<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
REGISTRATION NO. 333-43151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 6 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CUMETRIX DATA SYSTEMS CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 5045 95-4574138
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>
957 LAWSON STREET, INDUSTRY, CALIFORNIA 91748
(626) 965-6899
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
MAX TOGHRAIE, CHIEF EXECUTIVE OFFICER
957 LAWSON STREET
INDUSTRY, CALIFORNIA 91748
(626) 965-6899
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
------------------------
COPIES TO:
MURRAY MARKILES, ESQ. RUBI FINKELSTEIN, ESQ.
Jessica Cullen Smith, Esq. Orrick, Herrington & Sutcliffe LLP
Troop Meisinger Steuber & Pasich, LLP 666 Fifth Avenue
10940 Wilshire Boulevard New York, New York 10103
Los Angeles, California 90024 (212) 506-5000
(310) 824-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the securities being registered in this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the Securities being
registered, other than underwriting discounts. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee and the
NASD filing fee.
<TABLE>
<CAPTION>
<S> <C>
Registration fee--Securities and Exchange Commission........................... $ 4,300.00
NASD filing fee................................................................ 1,535.00
Nasdaq Listing fee............................................................. 10,000.00
Accounting fees and expenses................................................... 90,000.00
Legal fees and expenses (other than blue sky).................................. 150,000.00
Blue sky fees and expenses, including legal fees............................... 10,000.00
Underwriter's expenses......................................................... 345,000.00
Printing; stock certificates................................................... 100,000.00
Transfer agent and registrar fees.............................................. 2,500.00
Directors and Officers' Insurance.............................................. 50,000.00
Miscellaneous.................................................................. 38,665.00
-------------
Total...................................................................... $ 802,000.00
-------------
-------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation include a provision that
eliminates the personal liability of its directors to the Registrant and its
shareholders for monetary damages for breach of the directors' fiduciary duties
in certain circumstances. This limitation has no effect on a director's
liability (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Registrant or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Registrant or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of a serious injury to the
Registrant or its shareholders, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its shareholders, (vi) under Section 310 of the
California Corporations Code (the "California Code") (concerning contracts or
transactions between the Registrant and a director) or (vii) under Section 316
of the California Code (concerning directors' liability for improper dividends,
loans and guarantees). The provision does not extend to acts or omissions of a
director in his capacity as an officer. Further, the provision will not affect
the availability of injunctions and other equitable remedies available to the
Registrant's shareholders for any violation of a director's fiduciary duty to
the Registrant or its shareholders.
The Registrant's Articles of Incorporation also include an authorization for
the Registrant to indemnify its agents (as defined in Section 317 of the
California Code), through bylaw provisions, by agreement or otherwise, to the
fullest extent permitted by law. Pursuant to this latter provision, the
Registrant's Bylaws provide for indemnification of the Registrant's directors,
officers and employees. In addition, the Registrant, at its discretion, may
provide indemnification to persons whom the Registrant is not obligated to
indemnify. The Bylaws also allow the Registrant to enter into indemnity
agreements with individual directors, officers, employees and other agents.
These indemnity agreements have been entered into with all directors and provide
the maximum indemnification permitted by law. These agreements,
II-1
<PAGE>
together with the Registrant's Bylaws and Articles of Incorporation, may require
the Registrant, among other things, to indemnify such directors against certain
liabilities that may arise by reason of their status or service as directors
(other than liabilities resulting from willful misconduct of a culpable nature),
to advance expenses to them as they are incurred, provided that they undertake
to repay the amount advanced if it is ultimately determined by a court that they
are not entitled to indemnification, and to obtain directors' and officers'
insurance if available on reasonable terms.
Section 317 of the California Code and the Registrant's Bylaws make
provision for the indemnification of officers, directors and other corporate
agents in terms sufficiently broad to indemnify such persons, under certain
circumstances, for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.
Section 10 of the Underwriting Agreement filed as Exhibit 1.1 hereto sets
forth certain provisions with respect to the indemnification of certain
controlling persons, directors and officers against certain losses and
liabilities, including certain liabilities under the Securities Act.
The Registrant maintains director and officer liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
- ----------------------------------------------------------------------------- -----------------
<S> <C>
Proposed form of Underwriting Agreement...................................... 1.1
Registrant's Restated Articles of Incorporation.............................. 3.1
Registrant's Amended and Restated Bylaws..................................... 3.2
Registrant's Form of Indemnification Agreement............................... 10.3
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On November 26, 1997, the Company issued warrants to purchase 35,000 shares
of Common Stock to Joseph Stevens & Company, Inc. (the "Placement Agent
Warrants"). The Placement Agent's Warrants were sold for a nominal purchase
price of $3.50, or $.0001 per warrant, and were exercisable at $3.00 per share
during the period commencing November 26, 1998 and ending November 26, 2001. The
Placement Agent's Warrants were cancelled on March 6, 1998. In December 1997,
the Company issued warrants to purchase 45,000 shares of common stock of the
Company to Troop Meisinger Steuber & Pasich, LLP. The warrants issued to Troop
Meisinger Steuber and Pasich, LLP were issued for nominal consideration of
$45.00 and for legal services. These warrants are exercisable beginning December
23, 1997 and ending December 31, 2002 at an exercise price of $3.00 per share.
Each of Joseph Stevens & Company, Inc. and Troop Meisinger Steuber & Pasich,
LLP, represented that (i) it acquired the warrants for its own account with the
present intention of holding such warrants for investment purposes only and not
with a view to, or for sale in connection with, any distribution of such
warrants (other than a distribution in compliance with all applicable federal
and state securities laws); (ii) it is an experienced and sophisticated investor
and has such knowledge and experience in financial and business matters that it
is capable of evaluating the relative merits and the risks of an investment in
the warrants and of protecting its own interest in connection with the
transaction at issue; (iii) it is willing to bear and is capable of bearing the
economic risk of an investment in the warrants; and (iv) the Company made
available, prior to the date of its warrant agreement, to it the opportunity to
ask questions of the Company and its officers, and to receive from the Company
and its officers information concerning the terms and conditions of the warrant
and the warrant agreement and to obtain any additional information with respect
to the Company, its business, operations
II-2
<PAGE>
and prospects, as reasonably requested by it; and (v) it is an "accredited
investor" as that term is defined under Rule 501(a)(8) of Regulation D
promulgated by the Commission under the Securities Act. The issuance and sale of
these securities was exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act (in accordance with Rule 506 of Regulation D and Rule 152 promulgated by the
Commission under the Securities Act) as a transaction not involving any public
offering.
On December 23, 1997, prior to the filing of the Registration Statement with
respect to the Offering, the Company completed a financing (the "Bridge
Financing") consisting of the sale of 20 units (the "Units"), each unit
comprised of: (i) an unsecured promising note (each a "Bridge Note") of the
Company in the principal amount of $20,000, bearing interest at a rate of 10%
per annum payable upon the earlier of the closing of the Offering or 18 months
from the date of issuance; (ii) 15,000 shares of Common Stock of the Company,
and (iii) 5,000 warrants of the Company, each warrant exercisable to purchase
one share of Common Stock at an initial exercise price of $3.00 per share,
subject to adjustment, during the 36-month period commencing one year from the
date the warrants are issued (the "Bridge Warrants"). Each Unit was sold for
$50,000 generating gross proceeds to the Company of $1,000,000 and net proceeds
of $740,000. 60,000 of the Bridge Warrants are exercisable during the period
beginning November 26, 1998 and ending November 26, 2001. 37,500 of the Bridge
Warrants are exercisable during the period beginning December 16, 1998 and
ending December 16, 2001. 2,500 of the Bridge Warrants are exercisable during
the period beginning December 23, 1998 and ending December 23, 2001. Prior to
filing the Registration Statement with respect to the Offering, the purchasers
in the Bridge Financing had entered into binding agreements for the purchase of
the Units. 12 of the Units we sold on November 26, 1997, 7.5 of the Units were
sold December 16, 1997, and 0.5 of the Units were sold on December 23, 1997. The
obligations of the purchasers were not subject to any conditions within the
control of the purchasers or any right of renegotiation. All purchasers of Units
in the Bridge Financing were brokerage customers of Joseph Stevens & Company,
Inc., the Underwriter, who acted as placement agent for the Bridge Financing,
but were not and are not otherwise related to or affiliated with the Company or
Joseph Stevens & Company, Inc. Joseph Stevens & Company, Inc. acted as placement
agent and there was no public solicitation or advertising in connection with the
offering. The transaction was exempt from the registration requirements of the
Securities Act of 1933 (the "Act") under Section 4(2) of the Act (in accordance
with Rule 506 of Regulation D and Rule 152 promulgated by the Commission under
the Act) as a transaction not involving any public offering. The proceeds were
used by the Company for working capital, to repay indebtedness and to commence
construction of the Company's first ACSA Center.
On April 12, 1996, the Company sold 2,192,118 shares of its Common stock to
Nancy Hundt in consideration of $200,000 cash. On November 12, 1997, Ms. Hundt
signed an investment representation which states that she purchased the shares
for her own account and not with a view to resale or distribution. On April 12,
1996, Ms. Hundt was appointed, and she accepted, director of the Company. There
were no underwriters involved in the sale of these securities and there was no
public solicitation or advertisement by the Company in connection with the sale
of these securities. This transaction was exempt from the registration
requirements of the Act under section 4(2) of the Act and section 25102(f) of
the California Securities Law. The proceeds were used by the Company as working
capital to cover general start-up costs.
On April 12, 1996, the Company sold 1,096,059 shares of its Common Stock
each to James Ung and Mei Yang, who are married, each of whom paid $25,000 in
consideration therefor. On November 12, 1997, each of Mr. Ung and Ms. Yang
signed an investment representation which states that each of Mr. Ung and Ms.
Yang purchased the shares for their own accounts and not with a view to resale
or distribution. On April 12, 1996, Mr. Ung and Ms. Yang were appointed, and
they each accepted, director of the Company. There were no underwriters involved
in the sale of these securities and there was no public solicitation or
advertisement by the Company in connection with the sale of these securities.
This transaction was exempt from the registration requirements of the Act under
Section 4(2) of the Act and section 25102(f) of the
II-3
<PAGE>
California Securities Law. The proceeds were used by the Company as working
capital to cover general start-up costs.
On April 7, 1997, the Company sold 65,764 shares of its Common Stock and an
option to purchase an additional 372,659 shares, which option expired October 7,
1997, to Vince Yiang, the brother of Mei Yang, who paid $300,000 in
consideration therefor. On November 12, 1997, Mr. Yiang signed an investment
representation in which Mr. Yiang represents that he purchased the shares for
his own account and not with a view to resale or distribution, and that he has
an individual net worth greater than $1.0 million. There were no underwriters
involved in the sale of these securities and there was no public solicitation or
advertisement by the Company in connection with the sale of these securities.
The transaction was exempt from the registration requirements of the Act under
Section 4(2) of the Act. The proceeds were used by the Company as general
working capital.
II-4
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Underwriter's Warrant Agreement.
1.3* Form of Financial Advisory and Consulting Agreement.*
3.1 Articles of Incorporation of Registrant.*
3.2 Certificate of Amendment to Articles of Incorporation, as filed on December 22, 1997.*
3.2.1 Certificate of Amendment of the Articles of Incorporation, as filed on January 6, 1998.*
3.3 Amended and Restated Bylaws of Registrant.*
4.1 Specimen Stock Certificate of Common Stock of Registrant.*
5.1 Opinion and Consent of Troop Meisinger Steuber & Pasich, LLP.*
10.1 Standard Sublease Agreement, dated April 9, 1996, between ITT Barton Instruments and the Company.*
10.2 Employment Agreement, dated May 1, 1997, between the Company and James Ung.*
10.3 Employment Agreement, dated July 1, 1997, between the Company and Mei Yoon Yang.*
10.4 Executive Employment Agreement, dated July 1, 1997, between the Company and Max Toghraie.*
10.5 Amended and Restated License Agreement, dated July 1, 1997, between Computer-Aided Software Integration,
Inc. and the Company.*
10.6 Reseller Agreement, made effective as of September 15, 1997, between Computer-Aided Software
Integration, Inc. and the Company.(++)*
10.7 Promissory Note, dated July 1, 1997, executed by the Company in favor of Computer Aided Software
Integration, Inc.*
10.8 Warrant Agreement, dated July 1, 1997, between the Company and Computer-Aided Software Integration,
Inc.*
10.9 Promissory Note, dated July 1, 1997, executed by the Company in favor of Ralph Glasgal.*
10.10 Lease Agreement, dated for reference purposes October 28, 1997, between the Company and Fortune Dynamic,
Inc.*
10.11 Guaranty, dated December 3, 1997, given by James Ung to Fortune Dynamic, Inc.*
10.12 Dealer Loan and Security Agreement, dated June 3, 1997, between the Company and FINOVA Capital
Corporation.*
10.13 Individual Guaranty, dated June 3, 1997, between FINOVA Capital Corporation and James Ung and Mei Yang.*
10.14 Amended and Restated 1997 Stock Plan.*
10.15 Form of Nonstatutory Stock Option Agreement.*
10.16 Warrant Agreement, dated December 23, 1997, between the Company and Troop Meisinger Steuber & Pasich,
LLP.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Troop Meisinger Steuber & Pasich, LLP (included in its Opinion filed as Exhibit 5.1
herewith)*
27 Financial Data Schedule.*
99.1 Consent of Carl L. Wood.*
</TABLE>
- ------------------------
++ Specified portions of this Exhibit have been omitted and filed separately
with the United States Securities and Exchange Commission pursuant to a
request for an order granting confidential treatment pursuant to Rule 406 of
the General Rules and Regulations under the Securities Act of 1933.
* Previously filed.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused Amendment No. 6 to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on April 7,
1998.
<TABLE>
<S> <C> <C>
CUMETRIX DATA SYSTEMS CORP.
By: /s/ MAX TOGHRAIE
-----------------------------------------
Max Toghraie
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 6
to this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ MAX TOGHRAIE
- ------------------------------ Chief Executive Officer April 7, 1998
Max Toghraie and Director
*
- ------------------------------ President and Director April 7, 1998
James Ung
*
- ------------------------------ Secretary, Treasurer April 7, 1998
Mei Yang and Director
Chief Financial Officer
* and
- ------------------------------ Principal Accounting April 7, 1998
Carl Wood Officer
*
- ------------------------------ Director April 7, 1998
Nancy Hundt
*
- ------------------------------ Director April 7, 1998
David Tobey
*
- ------------------------------ Director April 7, 1998
Philip J. Alford
*By: /s/ MAX TOGHRAIE
-------------------------
Max Toghraie April 7, 1998
ATTORNEY-IN-FACT
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Underwriter's Warrant Agreement.
1.3 Form of Financial Advisory and Consulting Agreement.*
3.1 Articles of Incorporation of Registrant.*
3.2 Certificate of Amendment to Articles of Incorporation, as filed on December 22, 1997.*
3.2.1 Certificate of Amendment of the Articles of Incorporation, as filed on January 6, 1998.*
3.3 Amended and Restated Bylaws of Registrant.*
4.1 Specimen Stock Certificate of Common Stock of Registrant.*
5.1 Opinion and Consent of Troop Meisinger Steuber & Pasich, LLP.*
10.1 Standard Sublease Agreement, dated April 9, 1996, between ITT Barton Instruments and the Company.*
10.2 Employment Agreement, dated May 1, 1997, between the Company and James Ung.*
10.3 Employment Agreement, dated July 1, 1997, between the Company and Mei Yoon Yang.*
10.4 Executive Employment Agreement, dated July 1, 1997, between the Company and Max Toghraie.*
10.5 Amended and Restated License Agreement, dated July 1, 1997, between Computer-Aided Software Integration,
Inc. and the Company.*
10.6 Reseller Agreement, made effective as of September 15, 1997, between Computer-Aided Software
Integration, Inc. and the Company.(++)*
10.7 Promissory Note, dated July 1, 1997, executed by the Company in favor of Computer Aided Software
Integration, Inc.*
10.8 Warrant Agreement, dated July 1, 1997, between the Company and Computer-Aided Software Integration,
Inc.*
10.9 Promissory Note, dated July 1, 1997, executed by the Company in favor of Ralph Glasgal.*
10.10 Lease Agreement, dated for reference purposes October 28, 1997, between the Company and Fortune Dynamic,
Inc.*
10.11 Guaranty, dated December 3, 1997, given by James Ung to Fortune Dynamic, Inc.*
10.12 Dealer Loan and Security Agreement, dated June 3, 1997, between the Company and FINOVA Capital
Corporation.*
10.13 Individual Guaranty, dated June 3, 1997, between FINOVA Capital Corporation and James Ung and Mei Yang.*
10.14 Amended and Restated 1997 Stock Plan.*
10.15 Form of Nonstatutory Stock Option Agreement.*
10.16 Warrant Agreement, dated December 23, 1997, between the Company and Troop Meisinger Steuber & Pasich,
LLP.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Troop Meisinger Steuber & Pasich, LLP (included in its Opinion filed as Exhibit 5.1
herewith)*
27 Financial Data Schedule.*
99.1 Consent of Carl L. Wood.*
</TABLE>
- ------------------------
++ Specified portions of this Exhibit have been omitted and filed separately
with the United States Securities and Exchange Commission pursuant to a
request for an order granting confidential treatment pursuant to Rule 406 of
the General Rules and Regulations under the Securities Act of 1933.
* Previously filed.
<PAGE>
EXHIBIT 1.1
2,300,000 SHARES OF
COMMON STOCK
CUMETRIX DATA SYSTEMS CORP.
UNDERWRITING AGREEMENT
New York, New York
April , 1998
JOSEPH STEVENS & COMPANY, INC.
As Representative of the several Underwriters
listed on Schedule A hereto
33 Maiden Lane, 8th Floor
New York, New York 10038
Ladies and Gentlemen:
CUMETRIX DATA SYSTEMS CORP., a California corporation (the
"Company"), confirms its agreement with Joseph Stevens & Company, Inc.
("JSC") and each of the underwriters named on Schedule a (hereto
collectively, the "Underwriters"), for whom JSC is acting as representative
(in such capacity JSC shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase
by the Underwriters, acting severally and not jointly, acting severally and
not jointly, of the respective number of shares of the Company's common
stock, no par value (the "Common Stock") set forth on Schedule A. Such
2,300,000 shares of Common Stock are hereinafter referred to as the "Firm
Shares." Upon the Underwriters' request, as provided in Section 2(b) of this
Agreement, the Company shall also issue and sell to the Underwriters, acting
severally and not jointly, up to an additional 345,000 shares for the purpose
of covering over allotments, if any. Such 345,000 shares are hereinafter
collectively referred to as the "Option Shares." The Company also proposes
to issue and sell to the Representative or its designees warrants (the
"Representative's Warrants"), pursuant to the Representative Warrant
Agreement (the "Representative's Warrant Agreement"), for the purchase of an
additional 230,000 shares of Common Stock (the "Representative's Shares").
The Firm Shares, the Option Shares, the Representative's Warrants and the
Representative's Shares are hereinafter collectively referred to as the
"Securities" and are more fully described in the Registration Statement and
the Prospectus referred to below.
<PAGE>
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants and agrees with, the Underwriters as
of the date hereof, and as of the Closing Date (hereinafter defined) and the
Option Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (Registration No. 333-43151), including any related
preliminary prospectus or prospectuses (each a "Preliminary Prospectus"), for
the registration of the Securities, under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations of the Commission under the Act. The Company will not
file any other amendment to such registration statement which the Underwriters
shall have objected to in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time it becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to, those documents or that information incorporated
by reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430A of the rules and regulations under
the Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the rules and regulations under the Act is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any Preliminary
Prospectus, the Registration Statement or the Prospectus, and no proceedings for
a stop order suspending the effectiveness of the Registration Statement or any
of the Company's securities have been instituted or are pending or threatened.
Each of the Preliminary Prospectus, the Registration Statement and the
Prospectus, at the respective times of filing thereof, conformed with the
requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement nor the Prospectus, at the
respective times of filing thereof, 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 in which
they were made, not misleading; PROVIDED, HOWEVER, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters expressly for
use in such Preliminary Prospectus, the Registration Statement or the
Prospectus. The Company has filed all reports, forms or other documents
required to be filed under the Act and the Exchange Act and the respective Rules
and Regulations thereunder, and all such reports, forms or other documents, when
so filed or as subsequently amended, complied in all material respects with the
Act and the Exchange Act and the respective Rules and Regulations thereunder.
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(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; and, at and through such dates, neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; PROVIDED, HOWEVER,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or the Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations require such qualification
or licensing, except where the failure to be so qualified or be in good standing
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company,
taken as a whole ("Material Adverse Effect"). Except as set forth in the
Prospectus, the Company does not own, directly or indirectly, an interest in any
corporation, partnership, trust, joint venture or other business entity. The
Company has all requisite power and authority (corporate and other), and has
obtained any and all authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), necessary and material to the Company's
owning or leasing its properties and conducting its business as described in the
Prospectus; the Company is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates, franchises and
permits and with all federal, state, local and foreign laws, rules and
regulations to which it is subject; and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The disclosure in
the Registration Statement concerning the effects of federal, state, local and
foreign laws, rules and regulations on the Company's business as currently
conducted and as contemplated is correct in all material respects and does not
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have
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the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein,
and the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and the
Representative's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company on or
prior to the Closing Date and each Option Closing Date, if any, conform or,
when issued and paid for, will conform, in all respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; the holders thereof
have no rights of rescission with respect thereto and are not subject to
personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company or any similar contractual right granted by the
Company. The Securities to be sold by the Company hereunder and pursuant to
the Underwriters' Warrant Agreement are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the descriptions thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities, when delivered by
the Company, will be in due and proper form. Upon the issuance and delivery
pursuant to the terms hereof and the Representative Warrant Agreement of
the Securities to be sold by the Company hereunder and thereunder to the
Representative's or the Underwriters, as the case may be, the Representative
or the Underwriters, as the case may be, will acquire good and marketable
title to such Securities, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever asserted against the Company or any affiliate (within
the meaning of the Rules and Regulations) of the Company.
(f) The financial statements of the Company together with the related
notes thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position, income,
changes in stockholders' equity and the results of operations of the Company at
the respective dates and for the respective periods to which they apply and the
pro forma financial information included in the Registration Statement and
Prospectus presents fairly on a basis consistent with that of the audited
financial statement therein, what the Company's pro forma capitalization and
balance sheet data would have been for the respective periods and as of the
respective dates to which they apply after giving effect to the adjustments
described therein. Such financial statements have been prepared in conformity
with generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no
material adverse change or development involving a prospective change in the
condition, financial or otherwise, or in the earnings, prospects, stockholders'
equity, value, operations, properties, business or results of operations of the
Company, whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus; and the outstanding debt, the property, both tangible and
intangible, and the business of the Company conform in all material respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus. The financial information set forth in the Prospectus under the
headings "Summary
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Financial Data," "Capitalization," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation" fairly
presents, on the basis stated in the Prospectus, the information set forth
therein and such financial information has been derived from or compiled on a
basis consistent with that of the audited financial statements included in the
Prospectus.
(g) The Company (i) has paid all federal, state, local and foreign
taxes for which it is liable and which are required to have been paid,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986, as amended (the
"Code"), and has furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such taxes
which are not due and payable, and (iii) does not have any tax deficiency or
claims outstanding, proposed or assessed against it, except in the cases of each
clauses (i) through (iii) where the failure to do so would not have a Material
Adverse Effect..
(h) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company and the purchase by the Representative of the
Representative's Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement or the
Representative's Warrant Agreement, or (iv) resales of the Firm Shares or the
Option Shares in connection with the distribution contemplated hereby.
(i) The Company maintains insurance policies, including, but not
limited to, general liability, property, personal and product liability
insurance, and surety bonds which insure the Company and its employees against
such losses and risks generally insured against by comparable businesses. The
Company (i) has not failed to give notice or present any insurance claim with
respect to any insurable matter under the appropriate insurance policy or surety
bond in a due and timely manner, (ii) does not have any disputes or claims
against any underwriter of such insurance policies or surety bonds, nor has
failed to pay any premiums due and payable thereunder, or (iii) has not failed
to comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those pertaining to environmental or similar matters), domestic
or foreign, pending or, to the best knowledge of the Company, threatened
against (or circumstances that may give rise to the same), or involving the
properties or business of, the Company which (i) questions the validity of
the capital stock of the Company, this Agreement, the Representative's
Warrant Agreement or the Consulting Agreement (as defined in Section 1(ff)
hereof) or of any action taken or to be taken by the Company pursuant to or
in connection with this Agreement, the Representative's Warrant Agreement or
the Consulting Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or
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<PAGE>
otherwise, or the earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this
Agreement, the Representative's Warrant Agreement and the Consulting
Agreement and to consummate the transactions provided for in such agreements;
each of this Agreement, the Representative's Warrant Agreement and the
Consulting Agreement have been duly and properly authorized, executed and
delivered by the Company. Assuming due authorization, execution and delivery
by the Underwriters or JSC, as the case may be, this Agreement, the
Representative's Warrant Agreement and the Consulting Agreement constitutes a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and the application of
equitable principles in any motion, legal or equitable, and except as
obligations to indemnify or contribute to losses may be limited by applicable
law). None of the Company's issue and sale of the Securities, execution or
delivery of this Agreement, the Representative's Warrant Agreement or the
Consulting Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein or the
conduct of its business as described in the Registration Statement and the
Prospectus and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default
under, or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible)
of the Company pursuant to the terms of (i) the certificate of incorporation
or by-laws of the Company, (ii) any material license, contract, indenture,
mortgage, lease, deed of trust, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which it is or
may be bound or to which its properties or assets (tangible or intangible)
are or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental
or similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties, except where such breach or
violation would not have a Material Adverse Effect.
(l) No consent, approval, authorization or order of, and no filing
with, any arbitrator, court, regulatory body, administrative agency,
government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, this Agreement and the Representative's Warrant Agreement, the
performance of this Agreement, the Representative's Warrant Agreement and the
Consulting Agreement and the transactions contemplated hereby and thereby,
except such as have been obtained under the Act, the rules of the National
Association of Securities Dealers, Inc. (the "NASD"), the rules of the Nasdaq
Stock Market, or under State or other securities or Blue Sky Laws.
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<PAGE>
(m) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company, and
constitute legal, valid and binding agreements of the Company enforceable
against the Company, in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of equitable
principles in any motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form S-1; and there are no agreements, contracts or
other documents which are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required; and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of any class of its capital stock; and,
subsequent to such dates, and except as may be otherwise disclosed in the
Prospectus, there has not been any change in the capital stock, debt (long or
short term) or liabilities or any material change in the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company.
(o) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage,
lease, deed of trust, voting trust agreement, stockholders' agreement, note,
loan or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company is or may be bound or to which the
property or assets (tangible or intangible) of the Company is or may be subject.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local and foreign laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by the
United States Department of Labor or any other governmental agency responsible
for the enforcement of any federal, state, local or foreign laws, rules and
regulations relating to employment. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees
of the
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<PAGE>
Company, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or, to the best of the Company's knowledge, is imminent.
(q) The Company does not, now or at any time previously, maintain,
sponsor or contribute to any "employee benefit plan" as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended.
(r) Neither the Company nor any of its respective employees,
directors, stockholders or affiliates (within the meaning of the Rules and
Regulations), has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company, whether to facilitate
the sale or resale of the Securities or otherwise.
(s) To the best of the Company's knowledge, none of the trademarks,
trade names, service marks, service names, copyrights, patents and patent
applications, and none of the licenses and rights to the foregoing, presently
owned or held by the Company are in dispute or are in conflict with the right of
any other person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever, all
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications, and licenses and rights with respect to the foregoing, used
in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, trade name, service mark,
service name, copyright, patent or patent application except as set forth in the
Registration Statement or the Prospectus. There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or, to the best of the Company's
knowledge, threatened (or circumstances that may give rise to the same) against
the Company which challenges the rights of the Company with respect to any
trademarks, trade names, service marks, service names, copyrights, patents,
patent applications or licenses or rights to the foregoing used in the conduct
of its business.
(t) Except as set forth in the Registration Statement or the
Prospectus, the Company owns or has the right to use all trade secrets, know how
(including all unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), inventions, technology, designs, processes,
works of authorship, computer programs and technical data and information that
are material to the development, manufacture, operation and sale of all products
and services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien, or claim of others, including, without
limitation, former employers of its employees.
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(u) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, other than liens for taxes not
yet due and payable and except where failure by the Company to hold good and
marketable to, or valid and enforceable leasehold estates in such real or
personal property, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities would not
have a Material Adverse Effect.
(v) Arthur Andersen LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are independent certified public
accountants as required within the meaning of the Act and the Rules and
Regulations.
(w) The holders of all of the shares of Common Stock of the Company,
including each director, officer and principal shareholder of the Company, but
excluding the Bridge Investors (as such term is defined below), have executed an
agreement (collectively, the "Management Lock-Up Agreements") pursuant to which
he, she or it has agreed, for a period extending eighteen (18) months following
the effective date of the Registration Statement (the "Lock-Up Period"), not to
directly or indirectly, offer, offer to sell, sell, grant an option for the
purchase or sale of, transfer, pledge, assign, hypothecate or otherwise encumber
(whether pursuant to Rule 144 of the Rules and Regulations or otherwise) any
securities issued or issuable by the Company, whether or not owned by or
registered in the name of such persons, or dispose of any interest therein,
without the prior written consent of JSC; provided, however, that the Lock-Up
Period shall immediately terminate if the average closing bid price of the
Common Stock, if the Common Stock is quoted on the Nasdaq system, or the Nasdaq
SmallCap Market, or the average closing sale price of the Common Stock, if the
Common Stock is listed on the American Stock Exchange or New York Stock
Exchange, equals or exceeds $10.00 per share (subject to customary adjustments
for stocksplits, combinations, consolidations and similar transactions) for any
30 consecutive calendar days. Such persons have all further agreed in the
Management Lock-Up Agreements that, for a period extending twenty-four (24)
months following the effective date of the Registration Statement, all sales of
such securities of the Company shall be made through JSC in accordance with its
customary brokerage policies. The investors (collectively, the "Bridge
Investors"), who purchased securities of the Company in the Company's bridge
financing (the "Bridge Financing") pursuant to the confidential private
placement memorandum dated October 29, 1997, have agreed ("Bridge Lock-Up
Agreement"; collectively, the Bridge Lock-Up Agreements and the Management
Lock-Up Agreements shall be referred to as the "Lock-Up Agreements") not to
directly or indirectly, issue, offer to sell, grant an option for the sale of,
transfer, assign, hypothecate, pledge, distribute or otherwise dispose of or
encumber (either pursuant to Rule 144 of the regulations under the Securities
Act or otherwise) the units, the shares of common stock, the warrants or the
shares of common stock underlying such warrants acquired or sold in the Bridge
Financing for a period extending twelve (12) months following the effective date
of the Registration Statement and thereafter for an additional six (6) months,
without the prior written consent of JSC. The Bridge Investors have further
agreed that for a period extending twenty-four (24) months following the
effective date of the Registration Statement, all sales of such securities shall
be made through JSC in accordance with its customary
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brokerage policies. The Company will cause its transfer agent to make an
appropriate legend on the face of stock certificates representing all such
securities and to place "stop transfer" orders on the Company's stock ledgers.
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriters' compensation, as determined by the NASD.
(y) The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market.
(z) Neither the Company nor any of its respective directors,
officers, stockholders, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or any official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any other person who was, is or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (i) might subject the
Company, or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign), (ii) if
not given in the past, might have had a material and adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company, or (iii) if not continued in the future, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, and no affiliate or associate (as these terms are
defined in the Rules and Regulations) of any of the foregoing persons or
entities, has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company is
a party or by which the Company may be bound. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director or any person listed in the "Principal Shareholders"
section of the Prospectus or any affiliate or associate of any of the foregoing
persons or entities which are required to be disclosed in the Prospectus
pursuant to the Act and the Rules and Regulations.
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(bb) The minute books of the Company have been made available to the
Underwriters, contain a complete summary of all meetings and actions of the
directors and stockholders of the Company since the time of its incorporation,
and reflect all transactions referred to in such minutes accurately in all
respects.
(cc) Except and to the extent described in the Prospectus, no holder
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company has the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. Except as set forth in the Prospectus, no person
or entity holds any anti-dilution rights with respect to any securities of the
Company.
(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to Underwriters' Counsel (as defined in Section
4(d) herein), shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
(ee) The Company has entered into a financial advisory and consulting
agreement substantially in the form filed as Exhibit 10.16 to the Registration
Statement (the "Consulting Agreement") with JSC, with respect to the rendering
of consulting services by JSC to the Company. The Consulting Agreement provides
that JSC shall be retained by the Company commencing on the consummation of the
proposed public offering and ending 24 months thereafter, at a monthly retainer
of $2,000, all of which is payable on consummation of the proposed public
offering. The Consulting Agreement has been duly and validly authorized by the
Company and assuming due execution by the parties thereto other than the
Company, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
(ff) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form 8-A
has been declared effective by the Commission.
(gg) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of Max Toghraie,
James Ung and Mei Yang in the forms filed as Exhibit 10.4, 10.2 and 10.3,
respectively, to the Registration Statement and (ii) has obtained term key-man
insurance on the lives of each of James Ung and Max Toghraie in the amount of
$1,000,000 which policy names the Company as sole beneficiary.
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2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters, and the Underwriters
agree to purchase from the Company, the Firm Shares at a price equal to
$__________ [90.75% of the initial public offering price] per Share.
(b) In addition, on the basis of the representations, warranties,
covenants and agreement, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of the Option Shares at a price equal
to $__________ [90.75% of the initial public offering price] per Share. The
option granted hereby will expire forty-five (45) days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement
if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Shares upon notice by JSC to the Company
setting forth the number of Option Shares as to which the Underwriters are then
exercising the option and the time and date of payment and delivery for any such
Option Shares. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Representative, but shall not be later than seven (7)
full business days after the exercise of said option, nor in any event prior to
the Closing Date, unless otherwise agreed upon by the Representative and the
Company. Nothing herein contained shall obligate the Underwriters to exercise
the option granted hereby. No Option Shares shall be delivered unless the Firm
Shares shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of JSC at 33
Maiden Lane, New York, New York 10038, or at such other place as shall be
agreed upon by the Representative and the Company. Such delivery and payment
shall be made at 10:00 a.m. (New York City time) on __________ __, 1998 or at
such other time and date as shall be agreed upon by the Representative and
the Company, but not less than three (3) nor more than seven (7) full
business days after the effective date of the Registration Statement (such
time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Shares shall be made at the above
mentioned office of JSC or at such other place as shall be agreed upon by the
Representative and the Company. Delivery of the certificates for the Firm
Shares and the Option Shares, if any, shall be made to the Underwriters
against payment by the Underwriters of the purchase price for the Firm Shares
and the Option Shares, if any, to the order of the Company by wire transfer.
Certificates for the Firm Shares and the Option Shares, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the
Representative may request in writing at least two (2) business days prior to
the Closing Date or the relevant Option Closing Date, as the case may be.
The certificates for the Firm Shares and the Option Shares, if any, shall be
made available to the Representative at such offices or such other place as
the Representative may
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designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative or their designees the Representative's Warrants for an
aggregate purchase price of $.0001 per warrant, which warrants shall entitle
the holders thereof to purchase an aggregate of an additional 230,000 Shares.
The Representative's Warrants shall be exercisable for a period of four (4)
years commencing one (1) year from the effective date of the Registration
Statement at a price equaling one hundred and sixty-five percent (165%) of
the initial public offering price of the Shares. The Representative's
Warrant Agreement and the form of the certificates for the Representative's
Warrants shall be substantially in the form filed as Exhibit 1.2 to the
Registration Statement. Payment for the Representative's Warrants shall be
made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration
Statement becomes effective as the Representative deem advisable, the
Underwriters shall make a public offering of the Firm Shares and such of the
Option Shares as the Underwriters may determine (other than to residents of
or in any jurisdiction in which qualification of the Shares is required and
has not become effective) at the price and upon the other terms set forth in
the Prospectus. The Representative may from time to time increase or decrease
the public offering price after distribution of the Shares has been completed
to such extent as the Representative, in its sole discretion, deem advisable.
The Underwriters may enter into one or more agreements as the Underwriters,
in their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
and agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or the Exchange Act before termination of the offering of the
Securities to the public by the Underwriters of which the Representative
shall not previously have been advised and furnished with a copy, or to which
the Representative shall have objected or which is not in compliance with the
Act, the Exchange Act and the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the same in writing, (i)
when the Registration Statement, as amended, becomes effective, when any
post-effective amendment to the Registration Statement becomes effective and, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding the outcome of which may result in the suspension
of the effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of any
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proceedings for that purpose, (iii) of the issuance by the Commission or by any
state securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
or of the initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission, and (v) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If the
Commission or any state securities regulatory authority shall enter a stop order
or suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or,
if applicable and if consented to by the Representative, pursuant to Rule
424(b)(4) of the Rules and Regulations) within the time period specified in
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriters,
Rule 424(b)(4)).
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company proposes
for use in connection with the offering of any of the Securities which
differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) of the
Rules and Regulations), and will furnish the Representative with copies of
any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
amendment or supplement to which the Representative or Orrick, Herrington &
Sutcliffe LLP, its counsel ("Underwriters' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with
the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate to permit the continuance of sales and dealings therein for as long
as may be necessary to complete the distribution contemplated hereby, and
shall make such applications, file such documents and furnish such
information as may be required for such purpose; PROVIDED, HOWEVER, the
Company shall not be required to qualify as a foreign corporation or file a
general or limited consent to service of process in any such jurisdiction.
In each jurisdiction where such qualification shall be effected, the Company
will, unless the Representative agrees that such action is not at the time
necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, the Exchange Act and the Rules and
Regulations so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and
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<PAGE>
the Prospectus, or any amendments or supplements thereto. If, at any time
when a prospectus relating to the Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, includes an 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, in the light of the circumstances
in which they were made, not misleading, or if it is necessary at any time to
amend or supplement the prospectus to comply with the Act, the Company will
notify the Representative promptly and prepare and file with the Commission
an appropriate amendment or supplement in accordance with Section 10 of the
Act, each such amendment or supplement to be satisfactory to Underwriters'
Counsel, and the Company will furnish to the Underwriters copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriters may request.
(g) As soon as practicable, but in any event not later than forty
five (45) days after the end of the 12 month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (ninety (90) days in the event that
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required
by, and will otherwise comply with, the provisions of Section 11(a) of the
Act and Rule 158(a) of the Rules and Regulations, which statement need not be
audited unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
will deliver to the Representative:
i) unaudited quarterly reports of earnings as certified by the
Company's principal financial and accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of the Company's
independent certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
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v) every press release and every material news item or article
of interest to the financial community in respect of the Company, or
its respective affairs which was released or prepared by or on behalf
of the Company; and
vi) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its respective business which
the Representative may request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock.
(j) The Company will furnish to the Representative, without charge
and at such place as the Representative may designate, copies of each
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (one of which will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after
the effective date of the Registration Statement, in each case as soon as
available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with originally executed copies of
duly executed, legally binding and enforceable Lock-Up Agreements, which are in
form and substance satisfactory to the Representative. On or before the Closing
Date, the Company shall deliver instructions to its transfer agent authorizing
such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company agrees that, for the duration of the Lock-Up Period
(as defined in SECTION 1(w), it and its future subsidiaries will not, without
the prior written consent of JSC (i) issue, sell, contract or offer to sell,
grant an option for the purchase or sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise dispose of, directly or indirectly, any
shares of capital stock or any option, right or warrant with respect to any
shares of capital stock or any security convertible, exchangeable or exercisable
for capital stock, provided, that the Company may, without consent of JSC, issue
securities (a) upon the exercise of any outstanding stock options or warrants
granted or issued on or prior to the date hereof, and (b) subject to the terms
of Section 4(u) of this Agreement, up to an additional 116,283 shares of Common
Stock issuable upon the exercise stock options which may be granted pursuant to
the Company's 1997 Stock Option Plan, or (ii) file any registration statement
for the offer or sale of securities issued or to be issued by the Company or any
present or future subsidiaries.
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(m) Neither the Company nor any of its officers or directors will
take, directly or indirectly, any action designed to stabilize or manipulate the
price of any securities of the Company, or which might in the future reasonably
be expected to cause or result in the stabilization or manipulation of the price
of any such securities.
(n) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(o) The Company shall timely file all such reports, forms or other
documents as may be required from time to time under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents will
comply as to form and substance with the applicable requirements under the Act,
the Exchange Act and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date hereof, the Closing Date or the relevant
Option Closing Date, as the case may be) which have been read by the
Company's independent public accountants, as stated in their letters to be
furnished pursuant to SECTION 6(j) hereof.
(q) The Company shall cause the Common Stock to be quoted on the
Nasdaq SmallCap Market and listed on the Boston Stock Exchange, for a period
of five (5) years from the date hereof, use its best efforts to maintain
quotation of the Common Stock to the extent outstanding on the Nasdaq
SmallCap Market or the Nasdaq National Market provided that the Company shall
not be required to maintain the Boston Stock Exchange listing if the Common
Stock is listed in the Nasdaq National Market.
(r) For a period of three (3) years from the Closing Date, the
Company shall at the request of the Representative, furnish or cause to be
furnished to the Representative and at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and (ii) a list of
holders of all of the Company's securities.
(s) For a period of three (3) years from the Closing Date, the
Company shall, at the Company's sole expense, (i) promptly provide the
Representative, upon any and all requests of the Representative, with a "blue
sky trading survey" for secondary sales of the Company's securities, prepared
by counsel to the Company, and (ii) take all necessary and appropriate
actions to further qualify the Company's securities in all jurisdictions of
the United States in order to permit secondary sales of such securities
pursuant to the "blue sky" laws of those jurisdictions, provided that such
jurisdictions do not require the Company to qualify as a foreign corporation.
(t) As soon as practicable, but in no event more than thirty (30)
days after the effective date of the Registration Statement, the Company agrees
to take all necessary and appropriate actions to be included in Standard and
Poor's Corporation Descriptions and Moody's OTC Manual and to continue such
inclusion for a period of not less than three (3) years.
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<PAGE>
(u) Without the prior written consent of JSC, the Company hereby
agrees that it will not, for the duration of the Lock-Up Period, adopt,
propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or arrangement (i) permitting the
grant, issue, sale or entry into any agreement to grant, issue or sell any
option, warrant or other contract right (a) at an exercise or sale price per
share that is less than the greater of the initial public offering price of
the Shares set forth herein or the fair market value per share of the Common
Stock on the date of grant or sale, or (b) upon payment of less than the full
purchase or exercise price for such shares of Common Stock or other
securities of the Company on the date of grant or issuance; or (ii)
permitting the existence of stock appreciation rights, phantom options or
similar arrangements; or (iii) permitting the payment for such securities
with any form of consideration other than cash; or (iv) permitting the
maximum number of shares of Common Stock or other securities of the Company
purchasable at any time pursuant to options, warrants or other contract
rights to exceed 545,000 (excluding the Representative's Warrants, the
100,000 warrants issued to the Bridge Investors and the Representative's
Option to purchase 230,000 shares to cover-allotments, if any); or (v) to any
direct or indirect beneficial holder on the date hereof of more than 10% of
the issued and outstanding shares of Common Stock.
(v) Until the completion of the distribution of the Securities to the
public, and during any period during which a prospectus is required to be
delivered, the Company shall not, without the prior written consent of JSC,
issue, directly or indirectly, any press release or other communication or hold
any press conference with respect to the Company or its activities or the
offering contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with respect to
the Company's operations.
(w) The Company agrees that:
i) For a period of five (5) years after the effective date of
the Registration Statement, the Company shall cause one (1) individual
selected by JSC, subject to the good faith approval of the Company, to
be elected to the Board of Directors of the Company (the "Board"), if
requested by JSC.
ii) In the event JSC elects not to exercise the right as set
forth above, then it may designate one person to attend all meetings
of the Company's Board of Directors for a period of five (5) years.
Such person shall be entitled to attend all such meetings and to
receive all notices and other correspondence and communications sent
by the Company to members of its Board of Directors.
iii) The Company shall reimburse JSC's designee for his or her
out-of-pocket expenses incurred in connection with his or her
attendance of the Board meetings.
iv) In the event JSC shall not have designated such individual
at the time of any meeting of the Board or such person has not been
elected or is unavailable to serve, the Company shall notify JSC of
each meeting of the Board.
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(x) For a period equal to the lesser of (i) five (5) years from the
date hereof, and (ii) the sale to the public of the Representative's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 for the registration under the Act of the
Underwriters' Securities.
(y) For the duration of the Lock-Up Period, the Company shall not
restate, amend or alter any term of any written employment, consulting or
similar agreement entered into between the Company and any officer, director
or key employee as of the effective date of the Registration Statement in a
manner which is more favorable to such officer, director or key employee,
without the prior written consent of JSC.
(aa) The Company will use its best efforts to maintain the
effectiveness of the Registration Statement for a period of five (5) years
after the date hereof.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay (such payment to be made, at
the discretion of the Underwriters, on the Closing Date and any Option
Closing Date (to the extent not paid on the Closing Date or a previous Option
Closing Date)) all expenses and fees (other than fees of Underwriters'
Counsel, except as set forth in clause (iv) below), incident to the
performance of the obligations of the Company under this Agreement and the
Representative's Warrant Agreement, including, without limitation, (i) the
fees and expenses of accountants and counsel for the Company, (ii) all costs
and expenses incurred in connection with the preparation, duplication,
printing, (including mailing and handling charges) filing, delivery and
mailing (including the payment of postage, overnight delivery or courier
charges with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage, overnight delivery or courier
charges with respect thereto) and delivery of this Agreement, the
Representative's Warrant Agreement and agreements with selected dealers, and
related documents, including the cost of all copies thereof and of each
Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in such quantities as the Underwriters may request,
(iii) the printing, engraving, issuance and delivery of the Securities,
including transfer taxes, if any, (iv) the qualification of the Securities
under state or foreign securities or "blue sky" laws and determination of the
status of such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental
Blue Sky Memorandum" and "Legal Investments Survey," if any, and
disbursements, expenses and fees of counsel in connection therewith, (v)
advertising costs and expenses, including, but not limited to costs and
expenses in connection with "road shows," information meetings and
presentations, bound volumes and prospectus memorabilia and "tombstone"
advertisement expenses, (vi) costs and expenses in connection with due
diligence investigations, including, but not limited to, the fees of any
independent counsel or consultants, (vii) fees and expenses of a transfer and
warrant agent and registrar for the Securities, (viii) applications for
assignments of a rating of the Securities by qualified rating agencies, (ix)
the fees payable to the Commission and the NASD, and (x) the fees
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and expenses incurred in connection with the quotation of the Securities on the
Nasdaq SmallCap Market and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of SECTION 6 or SECTION 10(a) hereof, the Company shall
reimburse and indemnify the Underwriters for all of their actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to SECTION 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to SECTION 5(a) hereof, it will pay to JSC on the Closing Date
by certified or bank cashier's check, or, at the election of JSC, by deduction
from the proceeds of the offering of the Firm Shares, a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Firm Shares, thirty thousand dollars ($30,000) of
which has been paid to date by the Company. In the event the Underwriters elect
to exercise the overallotment option described in SECTION 2(b) hereof, the
Company further agrees to pay to JSC on each Option Closing Date, by certified
or bank cashier's check, or, at JSC's election, by deduction from the proceeds
of the Option Shares purchased on such Option Closing Date, a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of such Option Shares.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date and each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
provisions hereof; the performance by the Company on and as of the Closing Date
and each Option Closing Date, if any, of its covenants and obligations
hereunder; and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 p.m., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the
Representative, and, at the Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriters' Counsel.
If the Company has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant
to Rule 424(b) of the Rules and Regulations within the prescribed time
period, and prior to the Closing Date the Company shall have provided
evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the Rules and Regulations.
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(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and
is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances in which they were made not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material,
or omits to state a fact which, in the Representative's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and such other related matters as the
Representative may request and Underwriters' Counsel shall have received such
papers and information as they may request in order to enable them to pass
upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
favorable opinion of Troop Meisinger Steuber & Pasich, LLP, counsel to the
Company dated the Closing Date, addressed to the Underwriters, in form and
substance substantially as set forth in Exhibit A hereto and in form and
substance satisfactory to Underwriters' Counsel.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Troop Meisinger Steuber & Pasich, LLP, counsel
to the Company dated the relevant Option Closing Date, addressed to the
Underwriters, and in form and substance satisfactory to Underwriters' Counsel
confirming as of the Option Closing Date, the statements made by Troop Meisinger
Steuber & Pasich, LLP, in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
SECTION 6(c) hereof, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(g) Prior to the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or the
earnings, stockholders' equity, value, operations, properties, business or
results of operations of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such matters are set forth in the
Registration Statement and the Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and the Prospectus; (iii) the Company shall
not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) the Company shall not have issued any securities
(other than the Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock
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of any class and there shall not have been any change in the capital stock, debt
(long or short term) or liabilities or obligations of the Company (contingent or
otherwise) from the latest dates as of which such matters are set forth in the
Registration Statement and the Prospectus; (v) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and the Prospectus; (vi) no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially and adversely affect the condition,
financial or otherwise, or the earnings, stockholders' equity, value,
operations, properties, business or results of operations of the Company taken
as a whole, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act with respect to the
Registration Statement and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(h) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial officer of the Company,
dated the Closing Date or the relevant Option Closing Date, as the case may be,
to the effect that each of such persons has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option Closing Date, as
the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, are contemplated or
threatened under the Act;
iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus or any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading and neither the Preliminary Prospectus
nor any supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and
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<PAGE>
iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (A) the
Company has not incurred any material liabilities or obligations,
direct or contingent; (B) the Company has not paid or declared any
dividends or other distributions on its capital stock; (C) the Company
has not entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other
than any increase in short-term borrowings in the ordinary course of
business) of the Company (E) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured; (F) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the
foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (G) there
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this SECTION 6(g)
are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters and the
Board of Directors of the Company and in form and substance satisfactory in all
respects (including the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) to the Underwriters and Underwriters'
Counsel, from Arthur Andersen LLP.
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the Rules and Regulations;
ii) stating that it is their opinion that the financial
statements of the Company included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations and
that the Underwriters may rely upon the opinion of Arthur Andersen LLP
with respect to such financial statements and supporting schedules
included in the Registration Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest unaudited interim financial
statements of the Company, a reading of the latest available minutes
of the stockholders and board of directors and the various committees
of the board of directors of the Company, consultations with officers
and other employees of the Company responsible for financial and
23
<PAGE>
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that (A) the unaudited financial statements and supporting schedules
of the Company included in the Registration Statement do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the
Registration Statement, (B) the pro forma financial information
contained in the Registration Statement and the Prospectus does not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or is
not fairly presented in conformity with generally accepted accounting
principles applied on a basis consistent with that of the audited
financial statements of the Company or the unaudited financial
information included in the Registration Statement and Prospectus or
(C) at a specified date no more than five (5) days prior to the
effective date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the December
31, 1997 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement,
or, if there was any change or decrease, setting forth the amount of
such change or decrease, and (D) during the period from December 31,
1997 to a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any decrease
in net revenues, net earnings or net earnings per share of Common
Stock, in each case as compared with the corresponding period
beginning December 31, 1996, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
iv) setting forth, at a date not later than five (5) days prior
to the effective date of the Registration Statement, the amount of
liabilities of the Company (including a break down of commercial paper
and notes payable to banks);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in
the Prospectus, in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an audit in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
and
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<PAGE>
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Arthur Andersen LLP a letter, dated as
of the Closing Date or the relevant Option Closing Date, as the case may be,
to the effect that (i) it reaffirms the statements made in the letter
furnished pursuant to SECTION 6(i), (ii) if the Company has elected to rely
on Rule 430A of the Rules and Regulations, to the further effect that Arthur
Andersen LLP has carried out procedures as specified in clause (v) of SECTION
6(j) hereof with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (v).
(l) On each of Closing Date and Option Closing Date, if any, there
shall have been duly tendered to the Representative for the several
Underwriters the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to SECTION 4(e) hereof
shall have been issued on either the Closing Date or the Option Closing Date,
if any, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
(n) On or before the effective date of the Registration Statement,
the Company shall have executed and delivered to the Underwriters, the
Representative's Warrant Agreement, substantially in the form filed as
Exhibit 1.2 to the Registration Statement. On or before the Closing Date,
the Company shall have executed and delivered to the Representative the
Representative's Warrants in such denominations and to such designees as
shall have been provided to the Company.
(o) On or before Closing Date, the Common Stock shall have been
duly approved for quotation on the Nasdaq SmallCap Market, subject to
official notice of issuance and duly approved for listing on the Boston Stock
Exchange, subject to official notice of issuance.
(p) On or before Closing Date, there shall have been delivered to the
Underwriters all of the Lock-Up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
(q) On or before the Closing Date, the Company shall have (i)
executed and delivered to JSC the Consulting Agreement, substantially in the
form filed as Exhibit 10.16 to the Registration Statement and (ii) paid to JSC
$48,000 representing the retainer fee pursuant to the Consulting Agreement.
(r) At least two (2) full business days prior to the date hereof, the
Closing Date and each Option Closing Date, if any, the Company shall have
delivered to the Representative the
25
<PAGE>
unaudited interim financial statements required to be so delivered pursuant to
SECTION 4(p) of this Agreement.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or at any Option Closing Date, as
the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this SECTION 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, and each person, if any, who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions, proceedings,
investigations, inquiries and suits in respect thereof), whatsoever (including
but not limited to any and all costs and expenses whatsoever reasonably incurred
in investigating, preparing or defending against such action, proceeding,
investigation, inquiry or suit commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriters or such controlling
person may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon (A) any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, any Preliminary
Prospectus, or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Securities; or (iii) in any application or
other document or written communication (in this SECTION 7, collectively
referred to as "applications") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the NASD, Nasdaq or any securities exchange; (B) the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
light of the circumstances in which they were made); or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto, unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be. The indemnity agreement in
this Section 7(a) shall be in addition to any liability which the Company may
have at common law or otherwise.
(b) Each of the Underwriters agree, severally but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration
26
<PAGE>
Statement, and each person, if any, who controls the Company within the meaning
of the Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to any Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or the Prospectus directly
relating to the transactions effected by the Underwriters in connection with the
offering contemplated hereby. The Company acknowledges that the statements with
respect to the public offering of the Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement in this Section 7(b) shall be in addition
to any liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this SECTION
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against one or more indemnifying
parties under this SECTION 7, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure to so
notify an indemnifying party shall not relieve it from any liability which it
may have under this SECTION 7 (except to the extent that it has been prejudiced
in any material respect by such failure) or from any liability which it may have
otherwise). In case any such action, investigation, inquiry, suit or proceeding
is brought against any indemnified party, and it notifies an indemnifying party
or parties of the commencement thereof, the indemnifying party or parties will
be entitled to participate therein, and to the extent it or they may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, an indemnified party shall have the right to employ its own counsel
in any such case but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in connection
with the defense of such action at the expense of the indemnifying party, (ii)
the indemnifying parties shall not have employed counsel reasonably satisfactory
to such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to one
or all of the indemnifying parties (in which event the indemnifying parties
shall not have the right to direct the defense of such action, investigation,
inquiry, suit or proceeding on behalf of the indemnified party or parties), in
any of which events such fees and expenses of one additional counsel shall be
borne by the indemnifying parties. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action, investigation, inquiry, suit or proceeding or
separate
27
<PAGE>
but similar or related actions, investigations, inquiries, suits or proceedings
in the same jurisdiction arising out of the same general allegations or
circumstances. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle, compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. Anything in this SECTION 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this SECTION 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified, on the
other hand, in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriters are the indemnified party, 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
of the Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth in
the table on the cover page of the Prospectus. 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 or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions, investigations, inquiries, suits or
proceedings in respect thereof) referred to in the first (1st) sentence of this
SECTION 7(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, claim, investigation, inquiry suit or proceeding.
Notwithstanding the provisions of this SECTION 7(d), the Underwriters shall not
be required to contribute any amount in excess of the
28
<PAGE>
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 12(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
SECTION 7(d), each person, if any, who controls the Company or the Underwriters
within the meaning of the Act, each officer of the Company who has signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company or the Underwriters, as the case may be,
subject in each case to this SECTION 7(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit,
inquiry, investigation or proceeding, against such party in respect to which a
claim for contribution may be made against another party or parties under this
SECTION 7(d), notify such party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have hereunder or otherwise than under this SECTION 7(d), or to the extent
that such party or parties were not adversely affected by such omission.
Notwithstanding anything in this SECTION 7 to the contrary, no party will be
liable for contribution with respect to the settlement of any action or claim
effected without its written consent. The contribution agreement set forth
above shall be in addition to any liabilities which any indemnifying party may
have at common law or otherwise.
8. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO
SURVIVE DELIVERY. All representations, warranties, covenants and agreements
of the Company contained in this Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall be deemed to be
representations, warranties, covenants and agreements at the Closing Date and
each Option Closing Date, if any, and such representations, warranties,
covenants and agreements of the Company, and the respective indemnity and
contribution agreements contained in SECTION 7 hereof, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any of the Underwriters, the Company, any controlling person of any
of the Underwriters or the Company, and shall survive the termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters
and the Representatives, as the case may be.
9. EFFECTIVE DATE. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the
Securities for sale to the public; PROVIDED, however, that the provisions of
SECTIONS 5, 7 and 10 of this Agreement shall at all times be effective. For
purposes of this SECTION 9, the Securities to be purchased hereunder shall be
deemed to have been so released upon the earlier of dispatch by the
Representative of telegrams to securities dealers releasing such shares for
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities.
10. TERMINATION.
(a) Subject to SECTION 10(b) hereof, the Representative shall have
the right to terminate this Agreement: (i) if any domestic or international
event or act or occurrence has materially adversely disrupted, or in the
Representative's opinion will in the immediate future
29
<PAGE>
materially adversely disrupt, the financial markets; or (ii) if any material
adverse change in the financial markets shall have occurred; or (iii) if
trading generally shall have been suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the NASD, the Boston Stock Exchange, the Commission or any
governmental authority having jurisdiction over such matters; or (iv) if
trading of any of the securities of the Company shall have been suspended, or
if any of the securities of the Company shall have been delisted, on any
exchange or in any over-the-counter market; or (v) if the United States shall
have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities, or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium shall have been declared by any state or federal authority; or
(vii) if the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representative's opinion, make it inadvisable to
proceed with the delivery of the Securities; or (ix) if there shall have
occurred any outbreak or escalation of hostilities or any calamity or crisis
or there shall have been such a material adverse change in the conditions or
prospects of the Company, or if there shall have been such a material adverse
change in the general market, political or economic conditions, in the United
States or elsewhere, as in the Representative's judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (x) if Mr. James Ung or Mr. Max Toghraie shall no longer serve
the Company in their present respective capacities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of SECTION 6 or SECTION 10(a) hereof the
Company shall promptly reimburse and indemnify the Underwriters for all of
their actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less amounts previously paid pursuant to SECTION 5(c)
hereof. In addition, the Company shall remain liable for all "blue sky"
counsel fees and expenses and "blue sky" filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
SECTIONS 6 and 10(a) hereof), and whether or not this Agreement is otherwise
carried out, the provisions of SECTION 5 and SECTION 7 shall not be in any
way be affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver
the number of Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur
with respect to any Option Shares to be purchased on an Option Closing Date,
the Underwriters may, at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to SECTION 5,
SECTION 7 and SECTION 10 hereof. No action taken pursuant to this SECTION 11
shall relieve the Company from liability, if any, in respect of such default.
12. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Representative
30
<PAGE>
shall be directed to the Underwriters at Joseph Stevens & Company, Inc., 33
Maiden Lane, 8th Floor, New York, NY 10038, Attention: Mr. Joseph Sorbara;
with a copy to Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New
York, New York 10103, Attention: Rubi Finkelstein, Esq. Notices to the
Company shall be directed to the Company at CUMETRIX DATA SYSTEMS CORP., 957
Lawson Street, Industry, California 91748, with a copy to Troop Meisinger
Steuber & Pasich, LLP Attention: Murray Markiles, Esq.
13. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in SECTION 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Shares from the Underwriters shall be deemed to be a
successor by reason merely of such purchase.
14. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
giving effect to choice of law or conflict of laws principles.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the
Representative's Warrant Agreement and the Consulting Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or
oral agreements, understandings and negotiations with respect to the subject
matter hereof and thereof. This Agreement may not be amended except in a
writing signed by the Representative and the Company.
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<PAGE>
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CUMETRIX DATA SYSTEMS CORP.
By:
------------------------------------
Max Toghraie
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
JOSEPH STEVENS & COMPANY, INC.
For itself and as Representative of the
several Underwriters named in Schedule A hereto
By:
----------------------------------------
Name:
Title:
32
<PAGE>
SCHEDULE A
Name of Underwriter NUMBER OF SHARES
Joseph Stevens & Company, Inc.
Royce Investment Group, Inc.
33
<PAGE>
EXHIBIT 1.2
- --------------------------------------------------------------------------------
CUMETRIX DATA SYSTEMS CORP.
AND
JOSEPH STEVENS & COMPANY, INC.
-----------------
REPRESENTATIVE'S
WARRANT AGREEMENT
APRIL __, 1998
- --------------------------------------------------------------------------------
<PAGE>
REPRESENTATIVE'S WARRANT AGREEMENT dated as of April __,1998 by and
between CUMETRIX DATA SYSTEMS CORP., a California corporation (the "Company")
and JOSEPH STEVENS & COMPANY, INC. (hereinafter referred to variously as the
"Holder" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative or its
designee(s) warrants ("Warrants") to purchase up to 230,000 shares ("Shares") of
common stock, no par value per share, of the Company ("Common Stock"); and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof by and
between the Representative, as the Representative of the several Underwriters
named on Schedule A thereto, and the Company to act as the Representative in
connection with the proposed public offering (the "Offering") of 2,300,000
shares of Common Stock at a public offering price of $____ per share; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will
be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with the Representative
acting as the Representative pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the promises, the payment by
the Representative to the Company of twenty-three dollars ($23.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
1. GRANT. The Representative (or its designee(s)) are hereby
granted the right to purchase, at any time from April __, 1999
[one year from the date hereof], until 5:00 p.m., New York time, on April __,
2003 [5 years from the date hereof], up to 230,000 Shares at an initial
exercise price (subject to adjustment as provided in Section 8 hereof) of
$____ per Share [165% of the initial public offering price per share] subject
to the terms and conditions of this Agreement.
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1 METHOD OF EXERCISE. The Warrants are initially exercisable at an
initial exercise price per Share set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate, together with the annexed Form of Election to Purchase duly
executed and payment of the Exercise Price (as hereinafter defined) for the
Shares purchased at the Company's principal offices, located at 957 Lawson
Street, Industry, California 91748, the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Shares so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
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the Warrants). Warrants may be exercised to purchase all or part of the Shares
represented thereby. In the case of the purchase of less than all the Shares
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 in exchange for
the number of Shares equal to the product of (x) the number of Shares as to
which the Warrants are being exercised, multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined in Section 3.3 hereof) of the
Shares minus the Exercise Price of the Shares and the denominator of which is
the Market Price per Share. Solely for the purposes of this Section 3.2, Market
Price shall be calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to Section
13 hereof ("Notice Date") or (ii) as the average of the Market Price for each of
the five trading days immediately preceding the Notice Date, whichever of (i) or
(ii) results in a greater Market Price.
3.3 DEFINITION OF MARKET PRICE.
(a) As used herein, the phrase "Market Price" of the Shares, at any
date shall be deemed to be the last reported sale price of the Common Stock, or,
in case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange
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on which shares of the Common Stock are listed or admitted to trading or by the
Nasdaq National Market ("Nasdaq/NM") or the Nasdaq Small Cap Market ("Nasdaq
Small Cap"), or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq"), the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information. If the Market Price of the Shares cannot be determined pursuant to
the sentence above, the Market Price of the Shares shall be determined in good
faith (using customary valuation methods) by resolution of the members of the
Board of Directors of the Company, based on the best information available to
it.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants shall be made forthwith (and in
any event such issuance shall be made within five (5) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the
name of, or in such names as may be directed by, the Holder thereof.
The Warrant Certificates and the certificates representing the shares
of Common Stock underlying the Warrants or other securities, property or rights
shall be executed on behalf of the Company by the manual or facsimile signature
of the then present Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company under its corporate seal reproduced
thereon, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
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Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers or partners of the Underwriters.
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $____ per Share [165% of the initial public offering price per Share]. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrants and
the shares of Common Stock underlying the Warrants and any other securities
issuable upon exercise of the Warrants (collectively, the "Warrant Securities")
have not been registered under the Securities Act of 1933, as amended (the
"Act"), pursuant to the Company's Registration Statement on Form S-1
(Registration No. 333-43151) (the "Registration
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Statement"). Upon exercise, in part or in whole, of the Warrants, certificates
representing the Warrant Securities shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered, sold, pledged, hypothecated, assigned or
transferred except pursuant to (i) an effective registration statement
under the Act, (ii) to the extent applicable, Rule 144 under the Act
(or any similar rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an exemption
from registration under such Act is available.
7.2 PIGGYBACK REGISTRATION. If, at any time commencing after the
date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form
S-8, S-4 or a comparable registration statement), the Company will give
written notice by registered mail, at least thirty (30) days prior to the
filing of each such registration statement, to the Representative and to all
other Holders of the Warrants and/or the Warrant Securities of its intention
to do so. If the Representative or other Holders of the Warrants and/or
Warrant Securities notify the Company within twenty (20) days after receipt
of any such notice of their desire to include any such securities in such
proposed registration statement, the Company shall afford the Representative
and such Holders of the Warrants and/or Warrant Securities the opportunity to
have any such Warrant Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
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7.3 DEMAND REGISTRATION.
(a) At any time after the date hereof and expiring five (5) years
thereafter, the Holders of the Warrants and/or Warrant Securities representing a
"Majority" (as hereinafter defined) of such securities (assuming the exercise of
all of the Warrants) shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the underwriters
and Holders, in order to comply with the provisions of the Act, so as to permit
a public offering and sale of their respective Warrant Securities for nine (9)
consecutive months by such Holders and any other Holders of the Warrants and/or
Warrant Securities who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period specified in Section 7.4(a) hereof pursuant to the
written notice specified in Section 7.3(a) of a Majority of the Holders of the
Warrants and/or Warrant Securities, the Company shall have the option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities to repurchase (i) any and all Warrant
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Securities at the higher of the Market Price per Share of Common Stock on (x)
the date of the notice sent pursuant to Section 7.3(a) or (y) the expiration of
the period specified in Section 7.4(a) and (ii) any and all Warrants at such
Market Price less the Exercise Price of such Warrant. Such repurchase shall be
in immediately available funds and shall close within two (2) days after the
later of (i) the expiration of the period specified in Section 7.4(a) or
(ii) the delivery of the written notice of election specified in this Section
7.3(c).
(d) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing after the date hereof
and expiring five (5) years thereafter, any Holder of Warrants and/or Warrant
Securities shall have the right, exercisable by written request to the Company,
to have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder of its Warrant Securities provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall
use its best efforts to have any registration statement declared effective
at the earliest possible time, and shall furnish each Holder desiring to
sell Warrant Securities such number of prospectuses as shall reasonably be
requested.
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(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(d). If the Company
shall fail to comply with the provisions of Section 7.4(a), the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any or all incidental or special damages sustained
by the Holder(s) requesting registration of their Warrant Securities,
excluding consequential damages.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue
sky laws of such states as reasonably are requested by the Holder(s),
provided that the Company shall not be obligated to execute or file any
general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them
may become subject under the Act, the Exchange Act or otherwise, arising
from
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such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriters contained in Section 7 of the Underwriting
Agreement. The Company further agree(s) that upon demand by an indemnified
person, at any time or from time to time, it will promptly reimburse such
indemnified person for any loss, claim, damage, liability, cost or expense
actually and reasonably paid by the indemnified person as to which the
Company has indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 7.4(d) any such payment or
reimbursement by the Company of fees, expenses or disbursements incurred by
an indemnified person in any proceeding in which a final judgment by a
court of competent jurisdiction (after all appeals or the expiration of
time to appeal) is entered against the Company or such indemnified person
as a direct result of the Holder(s) or such person's gross negligence or
willful misfeasance will be promptly repaid to the Company.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the
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Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company. The Holder(s) further agree(s) that upon demand by
an indemnified person, at any time or from time to time, they will promptly
reimburse such indemnified person for any loss, claim, damage, liability,
cost or expense actually and reasonably paid by the indemnified person as
to which the Holder(s) have indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this Section 7.4(e) any such
payment or reimbursement by the Holder(s) of fees, expenses or
disbursements incurred by an indemnified person in any proceeding in which
a final judgment by a court of competent jurisdiction (after all appeals or
the expiration of time to appeal) is entered against the Company or such
indemnified person as a direct result of the Company or such person's gross
negligence or willful misfeasance will be promptly repaid to the Holder(s).
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof other than the holders of
securities in the Company's private placement consummated through closings
on November 26, 1997, December 16, 1997, and December 23, 1997, without the
prior written consent of the Holders of the Warrants and Warrant Securities
representing a Majority of such securities (assuming the exercise of all of
the Warrants).
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(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the
date of the closing under the underwriting agreement), and (ii) a "cold
comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting agreement)
signed by the independent public accountants who have issued a report on
the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of
at least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below
and to the
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managing underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to
the registration statement and permit each Holder and underwriter to do
such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it
deems reasonably necessary to comply with applicable securities laws or
rules of the NASD. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriter selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be Joseph Stevens or Royce. Such agreement shall
be satisfactory in form and substance to the Company, each Holder and such
managing underwriter, and shall contain such representations, warranties
and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Securities and may, at their option,
require that any or all of the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made
to and for the benefit of such Holders. Such Holders shall not be required
to make any representations or warranties to or agreements with
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the Company or the underwriters except as they may relate to such Holders
and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written request
therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of
the date of filing of such registration statement, including without
limitation, restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in reference
to the Holders of Warrants or Warrant Securities shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates, members of
their family, persons acting as nominees or in conjunction therewith and
(ii) have not been resold to the public pursuant to a registration
statement filed with the Commission under the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall pay
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately
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decreased. An adjustment made pursuant to this Section 8.2 shall be made as of
the record date for the subject stock dividend or distribution.
8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted Exercise Price of
each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as may be amended or
restated as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
8.5 MERGER OR CONSOLIDATION OR SALE.
(a) In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the holder of each Warrant then outstanding or
to be outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, the kind and amount of
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shares of stock and other securities and property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(b) In the event of (i) the sale by the Company of all or
substantially all of its assets, or (ii) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or (iii) a distribution to the Company's stockholders
of any cash, assets, property, rights, evidences of indebtedness, securities or
any other thing of value, or any combination thereof, the Holders of the
unexercised Warrants shall receive notice of such sale, transaction or
distribution twenty (20) days prior to the date of such sale or the record date
for such transaction or distribution, as applicable, and, if they exercise such
Warrants prior to such date, they shall be entitled, in addition to the shares
of Common Stock issuable upon the exercise thereof, to receive such property,
cash, assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment
of the Exercise Price shall be made if the amount of said adjustment shall be
less than ten cents (10 CENTS) per Warrant Security, provided, however, that in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time
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of and together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least ten cents (10 CENTS) per
Warrant Security.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock, or other securities, properties
or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof.
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The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any stockholder. As long
as the Warrants shall be outstanding, the Company shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Common Stock issued to the public in connection herewith may then
be listed and/or quoted on Nasdaq National Market or Nasdaq Small Cap Market.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
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(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof
or to such other address as the Company may designate by notice to the
Holders.
(c) If to the Representative, to Joseph Stevens & Company, Inc., 33
Maiden Lane, New York, New York, 10038, Attention: Joseph Sorbara;
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14. SUPPLEMENTS AND AMENDMENTS. The Company and the
Representative may from time to time supplement or amend this Agreement
without the approval of any Holders of Warrant Certificates (other than the
Representative) in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Representative may deem
necessary or desirable and which the Company and the Representative deem
shall not adversely affect the interests of the Holders of Warrant
Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of
business on April __, 2005. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on April __, 2011.
17. GOVERNING LAW, SUBMISSION TO JURISDICTION. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and the Holders hereby
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irrevocably waive any objection to such exclusive jurisdiction or
inconvenient forum. Any such process or summons to be served upon any of the
Company, the Representative and the Holders (at the option of the party
bringing such action, proceeding or claim) may be served by transmitting a
copy thereof, by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address as set forth in Section 13
hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, the Representative and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contain the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative
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and any other registered Holder(s) of the Warrant Certificates or Warrant
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole and exclusive benefit of the Company
and the Representative and any other Holder(s) of the Warrant Certificates or
Warrant Securities.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CUMETRIX DATA SYSTEMS CORP.
By:
-----------------------------------
Max Toghraie
Chief Executive Officer
Attest:
- -------------------------
Secretary
JOSEPH STEVENS & COMPANY, INC.
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, __________, 2003
No. UW-01 Warrants to Purchase ________
Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies
that______________________________, or registered assigns, is the registered
holder of Warrants to purchase initially, at any time from __________, 1999
until 5:00 p.m. New York time on __________, 2003 ("Expiration Date"), up to
230,000 fully paid and non-assessable shares of common stock, no par value
("Common Stock") of CUMETRIX DATA SYSTEMS CORP., a California corporation
(the "Company"), at the initial exercise price, subject to adjustment in
certain events (the "Exercise Price"), of $____ per share upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, or by surrender of this Warrant Certificate in lieu of
cash payment, but subject to the conditions set forth herein and in the
warrant agreement dated as of __________, 1998 by and between the Company and
Joseph Stevens & Company, Inc. (the "Warrant Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company or by surrender of
this Warrant Certificate.
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No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of April __, 1998
CUMETRIX DATA SYSTEMS CORP.
[SEAL] By:
----------------------------------------
Max Toghraie
Chief Executive Officer
Attest:
- --------------------------
Secretary
3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ Shares
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order of CUMETRIX
DATA SYSTEMS CORP. in the amount of $__________, all in accordance with the
terms of Section 3.1 of the Representative's Warrant Agreement dated as of
___________, 1998 by and between CUMETRIX DATA SYSTEMS CORP. and Joseph Stevens
& Company, Inc.. The undersigned requests that certificates for such
securities be registered in the name of _______________ whose address is
__________________________ and that such certificates be delivered to
______________________________ whose address is ____________________________.
Dated:
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Shares all
in accordance with the terms of Section 3.2 of the Underwriters' Warrant
Agreement dated as of ______________, 1998 by and between CUMETRIX DATA
SYSTEMS CORP. and Joseph Stevens & Company, Inc.. The undersigned requests
that certificates for such securities be registered in the name of
__________________ whose address is _______________________ and that such
certificates be delivered to _____________________ whose address is
____________________________________.
Dated:
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
--------------------------- ----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
6
