) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Section 10(a) notwithstanding
that Options and/or Option Shares subject to this Option may be included in any
such registration. The Company shall also comply with one request for
registration made by the majority holder pursuant to Section 10(b) at its own
expense and without charge to any Holder of any Options and/or Option Shares;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 10(b) if the
registration request is subsequently withdrawn at the request of the majority
holder, in which case the Holders participating in such offering and favoring
such withdrawal shall bear such expenses; provided further, however, that if
such registration request has been withdrawn by virtue of a material adverse
change in the condition, business, or prospects of the Company from that known
to the majority holder at the time of its request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 10(b). The Company shall comply with one additional request made by the
majority holder pursuant to Section 10(b) (and not deemed to be pursuant to
Section 10(a)) at the sole expense of such majority holder. Any Holder whose
Options and/or Option Shares are included in any such registration statement
pursuant to this Section 10 shall, however, bear the fees of his, her, or its
own counsel and any registration fees, transfer taxes or underwriting discounts
or commissions applicable to the Options and/or Option Shares sold by him, her,
or it pursuant thereto.
(iii) The Company shall indemnify and hold harmless each such
Holder and each underwriter, within the meaning of the Act, who may purchase
from or sell for any such Holder any Options and/or Option Shares from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any post-effective amendment thereto or any
registration statement under the Act or any prospectus included therein required
to be filed or furnished by reason of this Section 10 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 such
untrue statement or alleged untrue statement or omission or alleged omission
based upon information furnished or required to be furnished in writing to the
Company by such Holder or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such Holder
or underwriter within the meaning of such Act provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Holder or any other Holder, specifically for use
in the preparation thereof.
8
(iv) Each Holder severally, but not jointly, shall indemnify and
hold harmless the Company and each person who controls the Company, within the
meaning of the Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereto or any registration statement under the Act or any prospectus
included therein required to be filed or furnished by reason of this Section 10
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, provided, however, that each Holder will be liable in any such case
to the extent, but only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Holder specifically for use in the preparation thereof. In no event,
however, shall the liability of any Holder for indemnification under this
Section 10 exceed the net proceeds received by such holder from the sale of such
Holder's Options and/or Option Shares.
(v) Neither the giving of any notice by any such majority holder
nor the making of any request for prospectuses shall impose upon such majority
holder making such request any obligation to sell any Options and/or Option
Shares, or exercise any Options.
(d) The term "majority holder" as used in this Section 10 shall
include any owner or combination of owners of Options or Option Shares in any
combination if the holdings of the aggregate amount of (i) the Options held by
him, her, or among them, plus (ii) the Options which he, she, or they would be
holding if the Options for the Option Shares owned by him, her, or among them
had not been exercised, would constitute a majority of the Options originally
issued.
The Company's agreements with respect to Options or Option Shares in this
Section 10 shall continue in effect regardless of the exercise and surrender of
this Option.
11. OPTIONS NOT REDEEMABLE. Except as otherwise set forth herein, the
Company shall not have the right to redeem this Option without the consent of
the Holder.
IN WITNESS WHEREOF, the Company has caused this Option to be executed by a
duly authorized officer as of this _____ day of ____________, 2000.
RADYNE COMSTREAM, INC.
By:___________________________
Its:__________________________
9
EXHIBIT A
PURCHASE FORM
Dated ____________, ____
The undersigned hereby irrevocably elects to exercise the
within Option to the extent of purchasing _______ shares of Common Stock and
hereby makes payment of _______ in payment of the actual exercise price thereof.
________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________
(Please typewrite or print in block letters)
Address ______________________________
______________________________
______________________________
Signature _____________________________
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, _____________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________
(Please typewrite or print in block letters)
Address ______________________________
______________________________
______________________________
the right to purchase Common Stock represented by this Option to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _______________________________ as attorney, to transfer
the same on the books of the Company with full power of substitution in the
premises.
Date ____________, ____
Signature _____________________________
Signature(s) guaranteed by:*
----------------------------
*THE SIGNATURE(S) MUST BE GUARANTEED BY A BANK, SAVINGS AND LOAN ASSOCIATION,
STOCKBROKER, OR CREDIT UNION WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY
MEDALLION PROGRAM PURSUANT TO SECURITIES EXCHANGE ACT RULE 17Ad-15. NOTARIZATION
BY A NOTARY PUBLIC IS NOT ACCEPTABLE.
REPRESENTATIVE'S PURCHASE OPTION
TO PURCHASE COMMON STOCK OF
RADYNE COMSTREAM, INC.
