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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 10549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 6, 1996
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PC SERVICE SOURCE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-23686 52-1703687
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(STATE OF OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
2350 VALLEY VIEW LANE, DALLAS, TX 75234
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (214) 406-8583
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
In connection with the secondary public offering of 2,200,000 shares
of the Registrant's common stock, par value $.01 per share, attached hereto as
Exhibit 1 is the Underwriting Agreement dated June 6, 1996, by and among the
Registrant, the Selling Stockholders named in Schedule II thereto and the
Underwriters named in Schedule I thereto, a draft of which was previously filed
as an Exhibit to the Registrant's Registration Statement on Form S-1,
Registration Number 333-03977, initially filed with the Securities and Exchange
Commission on May 17, 1996, and declared effective on June 5, 1996.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Listed below is the exhibit filed as a part of this report.
1. Underwriting Agreement date June 6, 1996, by and among the
Registrant, the Selling Stockholders named in Schedule II thereto
and The Robinson-Humphrey Company, Inc., Rauscher Pierce Refsnes,
Inc. and ComVest Partners, Inc., as Representatives of the
Underwriters named in Schedule I thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, PC
Service Source, Inc. has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: June 13, 1996 PC SERVICE SOURCE, INC.
By: /s/ Mark T. Hilz
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Mark T. Hilz, President and
Chief Executive Officer
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EXHIBIT INDEX
1. Underwriting Agreement date June 6, 1996, by and among the
Registrant, the Selling Stockholders named in Schedule II thereto
and The Robinson-Humphrey Company, Inc., Rauscher Pierce Refsnes,
Inc. and ComVest Partners, Inc., as Representatives of the
Underwriters named in Schedule I thereto.
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PC SERVICE SOURCE, INC.
COMMON STOCK
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UNDERWRITING AGREEMENT
June 6, 1996
THE ROBINSON-HUMPHREY COMPANY, INC.
RAUSCHER PIERCE REFSNES, INC.
COMVEST PARTNERS, INC.
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o The Robinson-Humphrey Company, Inc.
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
Dear Sirs:
Subject to the terms and conditions stated herein, (i) PC Service Source,
Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
1,250,000 shares of common stock, par value $.01 per share ("Common Stock"), of
the Company (the "Company Firm Shares"), (ii) Rosetta Stone Corporation
("Rosetta Stone"), Mark T. Hilz and CompuCom Systems, Inc. ("CompuCom") propose
to sell to the Underwriters an aggregate of 900,000 shares of Common Stock (the
"Selling Stockholders' Firm Shares") in the respective amounts set forth
opposite their names in Schedule II hereto, and (iii) Jay Haft and the More
Children's Trust (the "Trust") propose to sell to the Underwriters options (the
"Firm Options") to acquire an aggregate of 50,000 shares of Common Stock (the
"Firm Option Shares") in the respective amounts set forth opposite their names
in Schedule II hereto (Rosetta Stone, Mark T. Hilz, CompuCom, Jay Haft and the
Trust are hereinafter collectively referred to as the "Selling Stockholders"
and the Company Firm Shares, Selling Stockholders' Firm Shares and the Firm
Option Shares are collectively referred to as the "Firm Shares"). In addition,
at the election of the Underwriters, subject to the terms and conditions stated
herein, the Company, Rosetta Stone, Mark T. Hilz and CompuCom propose, subject
to the terms and conditions stated herein, to sell to the Underwriters up to
187,500, 25,500, 4,500 and 112,500 additional shares, respectively, of Common
Stock (the "Optional Shares") (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are collectively
referred to as the "Shares"). In your capacity as representatives of the
several Underwriters, you are referred to herein as the "Representatives."
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1. (a) REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-1
(File No. 333-03977) with respect to the Shares, including a
prospectus subject to completion, has been filed by the
Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended
(the "Act"), and one or more amendments to such registration
statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either
(A) if such registration statement, as it may have been
amended, has become effective under the Act and information
has been omitted therefrom in accordance with Rule 430A under
the Act, a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration
statement) with such changes or insertions as are required by
Rule 430A or permitted by Rule 424(b) under the Act and as
have been provided to and approved by the Representatives, or
(B) if such registration statement, as it may have been
amended, has not become effective under the Act, an amendment
to such registration statement, including a form of
prospectus, a copy of which amendment has been provided to and
approved by the Representatives prior to the execution of this
Agreement. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at
the time when it was or is declared effective, including all
financial statement schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule
430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means
each prospectus subject to completion included in such
registration statement or any amendment or post- effective
amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement at
the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or, if no
prospectus is required to be so filed, such term means the
prospectus included in the Registration Statement. For
purposes of the following representations and warranties, to
the extent reference is made to the Prospectus and at the
relevant time the Prospectus is not yet in existence, such
reference shall be deemed to be to the most recent Preliminary
Prospectus.
(ii) No order preventing or suspending the
use of any Preliminary Prospectus has been issued and no
proceeding for that purpose has been instituted or threatened
by the Commission or the securities authority of any state or
other jurisdiction. If the Registration Statement has become
effective under the Act, no stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued and no proceeding for that purpose has
been instituted or threatened or, to the best knowledge of the
Company, contemplated by the Commission or the securities
authority of any state or other jurisdiction.
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(iii) When any Preliminary Prospectus was
filed with the Commission it (A) contained all statements
required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder and (B)
did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration
Statement or any amendment thereto was or is declared
effective, and at each Time of Delivery (as hereinafter
defined), it (A) contained or will contain all statements
required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission
thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading.
When the Prospectus or any amendment or supplement thereto is
filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or such amendment or supplement is not required to
be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and at each Time of
Delivery, the Prospectus, as amended or supplemented at any
such time, (A) contained or will contain all statements
required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission
thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (iii)
do not apply to statements or omissions made in any
Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with
written information furnished to the Company by any
Underwriter through the Representatives specifically for use
therein.
(iv) The descriptions in the Registration
Statement and the Prospectus of statutes, legal and
governmental proceedings or contracts and other documents are
accurate and fairly present the information required to be
shown; and there are no statutes or legal or governmental
proceedings required to be described in the Registration
Statement or the Prospectus that are not described as required
and no contracts or documents of a character that are required
to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described and filed as required.
(v) Each of the Company and its subsidiary
has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation and has full power and authority
(corporate and other) to own or lease its properties and
conduct its business as described in the Prospectus. The
Company has full power and authority (corporate and other) to
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enter into this Agreement and to perform its obligations
hereunder. Each of the Company and its subsidiary is duly
qualified to transact business as a foreign corporation and is
in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business,
so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the
financial position, results of operations or business of the
Company and its subsidiary.
(vi) The Company's authorized, issued and
outstanding capital stock is as set forth in the Prospectus
under the caption "Capitalization." All of the issued shares
of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and conform
to the description of the Common Stock contained in the
Prospectus. None of the issued shares of capital stock of the
Company or its predecessors or its subsidiary has been issued
or is owned or held in violation of any preemptive rights of
stockholders, and no person or entity (including any holder of
outstanding shares of capital stock of the Company or its
subsidiary) has any preemptive or other rights to subscribe
for any of the Shares.
(vii) All of the 1,900,000 issued shares of
capital stock of the Company's subsidiary have been duly
authorized and validly issued, are fully paid and
nonassessable, and, of such shares, 1,600,000 are owned
beneficially by the Company free and clear of all liens,
security interests, pledges, charges, encumbrances, defects,
stockholders' agreements, voting trusts, equities or claims of
any nature whatsoever and 300,000 are owned beneficially of
record by Philip W. Wise. Other than Cyclix Engineering
Corporation, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any other
corporation or any ownership interest in any partnership,
joint venture or other association other than as disclosed in
the Prospectus.
(viii) Except as disclosed in the Prospectus,
there are no outstanding (A) securities or obligations of the
Company or of its subsidiary convertible into or exchangeable
for any capital stock of the Company or such subsidiary, (B)
warrants, rights or options to subscribe for or purchase from
the Company or such subsidiary any such capital stock or any
such convertible or exchangeable securities or obligations, or
(C) obligations of the Company or such subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or
options.
(ix) Since the date of the most recent
audited financial statements included in the Prospectus,
neither the Company nor its subsidiary has sustained any
material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as disclosed in or
contemplated by the Prospectus.
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(x) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (A) neither the Company nor its subsidiary has
incurred any liabilities or obligations, direct or contingent,
or entered into any transactions, not in the ordinary course
of business, that are material to the Company and its
subsidiary, (B) the Company has not purchased any of its
outstanding capital stock or declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock,
(C) there has not been any change in the capital stock,
long-term debt or short-term debt of the Company or its
subsidiary, and (D) there has not been any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the financial position,
results of operations or business of the Company and its
subsidiary, in each case other than as disclosed in or
contemplated by the Prospectus.
(xi) The warrant to acquire up to 250,000
shares of Common Stock (the "Warrant Shares") issued by the
Company to CompuCom (the "CompuCom Warrant") pursuant to that
certain Common Stock Purchase Warrant dated May 22, 1996 (the
"Warrant Purchase Agreement") has been duly and validly
authorized by all necessary corporate action, has been duly
and validly issued and is exercisable in accordance with the
terms and conditions of the Warrant Purchase Agreement.
CompuCom owns of record the CompuCom Warrant entitling
CompuCom to purchase up to 250,000 shares of Common Stock
which is exercisable on or before the First Time of Delivery
(as hereinafter defined). The CompuCom Warrant is in full
force and effect and the Company is not, nor with the giving
of notice or passage of time or both will it be, in violation
or in default under the terms of any agreement entered into in
connection with or with respect to the CompuCom Warrant.
(xii) The Shares to be issued and sold by
the Company and the Warrant Shares have been duly authorized
and, when the Shares to be issued and sold by the Company are
issued and delivered against payment therefor as provided
herein, and when the Warrant Shares are issued by the Company
and sold by CompuCom upon the exercise of the CompuCom
Warrant, the Shares will be validly issued and fully paid and
nonassessable and will conform to the description of the
Common Stock contained in the Prospectus; and the certificates
evidencing the Shares will comply with all applicable
requirements of Delaware law.
(xiii) Except as disclosed in the Prospectus,
there are no contracts, agreements or understandings between
the Company and any person granting such person the right to
require the Company to file a registration statement under the
Act with respect to any securities of the Company owned or to
be owned by such person or to require the Company to include
such securities in the securities registered pursuant to the
Registration Statement (unless any such right has been
effectively waived) or any securities being registered
pursuant to any other registration statement filed by the
Company under the Act.
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(xiv) All sales of the Company's capital
stock prior to the date hereof were at all relevant times duly
registered under the Act or exempt from the registration
requirements of the Act by reason of Sections 3(b), 4(2) or
4(6) thereof and were duly registered or the subject of an
available exemption from the registration requirements of the
applicable state securities or blue sky laws.
(xv) Neither the Company nor its subsidiary
is, or with the giving of notice or passage of time or both
would be, in violation of its Certificate of Incorporation or
Bylaws or in default under any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument
to which the Company or its subsidiary is a party or to which
any of their respective properties or assets are subject.
(xvi) The issue and sale of the Shares to be
issued and sold by the Company, the issuance and sale of the
Warrant Shares upon the exercise of the CompuCom Warrant and
the performance of this Agreement and the consummation of the
transactions herein contemplated will not conflict with, or
(with or without the giving of notice or the passage of time
or both) result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or its
subsidiary is a party or to which any of their respective
properties or assets is subject, nor will such action conflict
with or violate any provision of the Certificate of
Incorporation or Bylaws of the Company or its subsidiary or
any statute, rule or regulation or any order, judgment or
decree of any court or governmental agency or body having
jurisdiction over the Company or its subsidiary or any of
their respective properties or assets.
(xvii) Neither the Company nor its subsidiary
own any real property; the Company and its subsidiary have
good title to all personal property owned by them, in each
case free and clear of all liens, security interests, pledges,
charges, encumbrances, mortgages and defects, except such as
are disclosed in the Prospectus or such as do not materially
and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such
property by the Company and its subsidiary; and any real
property and buildings held under lease by the Company or its
subsidiary are held under valid, subsisting and enforceable
leases, with such exceptions as are disclosed in the
Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property and buildings
by the Company or such subsidiary.
(xviii) No consent, approval, authorization,
order or declaration of or from, or registration,
qualification or filing with, any court or governmental agency
or body is required for the sale of the Shares or the
consummation of the transactions contemplated by this
Agreement, except the registration of the Shares under the Act
(which, if the Registration Statement is not effective as of
the time of execution hereof, shall be obtained as provided in
this Agreement) and such as
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may be required under state securities or blue sky laws in
connection with the offer, sale and distribution of the Shares
by the Underwriters.
(xix) Other than as disclosed in the
Prospectus, there is no litigation, arbitration, claim,
proceeding (formal or informal) or investigation pending or,
to the knowledge of the Company, threatened (or any basis
therefor) in which the Company or its subsidiary is a party or
of which any of their respective properties or assets are the
subject which, if determined adversely to the Company or such
subsidiary, would individually or in the aggregate have a
material adverse effect on the financial position, results of
operations or business of the Company and its subsidiary.
Neither the Company nor its subsidiary is in violation of, or
in default with respect to, any statute, rule, regulation,
order, judgment or decree, except as described in the
Prospectus or such as do not and will not individually or in
the aggregate have a material adverse effect on the financial
position, results of operations or business of the Company and
its subsidiary, and neither the Company nor its subsidiary is
required to take any action in order to avoid any such
violation or default.
(xx) KPMG Peat Marwick LLP, who have
certified certain financial statements of the Company and its
subsidiary, are, and were during the periods covered by their
reports included in the Registration Statement and the
Prospectus, independent public accountants as required by the
Act and the rules and regulations of the Commission
thereunder.
(xxi) The consolidated financial statements
and schedules (including the related notes) of the Company and
its subsidiary included in the Registration Statement, the
Prospectus or any Preliminary Prospectus were prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods involved and
fairly present the financial position and results of
operations of the Company and its subsidiary, on a
consolidated basis, at the dates and for the periods
presented. The selected financial data set forth under the
caption "Selected Consolidated Financial Data" in the
Prospectus fairly present, on the basis stated in the
Prospectus, the information included therein.
(xxii) This Agreement has been duly
authorized, executed and delivered by the Company and
constitutes the valid and binding agreement of the Company
enforceable against the Company in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws
relating to or affecting the enforcement of creditors' rights
generally and to general equitable principles and except as
the enforceability of rights to indemnity and contribution
under this Agreement may be limited under applicable
securities laws or the public policy underlying such laws.
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(xxiii) Neither the Company nor, to the
knowledge of the Company, any of its officers, directors or
affiliates has (A) taken, directly or indirectly, any action
designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (B) since the
filing of the Registration Statement (1) sold, bid for,
purchased or paid anyone any compensation for soliciting
purchases of, the Shares or (2) paid or agreed to pay to any
person any compensation for soliciting another to purchase any
other securities of the Company.
(xxiv) The Company has obtained for the
benefit of the Company and the Underwriters from each of its
directors, executive officers and the other persons whose
names appear on Schedule III hereto a written agreement that
for a period of 180 days from the date of the Prospectus such
director, officer or other person will not, without the prior
written consent of the Representatives, offer, pledge, sell,
contract to sell, grant any option for the sale of, or
otherwise dispose of (or announce any offer, pledge, sale,
grant of an option to purchase or other disposition), directly
or indirectly, any shares of Common Stock or securities
convertible into, or exercisable or exchangeable for, shares
of Common Stock.
(xxv) Neither the Company, its subsidiary,
nor, to the knowledge of the Company, any director, officer,
agent, employee or other person associated with or acting on
behalf of the Company or such subsidiary has, directly or
indirectly: used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(xxvi) The operations of the Company and its
subsidiary with respect to any real property currently leased
or owned or by any means controlled by the Company or such
subsidiary (the "Real Property") are in compliance in all
material respects with all federal, state, and local laws,
ordinances, rules, and regulations relating to occupational
health and safety and the environment (collectively, "Laws"),
and the Company and its subsidiary have all licenses, permits
and authorizations necessary to operate under all Laws and are
in compliance with all terms and conditions of such licenses,
permits and authorizations; and there is no pending or, to the
knowledge of the Company, threatened claim, litigation or any
administrative agency proceeding, nor has the Company or such
subsidiary received any written or oral notice from any
governmental entity or third party, that: (A) alleges a
violation of any Laws by the Company or such subsidiary; (B)
alleges the Company or such subsidiary is a liable party under
the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. or any state
superfund law; (C)
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alleges possible contamination of the environment by the
Company or such subsidiary; or (D) alleges possible
contamination of the Real Property.
(xxvii) The Company and its subsidiary own or
have the right to use all patents, patent applications,
trademarks, trademark applications, trade names, service
marks, copyrights, franchises, trade secrets, proprietary or
other confidential information and intangible properties and
assets (collectively, "Intangibles") necessary to their
respective businesses as presently conducted or proposed to be
conducted; to the knowledge of the Company, neither the
Company nor such subsidiary has infringed or is infringing,
and neither the Company nor such subsidiary has received
notice of infringement with respect to, asserted Intangibles
of others; and, to the knowledge of the Company, there is no
infringement by others of Intangibles of the Company or its
subsidiary.
(xxviii) The Company and its subsidiary are
insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are
prudent and customary in the businesses in which they are
engaged; and neither the Company nor such subsidiary has any
reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a comparable cost.
(xxix) Each of the Company and its subsidiary
makes and keeps accurate books and records reflecting its
assets and maintains internal accounting controls which
provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation
of the Company's consolidated financial statements in
accordance with generally accepted accounting principles and
to maintain accountability for the assets of the Company and
its subsidiary, (C) access to the assets of the Company and
its subsidiary is permitted only in accordance with
management's authorization, and (D) the recorded
accountability for assets of the Company and its subsidiary is
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxx) The Company's subsidiary is not
currently prohibited by contract or agreement, directly or
indirectly, from paying any dividends to the Company, from
making any other distributions on such subsidiary's capital
stock, from repaying to the Company any loans or advances to
such subsidiary or from transferring any of such subsidiary's
property or assets to the Company, except as disclosed in the
Prospectus.
(xxxi) The Company and its subsidiary have
filed all foreign, federal, state and local tax returns that
are required to be filed by them and have paid all taxes shown
as due on such returns as well as all other taxes, assessments
and governmental charges that are due and payable; and no
deficiency with respect
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to any such return has been assessed or, to the knowledge of
the Company, proposed.
(xxxii) The Company is not, will not become as
a result of the transactions contemplated hereby, and does not
intend to conduct its business in a manner that would cause it
to become, an "investment company" or a company "controlled"
by an "investment company" within the meaning of the
Investment Company Act of 1940.
(xxxiii) The Company has not distributed and,
prior to the later to occur of (i) the Time of Delivery and
(ii) completion of the distribution of the Shares, will not
distribute any offering material in connection with the
offering and sale of the Shares other than the Registration
Statement, the Preliminary Prospectus, the Prospectus or other
materials, if any, permitted by the Act.
(xxxiv) The Company has complied with all
provisions of Florida Statutes, Section 517.075, relating to
issuers doing business with Cuba.
(xxxv) Each of the Company and its subsidiary
has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee
Retirement Income Security Act of 1974 ("ERISA") and the
regulations and published interpretations thereunder with
respect to each "plan" (as defined in ERISA and such
regulations and published interpretations) in which employees
of the Company and its subsidiary are eligible to participate
and each such plan is in compliance in all material respects
with the presently applicable provisions of ERISA and such
regulations and published interpretations, and has not
incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for the payment of premiums in the
ordinary course) or to any such plan under Title IV of ERISA.
(b) REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
Each Selling Stockholder, severally, and not jointly, represents and warrants
to, and agrees with, each of the several Underwriters and the Company that:
(i) Such Selling Stockholder has full
right, power and authority to enter into this Agreement and
the Custody Agreement and Power of Attorney (as hereinafter
defined) and to sell, assign, transfer and deliver to the
Underwriters the Shares or the Firm Options, as the case may
be, to be sold by such Selling Stockholder hereunder.
(ii) Such Selling Stockholder has duly
executed and delivered this Agreement and the Custody
Agreement and Power of Attorney and each constitutes the valid
and binding agreement of such Selling Stockholder enforceable
against such Selling Stockholder in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws
relating to or affecting the enforcement of
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creditors' rights generally and to general equitable
principles and, with respect to this Agreement, except as the
enforceability of rights to indemnity and contribution under
this Agreement may be limited under applicable securities laws
or the public policy underlying such laws.
(iii) No consent, approval, authorization,
order or declaration of or from, or registration,
qualification or filing with, any court or governmental agency
or body is required for the sale of the Shares or the Firm
Options, as the case may be, to be sold by such Selling
Stockholder or the consummation of the transactions
contemplated by this Agreement or the Custody Agreement and
Power of Attorney, except the registration of such Shares and
the Firm Option Shares under the Act (which, if the
Registration Statement is not effective as of the time of
execution hereof, shall be obtained as provided in this
Agreement) and such as may be required under state securities
or blue sky laws in connection with the offer, sale and
distribution of such Shares and the Firm Option Shares by the
Underwriters.
(iv) The sale of the Shares or the Firm
Options, as the case may be, to be sold by such Selling
Stockholder and the performance of this Agreement and the
Custody Agreement and Power of Attorney and the consummation
of the transactions herein and therein contemplated will not
conflict with, or (with or without the giving of notice or the
passage of time or both) result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which such Selling
Stockholder is a party or to which any of such Selling
Stockholder's properties or assets is subject, nor will such
action conflict with or violate any statute, rule or
regulation or any order, judgment or decree of any court or
governmental agency or body having jurisdiction over such
Selling Stockholder or any of such Selling Stockholder's
properties or assets.
(v) Such Selling Stockholder has, and
immediately prior to the First Time of Delivery (as defined in
Section 4 hereof), such Selling Stockholder will have, good
and valid title to the Shares or the Firm Options, as the case
may be, to be sold by such Selling Stockholder hereunder, free
and clear of all liens, security interests, pledges, charges,
encumbrances, defects, stockholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and, upon
delivery of such Shares or the Firm Options, as the case may
be, against payment therefor as provided herein, good and
valid title to such Shares or the Firm Options, as the case
may be, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, stockholders'
agreements, voting trusts, equities or claims of any nature
whatsoever, will pass to the several Underwriters.
(vi) Such Selling Stockholder has not (A)
taken, directly or indirectly, any action designed to cause or
result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the
sale or resale of the Shares
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<PAGE> 12
or (B) since the filing of the Registration Statement (1)
sold, bid for, purchased or paid anyone any compensation for
soliciting purchases of, the Shares or (2) paid or agreed to
pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(vii) When any Preliminary Prospectus was
filed with the Commission it (A) contained all statements
required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder, and
(B) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration
Statement or any amendment thereto was or is declared
effective and at the First Time of Delivery, it (A) contained
or will contain all statements required to be stated therein
in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the
rules and regulations of the Commission thereunder and (B) did
not or will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when
the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is
declared effective), and at the First Time of Delivery, the
Prospectus, as amended or supplemented at any such time, (A)
contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the
rules and regulations of the Commission thereunder and (B) did
not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing
provisions of this paragraph (iii) do not apply to statements
or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to
the Company by any Underwriter through the Representatives
specifically for use therein.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Internal Revenue Code of 1986, as amended,
with respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to the Representatives prior to or at the First
Time of Delivery (as hereinafter defined) a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the Shares or the Firm
Options, as the case may be, to be sold by such
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<PAGE> 13
Selling Stockholder hereunder have been placed in custody with Sayles & Lidji,
P.C. (the "Custodian") for delivery under this Agreement pursuant to a Custody
Agreement and Power of Attorney (the "Custody Agreement and Power of Attorney")
executed by each of the Selling Stockholders appointing the persons indicated
on Schedule II hereto with respect to each of the Selling Stockholders as
agents and attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the delivery of the
Shares or the Firm Options, as the case may be, to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling
Stockholder in connection with the transactions contemplated by this Agreement
and the Custody Agreement and Power of Attorney.
Each of the Selling Stockholders specifically agrees that the Shares
or the Firm Options, as the case may be, represented by the certificates or the
option agreements, as the case may be, held in custody for such Selling
Stockholder under the Custody Agreement and Power of Attorney are subject to
the interests of the Underwriters hereunder, and that the arrangements made by
such Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Custody Agreement and Power of
Attorney, are irrevocable. Each of the Selling Stockholders specifically
agrees that the obligations of the Selling Stockholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of any
individual Selling Stockholder or, in the case of an estate or trust, by the
death or incapacity of any executor or trustee or the termination of such
estate or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of any
other event.
(c) ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ROSETTA STONE.
Rosetta Stone represents and warrants to, and agrees with, each of the several
Underwriters and the Company that:
(i) Rosetta Stone had the full right, power and
authority to grant the Firm Options to Jay Haft and the Trust,
and, upon exercise of the Firm Options, to deliver the Firm
Option Shares to the Underwriters hereunder and as further set
forth in Section 2 hereof.
(ii) The execution and delivery of the Firm
Options have been duly authorized by all necessary action of
Rosetta Stone.
(d) ADDITIONAL REPRESENTATION AND WARRANTIES OF COMPUCOM.
CompuCom represents and warrants to, and agrees with, each of the several
Underwriters and the Company that:
(i) CompuCom, upon exercise of the CompuCom
Warrant as contemplated herein, will have good and valid title
to the Warrant Shares to be sold by CompuCom hereunder, free
and clear of all liens, security interests, pledges, charges,
encumbrances, defects, stockholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and, upon
delivery of such Warrant
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<PAGE> 14
Shares against payment therefor as provided herein, good and
valid title to such Warrant Shares, free and clear of all
liens, security interests, pledges, charges, encumbrances,
defects, stockholders' agreements, voting trusts, equities or
claims of any nature whatsoever, will pass to the several
Underwriters.
(ii) CompuCom has the full right, power and
authority to exercise the CompuCom Warrant, and upon exercise
of the CompuCom Warrant, to deliver the Warrant Shares to the
Underwriters.
(iii) The exercise of the CompuCom Warrant has been
duly authorized by all necessary actions of CompuCom.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions herein set forth, (a) the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $13.18 per share, the
number of Company Firm Shares (to be adjusted by the Representatives so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Company Firm Shares to be sold by the Company by a fraction, the numerator of
which is the aggregate number of Company Firm Shares to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto, and the denominator of which is the aggregate number of Company Firm
Shares to be purchased by the Underwriters from the Company hereunder, (b) in
the event and to the extent that the Underwriters shall exercise the election
to purchase Optional Shares as provided below, the Company agrees to issue and
the Company and each of Rosetta Stone, Mark T. Hilz and CompuCom agrees to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of Rosetta Stone, Mark T.
Hilz and CompuCom, at the purchase price per share set forth in clause (a) of
this Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by the Representatives so as
to eliminate fractional shares and which shall be proportionate among the
Company and such stockholder based on the number of Optional Shares proposed to
be sold by each of them) determined by multiplying such number of Optional
Shares by a fraction, the numerator of which is the maximum number of Optional
Shares that such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto, and the denominator of which is
the maximum number of the Optional Shares that all of the Underwriters are
entitled to purchase hereunder, (c) each of Rosetta Stone, Mark T. Hilz and
CompuCom agrees, severally and not jointly, to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly,
to purchase from each of Rosetta Stone, Mark T. Hilz and CompuCom, at the
purchase price per share set forth in clause (a) of this Section 2, the number
of Selling Stockholders' Firm Shares (to be adjusted by the Representatives so
as to eliminate fractional shares) determined by multiplying the aggregate
number of Selling Stockholders' Firm Shares to be sold by such stockholders as
set forth opposite their respective names in Schedule II hereto by a fraction,
the numerator of which is the aggregate number of Selling Stockholders' Firm
Shares to be purchased by such Underwriter in Schedule I hereto, and the
denominator of which is the aggregate number of Selling Stockholders' Firm
Shares to be purchased by the Underwriters from such stockholders hereunder,
(d) each of Jay Haft and the Trust agrees, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase
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<PAGE> 15
from each of Jay Haft and the Trust, the number of Firm Options set forth
opposite the name of such Underwriter in Schedule I hereto (to be adjusted by
the Representatives in their discretion so as to eliminate fractional shares),
at a purchase price for each of the Firm Options equal to the purchase price
per share to be paid for the Company Firm Shares as set forth in clause (a) of
this Section 2, less the $3.00 per share option exercise price for the Firm
Option Shares as set forth in the Firm Options, and (e) each of the
Underwriters hereby notifies Jay Haft, the Trust and Rosetta Stone (the issuer
of the Firm Options) of such Underwriter's intention to exercise its portion of
the Firm Options at the First Time of Delivery (as hereinafter defined) in
accordance with the terms of the Firm Options, and upon such exercise and the
payment by the Underwriters to Rosetta Stone of the $3.00 per share option
exercise price Rosetta Stone shall deliver to the Underwriters the Firm Option
Shares.
The Company and each of Rosetta Stone, Mark T. Hilz and CompuCom
hereby severally grant to the Underwriters the right to purchase at their
election in whole or in part from time to time up to that number of Optional
Shares set forth opposite their respective names in Schedule II hereto, at the
purchase price per share set forth in clause (a) in the paragraph above for the
sole purpose of covering over-allotments in the sale of Firm Shares. Any such
election to purchase Optional Shares may be exercised by written notice from
the Representatives to the Company and the Attorneys- in-Fact, given from time
to time within a period of 30 calendar days after the date of this Agreement
and setting forth the aggregate number of Optional Shares to be purchased and
the date on which such Optional Shares are to be delivered, as determined by
the Representatives but in no event earlier than the First Time of Delivery (as
hereinafter defined) or, unless the Representatives, the Company and the
Attorneys-in-Fact otherwise agree in writing, earlier than two or later than
ten business days after the date of such notice. In the event the
Representatives elect to purchase all or a portion of the Optional Shares, the
Company and each of Rosetta Stone, Mark T. Hilz and CompuCom agree to furnish
or cause to be furnished to the Representatives the certificates, letters and
opinions, and to satisfy all conditions, set forth in Section 7 hereof at each
Subsequent Time of Delivery (as hereinafter defined).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by the
Representatives of the release of the Shares, the several Underwriters propose
to offer the Shares for sale upon the terms and conditions disclosed in the
Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form
for the Shares to be purchased by each Underwriter hereunder, and in such
denominations and registered in such names as The Robinson-Humphrey Company,
Inc. may request upon at least 48 hours' prior notice to the Company, shall be
delivered by or on behalf of the Company and the Selling Stockholders to the
Representatives for the account of such Underwriter, against payment by such
Underwriter on its behalf of the purchase price therefor in immediately
available funds to the order of the Company and the Custodian, as their
interests may appear. It is understood and agreed that the $3.00 per share
option exercise price for each of the Firm Option Shares shall be paid by the
Underwriters to Rosetta Stone at the First Time of Delivery in immediately
available funds, against delivery of the Firm Option Shares. The closing of
the sale and purchase of the Shares shall be held at the offices of Sayles &
Lidji, P.C., 4400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270,
except that physical delivery of such certificates shall be made at the office
of The Depository Trust Company, 55 Water Street, New York, New York 10041.
The
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<PAGE> 16
time and date of such delivery and payment shall be, with respect to the Firm
Shares, at 10:00 am., Eastern Daylight Time, on June 11, 1996 and, with respect
to the Optional Shares, at 10:00 a.m., Eastern Daylight Time, on the date
specified by the Representatives in the written notice given by the
Representatives of the Underwriters' election to purchase all or part of such
Optional Shares, or at such other time and date as the Representatives, the
Company and the Attorneys-in-Fact may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery," such time and date for delivery of any Optional Shares, if not the
First Time of Delivery, is herein called a "Subsequent Time of Delivery," and
each such time and date for delivery is herein called a "Time of Delivery." The
Company will make such certificates available for checking and packaging at
least 24 hours prior to each Time of Delivery at the office of The Depository
Trust Company, 55 Water Street, New York, New York 10041 or at such other
location in New York, New York specified by the Representatives in writing at
least 48 hours prior to such Time of Delivery.
5. (a) COVENANTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters:
(i) If the Registration Statement has been
declared effective prior to the execution and delivery of this
Agreement, the Company will file the Prospectus with the
Commission pursuant to and in accordance with subparagraph (1)
(or, if applicable and if consented to by the Representatives,
subparagraph (4)) of Rule 424(b) not later than the earlier of
(A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day
after the date on which the Registration Statement is declared
effective. The Company will advise the Representatives
promptly of any such filing pursuant to Rule 424(b).
(ii) The Company will not file with the
Commission the prospectus or the amendment referred to in the
second sentence of Section 1(a)(i) hereof, any amendment or
supplement to the Prospectus or any amendment to the
Registration Statement unless the Representatives have
received a reasonable period of time to review any such
proposed amendment or supplement and consented to the filing
thereof and will use its best efforts to cause any such
amendment to the Registration Statement to be declared
effective as promptly as possible. Upon the request of the
Representatives or counsel for the Underwriters, the Company
will promptly prepare and file with the Commission, in
accordance with the rules and regulations of the Commission,
any amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Shares by
the several Underwriters and will use its best efforts to
cause any such amendment to the Registration Statement to be
declared effective as promptly as possible. If required, the
Company will file any amendment or supplement to the
Prospectus with the Commission in the manner and within the
time period required by Rule 424(b) under the Act. The
Company will advise the Representatives, promptly after
receiving notice thereof, of the time when the Registration
Statement or any amendment thereto has been filed or declared
effective or the
16
<PAGE> 17
Prospectus or any amendment or supplement thereto has been
filed and will provide evidence to the Representatives of each
such filing or effectiveness.
(iii) The Company will advise the
Representatives promptly after receiving notice or obtaining
knowledge of (A) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or any part thereof or any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (B) the
suspension of the qualification of the Shares for offer or
sale in any jurisdiction or of the initiation or threatening
of any proceeding for any such purpose, (C) any request made
by the Commission or any securities authority of any other
jurisdiction for amending the Registration Statement, for
amending or supplementing the Prospectus or for additional
information or (D) any threat by the Commission or any such
securities authority to initiate proceedings for issuance of
such stop order or other order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto. The Company will use its
best efforts to prevent the issuance of any such stop order or
other order and, if any such stop order or other order is
issued, to obtain the withdrawal thereof as promptly as
possible.
(iv) If the delivery of a prospectus
relating to the Shares is required under the Act at any time
prior to the expiration of nine months after the date of the
Prospectus and if at such time any events have occurred as a
result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or if for any reason it is
necessary during such same period to amend or supplement the
Prospectus to comply with the Act or the rules and regulations
thereunder, the Company will promptly notify the
Representatives and upon the request of the Representatives
(but at the Company's expense) prepare and file with the
Commission an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance
and will furnish without charge to each Underwriter and to any
dealer in securities as many copies of such amended or
supplemented Prospectus as the Representatives may from time
to time reasonably request. If the delivery of a prospectus
relating to the Shares is required under the Act at any time
nine months or more after the date of the Prospectus, upon the
request of the Representatives but at the expense of the
Underwriters, the Company will prepare and deliver to the
Underwriters as many copies as the Representatives may request
of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act. Neither the Representatives'
consent to, nor the Underwriters' delivery of, any such
amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section 7.
(v) The Company promptly from time to time
will take such action as the Representatives may reasonably
request to qualify the Shares for
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<PAGE> 18
offering and sale under the securities or blue sky laws of
such jurisdictions as the Representatives may request and will
continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction.
(vi) The Company will promptly provide the
Representatives, without charge, (A) four manually executed
copies of the Registration Statement as originally filed with
the Commission and of each amendment thereto, each accompanied
by all exhibits thereto, (B) for each other Underwriter a
conformed copy of the Registration Statement as originally
filed and of each amendment thereto, without exhibits, and (C)
so long as a prospectus relating to the Shares is required to
be delivered under the Act, as many copies of each Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request.
(vii) As soon as practicable, but in any
event not later than the last day of the thirteenth month
after the effective date of the Registration Statement, the
Company will make generally available to its security holders
an earnings statement of the Company and its subsidiary, if
any, covering a period of at least 12 months beginning after
the effective date of the Registration Statement (which need
not be audited) complying with Section 11(a) of the Act and
the rules and regulations thereunder.
(viii) During the period beginning from the
date hereof and continuing to and including the date 180 days
after the date of the Prospectus, the Company will not,
without the prior written consent of the Representatives,
offer, pledge, issue, sell, contract to sell, grant any option
for the sale of, or otherwise dispose of (or announce any
offer, pledge, sale, grant of an option to purchase or other
disposition), directly or indirectly, any shares of Common
Stock or securities convertible into, exercisable or
exchangeable for, shares of Common Stock, except as provided
in Section 2 and except for the issuance of Common Stock upon
the exercise of stock options or warrants granted pursuant to
any of the Company's existing stock option plans or any
successor or other plan, provided no such option or warrant
shall be exercisable during such 180-day period.
(ix) During a period of five years from the
effective date of the Registration Statement, the Company will
furnish to the Representatives and, upon request, to each of
the other Underwriters, without charge, (A) copies of all
reports or other communications (financial or other) furnished
to stockholders, (B) as soon as they are available, copies of
any reports and financial statements furnished to or filed
with the Commission or any national securities exchange, and
(C) such additional information concerning the business and
financial condition of the Company and its subsidiary, if any,
as the Representatives may reasonably request.
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<PAGE> 19
(x) Neither the Company nor any of its
officers, directors or affiliates will (A) take, directly or
indirectly, prior to the termination of the underwriting
syndicate contemplated by this Agreement, any action designed
to cause or to result in, or that might reasonably be expected
to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or
resale of any of the Shares, (B) sell, bid for, purchase or
pay anyone any compensation for soliciting purchases of, the
Shares or (C) pay or agree to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(xi) The Company will apply the net
proceeds received by it from the offering in the manner set
forth under "Use of Proceeds" in the Prospectus.
(xii) The Company will cause the Shares to
be listed on the Nasdaq National Market at each Time of
Delivery.
(xiii) If at any time during the period
beginning on the date the Registration Statement becomes
effective and ending on the later of (A) the date 30 days
after such effective date and (B) the date that is the earlier
of (1) the date on which the Company first files with the
Commission a Quarterly Report on Form 10-Q after such
effective date and (2) the date on which the Company first
issues a quarterly financial report to stockholders after such
effective date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in the
reasonable opinion of the Representatives the market price of
the Common Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or
event necessitates an amendment of or supplement to the
Prospectus), the Company will, after written notice from the
Representatives advising the Company to the effect set forth
above, forthwith prepare, consult with the Representatives
concerning the substance of, and disseminate a press release
or other public statement, reasonably satisfactory to the
Representatives, responding to or commenting on such rumor,
publication or event.
(xiv) The Company, upon exercise of the
CompuCom Warrant, will issue and deliver the Warrant Shares to
CompuCom in accordance with the CompuCom Warrant and as
contemplated herein.
(b) COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder covenants and agrees with each of the Underwriters:
(i) During the period beginning from the
date hereof and continuing to and including the date 180 days
after the date of the Prospectus, such Selling Stockholder
will not, without the prior written consent of the
Representatives, offer, pledge, issue, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of (or
announce any offer, pledge, sale, grant of an option to
purchase or other disposition), directly or indirectly, any
shares of
19
<PAGE> 20
Common Stock or securities convertible into, exercisable or
exchangeable for, shares of Common Stock, except as provided
in Section 2.
(ii) Such Selling Stockholder will not (A)
take, directly or indirectly, prior to the termination of the
underwriting syndicate contemplated by this Agreement, any
action designed to cause or to result in, or that might
reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares, (B) sell,
bid for, purchase or pay anyone any compensation for
soliciting purchases of, the Shares or (C) pay to or agree to
pay any person any compensation for soliciting another to
purchase any other securities of the Company.
(c) ADDITIONAL COVENANT OF COMPUCOM. CompuCom covenants
and agrees with each of the Underwriters to exercise the CompuCom Warrant at or
prior to the First Time of Delivery.
6. EXPENSES. The Company and each of the Selling Stockholders
will pay all costs and expenses incident to the performance of their respective
obligations under this Agreement (in such proportion as may be agreed upon
among them), whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated pursuant to Section 10 hereof,
including, without limitation, all costs and expenses incident to (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and, if applicable,
filing of the Registration Statement (including all amendments thereto), any
Preliminary Prospectus, the Prospectus and any amendments and supplements
thereto, this Agreement and any blue sky memoranda; (ii) the delivery of copies
of the foregoing documents to the Underwriters; (iii) the filing fees of the
Commission and the National Association of Securities Dealers, Inc. relating to
the Shares; (iv) the preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Shares, including transfer agent's and
registrar's fees; (v) the qualification of the Shares for offering and sale
under state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto; (vi) listing of
the Shares on the Nasdaq National Market and (vii) any expenses for travel,
lodging and meals incurred by the Company and any of its officers, directors
and employees in connection with any meetings with prospective investors in the
Shares. In addition, each Selling Stockholder will pay all costs and expenses
incident to (i) the fees, disbursements and expenses of counsel for such
Selling Stockholder, and (ii) the sale and delivery of the Shares to be sold by
such Selling Stockholder to the Underwriters hereunder. It is understood,
however, that, except as provided in this Section, Section 8 and Section 10
hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses relating to the offer and sale
of the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters hereunder to purchase and pay for the Shares to be
delivered at each Time of Delivery shall be subject, in their discretion, to
the accuracy of the representations and warranties
20
<PAGE> 21
of the Company and the Selling Stockholders contained herein as of the date
hereof and as of such Time of Delivery, to the accuracy of the statements of
Company officers made pursuant to the provisions hereof, to the performance by
the Company and the Selling Stockholders of their respective covenants and
agreements hereunder, and to the following additional conditions precedent:
(a) If the registration statement as amended to date has
not become effective prior to the execution of this Agreement, such
registration statement shall have been declared effective not later
than 11:00 am., Eastern Daylight Time, on the date of this Agreement
or such later date and/or time as shall have been consented to by the
Representatives in writing. If required, the Prospectus and any
amendment or supplement thereto shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing and in accordance with Section 5(a) of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceedings for that purpose shall have been instituted, threatened
or, to the best knowledge of the Company and the Representatives,
contemplated by the Commission; and all requests for additional
information on the part of the Commission shall have been complied
with to the reasonable satisfaction of the Representatives.
(b) Powell, Goldstein, Frazer & Murphy, counsel for the
Underwriters, shall have furnished to the Representatives such opinion
or opinions, dated such Time of Delivery, with respect to the
incorporation of the Company, the validity of the Shares being
delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as the Representatives may
reasonably request, and the Company shall have furnished to such
counsel prior to such Time of Delivery such documents as they request
for the purpose of enabling them to pass upon such matters.
(c) The Representatives shall have received an opinion,
dated such Time of Delivery, of Sayles & Lidji, P.C., counsel for the
Company, in form and scope satisfactory to the Representatives and
counsel for the Underwriters, to the effect that:
(i) The Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to own or lease its
properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into
this Agreement and perform its obligations hereunder. The
Company is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or
conducts any business, so as to require such qualification,
except where the failure to so qualify would not have a
material adverse effect on the financial position, results of
operations or business of the Company and its subsidiary.
(ii) The subsidiary of the Company has been
duly incorporated, is validly existing as a corporation in
good standing under the laws of its
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<PAGE> 22
jurisdiction of incorporation and has the corporate power and
authority to own or lease its properties and conduct its
business as described in the Registration Statement and the
Prospectus. Such subsidiary is duly qualified to transact
business as a foreign corporation and is in good standing
under the laws of each other jurisdiction in which it owns or
leases property, or conducts any business, so as to require
such qualification, except where the failure to so qualify
would not have a material adverse effect on the financial
position, results of operations or business of the Company and
its subsidiary.
(iii) The Company's authorized, issued and
outstanding capital stock is as set forth in the Prospectus
under the caption "Capitalization." All of the issued shares
of capital stock of the Company (including the Shares to be
sold by the Selling Stockholders) have been duly authorized
and validly issued, are fully paid and nonassessable and
conform to the description of the Common Stock contained in
the Prospectus. None of the issued shares of capital stock of
the Company or its predecessors or of its subsidiary has been
issued or is owned or held in violation of any preemptive
rights of stockholders, and no person or entity (including any
holder of outstanding shares of capital stock of the Company
or its subsidiary) has any preemptive or other rights to
subscribe for any of the Shares.
(iv) All of the 1,900,000 issued shares of
capital stock of the Company's subsidiary have been duly
authorized and validly issued, are fully paid and
nonassessable, and of such shares 1,600,000 are owned of
record by the Company and, to such counsel's knowledge, are
owned beneficially by the Company free and clear of all liens,
security interests, pledges, charges, encumbrances,
stockholders' agreements, voting trusts, defects, equities or
claims of any nature whatsoever and 300,000 are owned of
record by Philip W. Wise. Other than Cyclix Engineering
Corporation, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any other
corporation or any ownership interest in any partnership,
joint venture or other association except as disclosed in the
Prospectus.
(v) Except as disclosed in the Prospectus,
there are no outstanding (A) securities or obligations of the
Company or its subsidiary convertible into or exchangeable for
any capital stock of the Company or such subsidiary, (B)
warrants, rights or options to subscribe for or purchase from
the Company or such subsidiary any such capital stock or any
such convertible or exchangeable securities or obligations, or
(C) obligations of the Company or such subsidiary to issue any
shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or
options.
(vi) The Shares to be issued and sold by
the Company (including the Warrant Shares) have been duly
authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully
paid and nonassessable and will conform to the description of
the Common Stock contained in the Prospectus; the certificates
evidencing the Shares comply with all
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<PAGE> 23
applicable requirements of Delaware law; the Shares have been
listed on the Nasdaq National Market.
(vii) Except as disclosed in the Prospectus,
there are no contracts, agreements or understandings known to
such counsel between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Act with respect to any securities of the
Company owned or to be owned by such person or to require the
Company to include such securities in the securities
registered pursuant to the Registration Statement (unless any
such right has been effectively waived) or in any securities
being registered pursuant to any other registration statement
filed by the Company under the Act.
(viii) All sales of the Company's capital
stock prior to the date hereof were at all relevant times duly
registered under the Act or exempt from the registration
requirements of the Act by reason of Sections 3(b), 4(2) or
4(6) thereof and were duly registered or the subject of an
available exemption from the registration requirements of the
applicable state securities or blue sky laws.
(ix) Neither the Company nor its subsidiary
is, or with the giving of notice or passage of time or both,
would be, in violation of its Certificate of Incorporation or
Bylaws or in default under any material indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or
instrument to which the Company or such subsidiary is a party
or to which any of their respective properties or assets is
subject.
(x) The issue and sale of the Shares being
issued at such Time of Delivery (including the Warrant Shares)
and the performance of this Agreement and the consummation of
the transactions herein contemplated will not conflict with,
or (with or without the giving of notice or the passage of
time or both) result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument known to such counsel to which
the Company or such subsidiary is a party or to which any of
their respective properties or assets is subject, nor will
such action conflict with or violate any provision of the
Certificate of Incorporation or Bylaws of the Company or of
its subsidiary or any statute, rule or regulation or any
order, judgment or decree known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or of its subsidiary or any of their respective
properties or assets.
(xi) Any material real property and
buildings held under lease by the Company or its subsidiary
are held by the Company or such subsidiary under valid,
subsisting and enforceable leases with such exceptions as are
disclosed in the Prospectus or are not material and do not
interfere with the use made and proposed to be made of such
property and buildings by the Company or such subsidiary.
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<PAGE> 24
(xii) No consent, approval, authorization,
order or declaration of or from, or registration,
qualification or filing with, any court or governmental agency
or body is required for the issue and sale of the Shares or
the consummation of the transactions contemplated by this
Agreement, except the registration of the Shares under the Act
and such as may be required under state securities or blue sky
laws in connection with the offer, sale and distribution of
the Shares by the Underwriters.
(xiii) To such counsel's knowledge and other
than as disclosed in or contemplated by the Prospectus, there
is no litigation, arbitration, claim, proceeding (formal or
informal) or investigation pending or threatened (or any basis
therefor) in which the Company or its subsidiary is a party or
of which any of their respective properties or assets is the
subject which, if determined adversely to the Company or such
subsidiary, would individually or in the aggregate have a
material adverse effect on the financial position, results of
operations or business of the Company and its subsidiary; and,
to such counsel's knowledge, neither the Company nor its
subsidiary is in violation of, or in default with respect to,
any statute, rule, regulation, order, judgment or decree,
except as described in the Prospectus, nor is the Company or
such subsidiary required to take any action in order to avoid
any such violation or default.
(xiv) This Agreement has been duly
authorized, executed and and delivered by the Company.
(xv) The Registration Statement and the
Prospectus and each amendment or supplement thereto (other
than the financial statements and related schedules therein,
as to which such counsel need express no opinion), as of their
respective effective or issue dates, complied as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder. The descriptions in the
Registration Statement and the Prospectus of statutes, legal
and governmental proceedings or contracts and other documents
are accurate and fairly present the information required to be
shown; and such counsel do not know of any statutes or legal
or governmental proceedings required to be described in the
Registration Statement or Prospectus that are not described as
required or of any contracts or documents of a character
required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required.
(xvi) The Registration Statement is
effective under the Act; any required filing of the Prospectus
pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and to such counsel's
knowledge no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued
and, to such counsel's knowledge, no proceedings for that
purpose have been instituted or threatened or are contemplated
by the Commission.
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<PAGE> 25
(xvii) The Company is not, and will not be as
a result of the consummation of the transactions contemplated
by this Agreement, an "investment company," or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940.
(xviii) The Warrant Shares have been duly and
validly authorized by all necessary corporate action, have
been duly and validly issued and are exercisable, subject to
the terms and conditions of the Warrant Purchase Agreement
pursuant to which they were issued, in accordance with their
terms.
Such counsel shall also state that they have no reason to believe that
the Registration Statement, or any further amendment thereto made prior to such
Time of Delivery, on its effective date and as of such Time of Delivery,
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, or any
amendment or supplement thereto made prior to such Time of Delivery, as of its
issue date and as of such Time of Delivery, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (provided that such
counsel need express no belief regarding the financial statements and related
schedules and other financial data contained in the Registration Statement, any
amendment thereto, or the Prospectus, or any amendment or supplement thereto).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the states of Delaware and
Texas or the United States, to the extent satisfactory in form and scope to
counsel for the Underwriters, upon the opinion of local counsel, provided that
such counsel states such counsel believes that the Underwriters are justified
in relying upon such opinion and copies of such opinion are delivered to the
Representatives and counsel for the Underwriters.
(d) The Representatives shall have received an opinion, dated such
Time of Delivery, of Sayles & Lidji, P.C., counsel for each of the Selling
Stockholders in form and scope satisfactory to the Representatives and counsel
for the Underwriters, to the effect that:
(i) A Custody Agreement and Power of Attorney has
been duly executed and delivered by such Selling Stockholder, each of
which is enforceable against such Selling Stockholder in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles.
(ii) This Agreement has been duly executed and
delivered by or on behalf of such Selling Stockholder; the sale of the
Shares or the Firm Options, as the case may be, to be sold by such
Selling Stockholder at such Time of Delivery and the performance of
this Agreement and the Custody Agreement and Power of Attorney and the
consummation of the transactions herein and therein contemplated will
not conflict with,
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<PAGE> 26
or (with or without the giving of notice or the passage of time or
both) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, the Certificate of
Incorporation and Bylaws of such Selling Stockholder, if such Selling
Stockholder is a corporation, or any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument known to
such counsel to which such Selling Stockholder is a party or to which
any of such Selling Stockholder's properties or assets is subject, nor
will such action conflict with or violate any statute, rule or
regulation or any order, judgment or decree known to such counsel of
any court or governmental agency or body having jurisdiction over such
Selling Stockholder or any of such Selling Stockholder's properties or
assets.
(iii) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the issue and
sale of the Shares or the Firm Options, as the case may be, being sold
by such Selling Stockholder or the consummation of the transactions
contemplated by this Agreement or the Custody Agreement and Power of
Attorney, except the registration of such Shares and the Firm Option
Shares under the Act and such as may be required under state
securities or blue sky laws in connection with the offer, sale and
distribution of such Shares by the Underwriters.
(iv) Upon delivery of the Shares or the Firm Options,
as the case may be, against payment therefor as provided herein and
assuming that none of the several Underwriters has notice of any
adverse claim to such Shares, or the Firm Options, as the case may be,
the several Underwriters will acquire such Shares, or the Firm
Options, as the case may be, free of any adverse claim.
(v) The Firm Options granted to each of Jay Haft and
the Trust have been duly executed and delivered by Rosetta Stone, each
of which is enforceable against Rosetta Stone in accordance with its
terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on certificates of responsible
officers of the Company, the Selling Stockholders and public officials and, as
to matters involving the application of laws of any jurisdiction other than the
states of Delaware and Texas or the United States, to the extent satisfactory
in form and scope to counsel for the Underwriters, upon the opinion of local
counsel, provided that such counsel states such counsel believes that the
Underwriters are justified in relying upon such opinion and copies of such
opinion are delivered to the Representatives and counsel for the Underwriters.
(e) The Representatives shall have received from KPMG Peat Marwick
LLP letters dated, respectively, the date hereof (or, if the Registration
Statement has been declared effective prior to the execution and delivery of
this Agreement, dated such effective date and the date of this Agreement) and
each Time of Delivery, in form and substance satisfactory to the
Representatives. In the event that the letters referred to in this Section
7(e) set forth any
26
<PAGE> 27
changes, decreases or increases in amounts reflected in the financial
statements included in the Prospectus, it shall be a further condition to the
obligations of the Underwriters that (i) such letters shall be accompanied by a
written explanation by the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (ii) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares being delivered at such Time of Delivery as contemplated
by the Registration Statement, as amended as of the date of such letter.
(f) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company nor its subsidiary shall have
sustained (i) any loss or interference with their respective businesses from
fire, explosion, flood, hurricane or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as disclosed in or contemplated by the Prospectus, or
(ii) any change, or any development involving a prospective change (including
without limitation a change in management or control of the Company), in or
affecting the position (financial or otherwise), results of operations, net
worth or business prospects of the Company and its subsidiary, otherwise than
as disclosed in or contemplated by the Prospectus, the effect of which, in
either such case, is in the sole judgment of the Representatives so material
and adverse as to make it impracticable or inadvisable to proceed with the
purchase, sale and delivery of the Shares being delivered at such Time of
Delivery as contemplated by the Registration Statement, as amended as of the
date hereof.
(g) Subsequent to the date hereof there shall not have occurred
any of the following: (i) any suspension or limitation in trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange, or in the Common Stock by the Commission or the
Nasdaq National Market; (ii) a moratorium on commercial banking activities in
New York declared by either federal or state authorities; or (iii) any outbreak
or escalation of hostilities involving the United States, declaration by the
United States of a national emergency or war or any other national or
international calamity or emergency if the effect of any such event specified
in this clause (iii) in the sole judgment of the Representatives makes it
impracticable or inadvisable to proceed with the purchase, sale and delivery of
the Shares being delivered at such Time of Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(h) The Company shall have furnished to the Representatives at
such Time of Delivery certificates of officers of the Company and certificates
of the Selling Stockholders, satisfactory to the Representatives and counsel to
the Underwriters, as to the accuracy of the representations and warranties of
the Company and such Selling Stockholders herein at and as of such Time of
Delivery, as to the performance by the Company and such Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as the Representatives may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (f)
of this Section 7, and as to such other matters as the Representatives may
reasonably request.
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(i) The Shares shall be listed on the Nasdaq National Market.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement made by the Company in Section
1(a) of this Agreement; (ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or (B) any application or other document, or
any amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities or blue sky
laws thereof or filed with the Commission or any securities association or
securities exchange (each an "Application"); or (iii) the omission or alleged
omission to state in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or any Application a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating, defending against or appearing as
a third-party witness in connection with any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives expressly for use therein. The Company will not,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding (or related cause of action or portion thereof) in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such claim, action, suit or
proceeding (or related cause of action or portion thereof).
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement made by such Selling
Stockholder in Section 1(b) of this Agreement; or (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, or any Application or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating, defending against or appearing as a third-party
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<PAGE> 29
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that no such Selling Stockholder shall be liable in any such
case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any amendment
or supplement thereto or any Application in reliance upon and in conformity
with written information furnished to the Company by any Underwriter through
the Representatives expressly for use therein. No Selling Stockholder will,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding (or related cause of action or portion thereof) in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter from all liability arising out of such claim, action, suit or
proceeding (or related cause of action or portion thereof).
(c) Each Underwriter, severally but not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against
any losses, claims, damages or liabilities to which the Company or any Selling
Stockholder may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through the Representatives expressly for use therein; and
will reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party); provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to
29
<PAGE> 30
assume the defense of such action on behalf of such indemnified party and such
indemnified party shall have the right to select separate counsel to defend
such action on behalf of such indemnified party. After such notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence or (ii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party. Nothing in this Section 8(d) shall preclude an
indemnified party from participating at its own expense in the defense of any
such action so assumed by the indemnifying party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Stockholders on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount
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by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) Notwithstanding any other provision of this Agreement, (i) the
liability of CompuCom under this Section 8 shall not exceed an amount equal to
the net proceeds received by CompuCom (before deducting expenses) from the sale
of the Shares and (ii) the indemnity obligations of Jay Haft and the Trust
provided under this Section 8 shall only arise out of or be based upon
information furnished in writing by or on behalf of Jay Haft or the Trust
expressly for use in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto.
(g) The obligations of the Company and the Selling Stockholders
under this Section 8 shall be in addition to any liability which the Company or
such Selling Stockholders may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in
its obligation to purchase Shares at a Time of Delivery, the Representatives
may in their discretion arrange for the Representatives or another party or
other parties to purchase such Shares on the terms contained herein. If within
thirty-six (36) hours after such default by any Underwriter the Representatives
do not arrange for the purchase of such Shares, the Company and the Selling
Stockholders shall be entitled to a further period of thirty-six (36) hours
within which to procure another party or other parties satisfactory to the
Representatives to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, the Representatives notify the
Company and the Selling Stockholders that the Representatives have so arranged
for the purchase of such Shares, or the Company and the Selling Stockholders
notify the Representatives that they have so arranged for the purchase of such
Shares, the Representatives or the Company and the Selling Stockholders shall
have the right to postpone a Time of Delivery for a period of not more than
seven days in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus that in the opinion of the
Representatives may thereby be made necessary. The cost of preparing, printing
and filing any such amendments shall be paid for by the Underwriters. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
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(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by the
Representatives and the Company and the Selling Stockholders as provided in
subsection (a) above, the aggregate number of such Shares which remains
unpurchased does not exceed one-eleventh of the aggregate number of Shares to
be purchased at such Time of Delivery, then the Company and the Selling
Stockholders shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have
not been made, but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. TERMINATION. (a) This Agreement may be terminated with
respect to the Firm Shares or any Optional Shares in the sole discretion of the
Representatives by notice to the Company given prior to the First Time of
Delivery or any Subsequent Time of Delivery, respectively, in the event that
(i) any condition to the obligations of the Underwriters set forth in Section 7
hereof has not been satisfied, or (ii) the Company or the Selling Stockholders
shall have failed, refused or been unable to deliver the Shares or to perform
all obligations and satisfy all conditions on their respective parts to be
performed or satisfied hereunder at or prior to such Time of Delivery, in
either case other than by reason of a default by any of the Underwriters. If
this Agreement is terminated pursuant to this Section 10(a), the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including counsel fees and disbursements) that shall have been incurred by
them in connection with the proposed purchase and sale of the Shares. Neither
the Company nor any Selling Stockholder shall in any event be liable to any of
the Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by the
Representatives and the Company and the Selling Stockholders as provided in
Section 9(a), the aggregate number of such Shares which remains unpurchased
exceeds one-eleventh of the aggregate number of Shares to be purchased at such
Time of Delivery, or if the Company and the Selling Stockholders shall not
exercise the right described in Section 9(b) to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to a Subsequent Time of Delivery, the
obligations of the Underwriters to purchase and of the Company and the Selling
Stockholders to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholders, except for the expenses to be borne by the Company, the
Selling Stockholders and the Underwriters as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements,
representations, warranties and other statements of the Company, its officers,
the Selling Stockholders and the several Underwriters, as set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any
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controlling person referred to in Section 8(e) or the Company, any Selling
Stockholder or any officer or director or controlling person of the Company or
any Selling Stockholder referred to in Section 8(e), and shall survive delivery
of and payment for the Shares. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6 and 8 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
12. NOTICES. All communications hereunder shall be in writing
and, if sent to any of the Underwriters, shall be mailed, delivered or
telegraphed and confirmed in writing to the Representatives in care of The
Robinson- Humphrey Company, Inc., 3333 Peachtree Road, N.E., Atlanta, Georgia
30326, Attention: Corporate Finance Department (with a copy to Powell,
Goldstein, Frazer & Murphy, 191 Peachtree Street, Atlanta, Georgia 30303,
Attention: G. William Speer); if sent to CompuCom, shall be mailed, delivered
or telegraphed and confirmed in writing to CompuCom at 10100 N. Central
Expressway, Dallas, Texas 75231; if to any other Selling Stockholder shall be
sufficient in all respects if delivered or sent by registered mail to such
Selling Stockholder at its address set forth in the Prospectus; and if sent to
the Company, shall be mailed, delivered or telegraphed and confirmed in writing
to the Company at 2350 Valley View Lane, Dallas, Texas 75234, Attention:
President (with a copy to Sayles and Lidji, P.C., 4400 Renaissance Tower, 1201
Elm Street, Dallas, Texas 75270, Attention: Brian M. Lidji.
13. REPRESENTATIVES. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this
Agreement, and any action under this Agreement taken by the Representatives
jointly or by The Robinson-Humphrey Company, Inc. will be binding upon all the
Underwriters.
14. BINDING EFFECT. This Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company and the Selling
Stockholders and to the extent provided in Sections 8 and 10 hereof, the
officers and directors and controlling persons referred to therein and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia without giving
effect to any provisions regarding conflicts of laws.
16. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
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<PAGE> 34
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and
upon the acceptance hereof by The Robinson-Humphrey Company, Inc., on behalf of
each of the Underwriters, this letter will constitute a binding agreement among
the Underwriters, the Company and the Selling Stockholders. It is understood
that the acceptance by the Representatives of this letter on behalf of each of
the Underwriters is pursuant to the authority set forth in the Master Agreement
among Underwriters, a copy of which shall be submitted to the Company for
examination, upon request, but without warranty on the part of the
Representatives as to the authority of the signers thereof.
Very truly yours,
PC SERVICE SOURCE, INC.
By: /s/ Mark T. Hilz
------------------------------------------
Mark T. Hilz
President and Chief Executive Officer
ROSETTA STONE CORPORATION
MARK T. HILZ
MORE CHILDREN'S TRUST
JAY HAFT
By: /s/ Morti Tenenhaus
------------------------------------------
Name: Morti Tenenhaus
Attorney-in-Fact
COMPUCOM SYSTEMS, INC.
By: /s/ Robert J. Boutin
------------------------------------------
Name: Robert J. Boutin
Attorney-in-Fact
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<PAGE> 35
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above at
Atlanta, Georgia.
THE ROBINSON-HUMPHREY COMPANY, INC.
RAUSCHER PIERCE REFSNES, INC.
COMVEST PARTNERS, INC.
By: The Robinson-Humphrey Company, Inc.
By: /s/ Charles B. Shelton III
(Authorized Representative)
On behalf of each of the Underwriters
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SCHEDULE I
<TABLE>
<CAPTION>
Number of
Total Optional
Number of Total Shares to Be
Total Selling Number of Purchased if
Number of Company Stockholders' Firm Options Maximum
Firm Shares to be Firm Shares to be Option
Underwriter Purchased to be Purchased Purchased Exercised
- ----------- -------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
The Robinson-Humphrey Company, Inc. 500,000 360,000 20,000 132,000
Rauscher Pierce Refsnes, Inc. 500,000 360,000 20,000 132,000
ComVest Partners, Inc. 250,000 180,000 10,000 66,000
-------- ------ ------ -------
Total 1,250,000 900,000 50,000 330,000
========= ======= ====== =======
</TABLE>
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SCHEDULE II
<TABLE>
<CAPTION>
TOTAL NUMBER OF TOTAL
Total Number SELLING NUMBER OF
of Company STOCKHOLDERS' TOTAL NUMBER OF OPTIONAL
Firm Shares FIRM SHARES FIRM OPTIONS SHARES
to be Sold TO BE SOLD TO BE SOLD TO BE SOLD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
The Company . . . . . . . . . . 1,250,000 -- -- 187,500
Rosetta Stone Corporation(1) . -- 120,000 -- 25,500
Mart T. Hilz(1) . . . . . . . . -- 30,000 -- 4,500
Jay Haft(1) . . . . . . . . . . -- -- 25,000 --
More Children's Trust(2) . . . -- -- 25,000 --
CompuCom Systems, Inc.(2) . . . 750,000 112,500
--------- ------- ------ -------
Total . . . . . . . . . . . . . 1,250,000 900,000 50,000 330,000
========= ======= ====== =======
</TABLE>
__________________
Has appointed Avery More, Mark T. Hilz and Morti Tenenhaus as Attorneys-in-Fact
Has appointed Robert Boutin and Lazane Smith as Attorneys-in-Fact.
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SCHEDULE III
LIST OF DIRECTORS, OFFICERS AND OTHER PERSONS SUBJECT TO LOCK-UP
Avery More
Mark T. Hilz
Philip Wise
James N. Contardi
Danny T. Hendrix
Bernard W. Rohde
Robert S. Leff
James Ounsworth
Edward C. Raymond
Morti Tenenhaus
Jay Haft
Rosetta Stone Corporation
More Children's Trust
CompuCom Systems, Inc.
38
