SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): March 7, 2006
I.D. SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 001-15087 22-3270799
-------- --------- ----------
(State Or Other (Commission (IRS Employer
Jurisdiction Of File Number) Identification No.)
Incorporation)
One University Plaza, Hackensack, NJ 07601
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 996-9000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01. OTHER EVENTS.
This Current Report on Form 8-K (this "Report") is being filed for the
purpose of filing Exhibits 1.1, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 10.1 to the
Registration Statement on Form S-3 of I.D. Systems, Inc. (Registration No.
333-131489) filed with the Securities and Exchange Commission (the "SEC") on
February 2, 2006, as amended by Amendment No. 1 filed with the SEC on February
22, 2006.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
1.1 Form of Underwriting Agreement between I.D. Systems, Inc. and the
Underwriters named therein.
4.4 Loan Agreement, dated January 2, 2003, between Wachovia Bank, NA
and I.D. Systems, Inc.
4.5 Promissory Note, dated January 2, 2003, from I.D. Systems, Inc. to
Wachovia Bank, NA.
4.6 Security Agreement, dated January 2, 2003, by I.D. Systems, Inc.
for the benefit of Wachovia Bank, NA.
4.7 Loan Agreement, dated May 4, 2005, between Wachovia Bank, NA and
I.D. Systems, Inc.
4.8 Promissory Note, dated May 4, 2005, from I.D. Systems, Inc. to
Wachovia Bank, NA.
4.9 Letter Agreement, dated January 1, 2006, between Wachovia Bank, NA
and I.D. Systems, Inc., which amends that certain Loan Agreement, dated January
2, 2003, between Wachovia Bank, NA and I.D. Systems, Inc.
10.1 1999 Stock Option Plan (as amended and restated effective April
20, 2005).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
I.D. SYSTEMS, INC.
By: /s/ Ned Mavrommatis
-------------------
Name: Ned Mavrommatis
Title: Chief Financial Officer
Date: March 7, 2006
Exhibit 1.1
[2,500,000] SHARES
I.D. SYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
MARCH [__], 2006
UNDERWRITING AGREEMENT
March [__], 2006
MORGAN KEEGAN & COMPANY, INC.
COWEN & CO., LLC
JEFFERIES & COMPANY, INC.
[And the other several Underwriters named in
Schedule I]
c/o Morgan Keegan & Company, Inc.
50 N. Front Street
Memphis, Tennessee 38103
Ladies and Gentlemen:
I.D. Systems, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), for whom Morgan Keegan & Company, Inc. is acting as the
representative (in such capacity, the "Representative"), an aggregate of
[2,500,000] shares (the "Firm Shares") of common stock, $0.01 par value per
share (the "Common Stock") of the Company. The Company also proposes to issue
and sell to the several Underwriters not more than an additional [375,000]
shares, solely to cover overallotments, if any (the "Overallotment Shares") of
the Common Stock if and to the extent that the Representative shall have
determined to exercise, on behalf of the several Underwriters, the right to
purchase such shares granted to the Underwriters in Section 2 hereof. The Firm
Shares and the Overallotment Shares are hereinafter collectively referred to as
the "Shares."
The Company (i) has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-131489) and (ii) has prepared, and will file with the Commission promptly
after execution and delivery of this Agreement in accordance with Rule 424(b)
and Rule 430A under the Securities Act (as defined below), a prospectus relating
to the Shares. Such registration statement, as amended, including the financial
statements, exhibits and schedules thereto, in the form in which it was declared
effective by the Commission under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (collectively, the "Securities
Act"), and any information incorporated by reference therein or deemed to be a
part thereof (pursuant to Rule 430A under the Securities Act or otherwise) is
called the "Registration Statement." If any registration statement is filed
pursuant to Rule 462(b) under the Securities Act, the term "Registration
Statement" as used herein shall include any Rule 462(b) registration statement.
Each prospectus included in the Registration Statement, or amendments thereof or
supplements thereto, before it was declared effective by the Commission (and, if
the Company files a post-effective amendment to such registration statement that
becomes effective prior to the First Closing Date or any Option Closing Date,
each as defined herein, the registration statement as so amended) under the
Securities Act, and any preliminary form of prospectus filed with the Commission
by the Company with the consent of the Underwriters pursuant to Rule 424(a) of
the Securities Act, including all information incorporated by reference therein
or deemed to be a part thereof, is
1
hereinafter called the "Preliminary Prospectus." Such prospectus relating to the
Shares that is first filed pursuant to Rule 424(b), and any amendments thereof
or supplements thereto, including all information incorporated by reference
therein or deemed to be a part thereof, is called the "Prospectus." All
references in this Agreement to the Registration Statement, the Preliminary
Prospectus, the Prospectus or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
As used herein:
"Disclosure Package" means (i) the Preliminary Prospectus, as most
recently amended or supplemented immediately prior to the date hereof, including
any document incorporated or deemed incorporated by reference therein, (ii) the
Issuer Free Writing Prospectuses, if any, identified in Schedule II hereto,
(iii) any other Free Writing Prospectus that the parties hereto shall hereafter
expressly agree to treat as part of the Disclosure Package and (iv) the
information set forth on Schedule III hereto, all considered together;
"Free Writing Prospectus" means any free writing prospectus, as defined
in Rule 405 of the Securities Act;
"Issuer Free Writing Prospectus" means any issuer free writing
prospectus as defined in Rule 433 of the Securities Act;
"Knowledge" means the actual knowledge of a fact or other matter by any
of the following persons: Jeffrey M. Jagid, Kenneth S. Ehrman, Michael L.
Ehrman, Ned Mavrommatis, Greg Smith and Frederick F. Muntz; and
"Material Adverse Change" means any change, development or occurrence,
whether or not arising in the ordinary course of business, that would reasonably
be expected to result in a material adverse change in the condition, financial
or otherwise, or in the earnings, business, operations or prospects of the
Company.
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each of the Underwriters
as follows:
(a) Compliance with Registration Requirements.
The Registration Statement has been declared effective by the
Commission under the Securities Act. The Company has complied with all requests
of the Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to the
Company's Knowledge, threatened by the Commission. No order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus has been
issued and no proceeding for that purpose has been instituted or, to the
Company's Knowledge, threatened by the Commission or by the state securities
authority of any jurisdiction.
2
The Preliminary Prospectus and the Prospectus when first filed with the
Commission, on the First Closing Date and on any Option Closing Date (i)
complied, and will comply, in all material respects with the Securities Act,
(ii) will be identical to the copy thereof delivered to the Underwriters for use
in connection with the offer and sale of the Shares and (iii) did not and will
not contain any untrue statement of a material fact or omit 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. The Registration
Statement, as of each effective date and as of the First Closing Date and any
Option Closing Date, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The representations and
warranties set forth in the two immediately preceding sentences do not apply to
statements in or omissions from the Registration Statement, the Preliminary
Prospectus or the Prospectus made in reliance upon and in conformity with
information relating to the Underwriters furnished to the Company in writing by
the Underwriters through the Representative expressly for use therein, it being
understood and agreed that the only such information furnished to the Company
consists of the information described as such in the penultimate sentence of
Section 8(b) hereof. There are no contracts or other documents required to be
disclosed in the Preliminary Prospectus, the Prospectus or to be filed as
exhibits to the Registration Statement that have not been disclosed or filed as
required and the filing of any such contract or other document, or the reference
thereto in the Registration Statement, the Preliminary Prospectus or Prospectus,
did not require the consent of any third party that has not been obtained.
(b) Periodic Reporting; Incorporated Documents
As of the date hereof, the Company (i) is subject to the requirement to
file reports pursuant to Section 13 or Section 15(d) of the Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), (ii) has filed all reports and other materials required to be
filed by Sections 13(a), 14 or 15(d) of the Exchange Act during the preceding 12
months, (iii) has filed an Annual Report on Form 10-K required under Section
13(a) or 15(d) under the Exchange Act for its most recently completed fiscal
year; (iv) is not, and during the past three years was not (nor was any
predecessor), (A) a blank check company, as defined in Rule 419(a)(2) of the
Securities Act, (B) a shell company, other than a business combination related
shell company, each as defined in Rule 405 of the Securities Act, or (C) a
registrant for an offering of penny stock as defined in Rule 3a51-1 of the
Exchange Act, (v) makes its periodic and current reports filed pursuant to
Section 13 or Section 15(d) of the Exchange Act readily available and accessible
on a web site maintained by or for the Company and containing information about
the Company and (vi) is eligible to use Form S-3 for the offering of Shares
contemplated by this Agreement.
Each document incorporated by reference in the Registration Statement,
Prospectus and the Disclosure Package, when it became effective or was filed
with the Commission, as applicable, conformed in all material respects to the
requirements of the Securities Act and the Exchange Act, as applicable, and,
when read together with the other information included in or incorporated by
reference into the Prospectus, none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which
3
they were made, not misleading; and any further documents so filed and
incorporated by reference in the Registration Statement, Prospectus and the
Disclosure Package or any further amendment or supplement thereto, when such
documents are filed with or declared effective by the Commission, as applicable,
will conform in all material respects to the requirements of the Securities Act
and the Exchange Act, as applicable, and, when read together with the other
information included in or incorporated by reference into the Prospectus, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(c) Disclosure Package.
As of the date hereof, the Disclosure Package did not, and at the time
of each sale of Shares and the First Closing Date and any Option Closing Date,
the Disclosure Package will not, contain 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; provided, however, that the representations and warranties set forth
in the immediately preceding sentence do not apply to statements in or omissions
from the Disclosure Package made in reliance upon and in conformity with
information relating to the Underwriters furnished to the Company in writing by
the Underwriters through the Representative expressly for use therein, it being
understood and agreed that the only such information furnished to the Company
consists of the information described as such in the penultimate sentence of
Section 8(b) hereof.
(d) Free Writing Prospectuses.
The Company is eligible to use Free Writing Prospectuses in connection
with the offering contemplated by this Agreement pursuant to Rules 164 and 433
under the Securities Act; any Free Writing Prospectus that the Company is
required to file pursuant to Rule 433(d) under the Securities Act has been, or
will be, filed with the Commission in accordance with the requirements of the
Securities Act; and each Free Writing Prospectus that the Company has filed, or
is required to file, pursuant to Rule 433(d) under the Securities Act or that
was prepared by or on behalf of or used by the Company complies or will comply
in all material respects with the requirements of the Securities Act.
Each Issuer Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offering and sale of the
Shares did not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement, including any document incorporated by reference therein that has not
been superseded or modified.
Except for the Issuer Free Writing Prospectuses identified in Schedule
II hereto, if any, the Company has not prepared, used or referred to any Free
Writing Prospectus.
(e) Registration Statement Furnished to Representative.
The Company has delivered to the Representative one conformed copy of
the Registration Statement and each amendment thereto.
4
(f) Distribution of Offering Material By the Company.
The Company has not distributed and will not distribute, prior to the
completion of the Underwriters' distribution of the Shares, any written offering
material in connection with the offering and sale of the Shares other than the
Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus and
the Registration Statement.
(g) The Underwriting Agreement.
This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as rights to indemnity
hereunder may be limited by federal or state securities laws and applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and by equitable limitations on the availability
of specific remedies.
(h) Authorization of the Shares.
The Shares to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor pursuant to this
Agreement, will be validly issued, fully paid and nonassessable.
(i) No Applicable Registration or Other Similar Rights.
No person has rights to have any securities registered for sale under
the Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as have been duly waived.
(j) No Material Adverse Change.
Except as otherwise disclosed in both the Prospectus and the Disclosure
Package, subsequent to December 31, 2005: (i) there has been no Material Adverse
Change; (ii) the Company has not incurred any material liability or obligation,
indirect, direct or contingent, not in the ordinary course of business or
entered into any material transaction or agreement not in the ordinary course of
business; and (iii) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of capital stock or
repurchase or redemption by the Company of any class of capital stock.
(k) Independent Accountants.
Eisner LLP, which has expressed its opinion with respect to certain
financial statements (which term as used in this Agreement includes the related
notes thereto) and supporting schedules filed with the Commission as a part of
any of the Registration Statement, the Prospectus or the Disclosure Package or
are incorporated by reference therein, are and were during the period covered by
its reports, an independent registered public accounting firm as required by the
Securities Act and the Exchange Act.
5
(l) Preparation of the Financial Statements.
The financial statements included in the Disclosure Package or the
Prospectus present fairly in all material respects the financial position of the
Company as of and at the dates indicated and the results of its operations, cash
flows and changes in stockholders' equity for the periods specified. The
supporting schedules included in the Registration Statement present fairly the
information required to be stated therein. Such financial statements and
supporting schedules have been prepared in conformity with generally accepted
accounting principles in the United States ("GAAP") applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement, the Disclosure Package or
the Prospectus. All non-GAAP financial measures included in each of the
Disclosure Package, the Prospectus and the Registration Statement, if any,
comply with the Securities Act, including Regulation G and Item 10(e) of
Regulation S-K, and present fairly the information shown therein and the
Company's basis for using such measures.
(m) Incorporation and Good Standing of the Company; No Subsidiaries.
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware and has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in both the Disclosure Package and the
Prospectus and to enter into and perform its obligations under this Agreement.
The Company is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which the ownership or lease of
property or the conduct of its business requires such qualification, except for
such jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change. The Company does not own or control, directly or indirectly, any
interest in any corporation, association or other entity.
(n) Capitalization and Other Capital Stock Matters.
As of January 31, 2006, the authorized capital stock of the Company is
as set forth, and the outstanding capital stock of the Company is as set forth,
in both the Disclosure Package and the Prospectus under the caption "Description
of Capital Stock." There are no shares of preferred stock of the Company
outstanding. The Common Stock (including the Shares) conforms in all material
respects to all statements relating thereto contained in both the Disclosure
Package and the Prospectus and such description conforms, in all material
respects, to the rights set forth in the instruments defining the same. All of
the issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal, state and foreign securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. Other than those disclosed in both the
Disclosure Package and the Prospectus, there are no (i) shares of Common Stock
reserved for any purpose except for options to purchase Common Stock under the
Company's 1995 Non-Qualified Stock Option Plan, 1999 Stock Option Plan and
Director Stock Option Plan and (ii) authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or
6
exchangeable or exercisable for, capital stock of the Company. All options,
warrants and other rights to purchase shares of capital stock in the Company
were issued in compliance with federal, state and foreign securities laws, and
conform in all material respects to the description thereof contained in both
the Disclosure Package and the Prospectus.
(o) Nasdaq National Market Listing.
The Shares have been approved for listing on The Nasdaq Stock Market,
Inc.'s National Market (the "Nasdaq National Market").
(p) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required.
The Company is not: (i) in violation of its certificate of
incorporation or by-laws; or (ii) in default or, with the giving of notice or
lapse of time, none of them would be in default (each, a "Default") under any
indenture, mortgage, loan or credit agreement, note, contract, franchise, lease
or other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the Company is
subject (each, an "Existing Instrument"), except in the case of this clause (ii)
for such Defaults as would not, individually or in the aggregate, result in a
Material Adverse Change. The Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
both the Disclosure Package and the Prospectus: (i) have been duly authorized by
all necessary corporate action and will not result in any violation of the
provisions of the certificate of incorporation or by-laws of the Company; (ii)
will not conflict with or constitute a breach of, or Default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company pursuant to, or require the consent (other than
consents that have been obtained) of any other party to, any Existing
Instrument; and (iii) will not result in any violation of any applicable law,
administrative regulation or administrative or court decree applicable to the
Company; except in the case of clauses (ii) and (iii) for such conflicts,
breaches, Defaults, liens, charges, encumbrances or violations as would not,
individually or in the aggregate, result in a Material Adverse Change. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority, agency or body
(each, a "Governmental Authority"), is required for the Company's execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by both the Disclosure Package and the Prospectus,
except such as (i) have been obtained or made by the Company and are in full
force and effect under the Securities Act and (ii) may be required by applicable
state securities or blue sky laws and from the National Association of
Securities Dealers, Inc. (the "NASD") or the Nasdaq National Market.
(q) No Material Actions or Proceedings.
Except as disclosed in both the Disclosure Package and the Prospectus,
there are no legal, governmental or regulatory investigations, actions, suits or
proceedings pending or, to the Company's Knowledge, threatened: (i) against or
affecting the Company; or (ii) which has as the subject thereof property owned
or leased by the Company where in the case of (i) or (ii) above any such action,
suit or proceeding, if determined adversely, would result in a Material Adverse
7
Change or adversely affect the ability of the Company to consummate the
transactions contemplated by this Agreement. Furthermore, to the Company's
Knowledge, no domestic or foreign regulatory body (including the NASD),
securities exchange or market has conducted, is conducting or has threatened to
commence or conduct any investigations, actions or proceedings relating to the
Company or any offering of the Common Stock or other security of the Company.
(r) Intellectual Property Rights.
The Company owns, possesses, licenses or has other rights to use all
material patents or patent applications (collectively, the "Patents"),
trademarks and service marks, trademark and service mark applications and
registrations, trade names, copyrights, copyright applications and
registrations, Internet uniform resource locators and domain name registrations,
licenses, inventions, trade secrets, computer software, technology, know-how and
other intellectual property (collectively, the "Intellectual Property")
necessary for the conduct of the Company's business as described in both the
Disclosure Package and the Prospectus and: (i) to the Company's Knowledge, there
is no infringement or misappropriation by third parties of any item of
Intellectual Property owned by or licensed to the Company; (ii) there is no
pending or, to the Company's Knowledge, threatened, action, suit, proceeding or
claim by others challenging the Company's rights in or to any such Intellectual
Property; (iii) there is no pending or, to the Company's Knowledge, threatened,
action, suit, proceeding or claim by others challenging the validity,
enforceability, or scope of Intellectual Property owned by or licensed to the
Company; (iv) there is no pending or, to the Company's Knowledge, threatened,
action, suit, proceeding or claim by others that the Company infringes, or
otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of others; (v) to the Company's Knowledge, the Company does
not, in the conduct of its business as described in both the Disclosure Package
and the Prospectus, infringe or conflict with any copyright or patent of any
third party, any work that is the subject of any third party's copyright
registration or application to register a copyright, or any discovery,
invention, product or process that is the subject of a patent application filed
by any third party; (vi) to the Company's Knowledge, the Company does not, in
the conduct of its business as described in both the Disclosure Package and the
Prospectus, misappropriate any right of any third party in any trade secrets, or
take any action that constitutes unfair competition or unfair trade practices
under applicable law; (vii) to the Company's Knowledge, the Company does not, in
the conduct of its business as described in both the Disclosure Package and the
Prospectus, infringe or conflict with any right of any third party in any
trademark or service mark or trade dress; (viii) to the Company's Knowledge,
there is no U.S. patent that contains claims that interfere with or cover the
subject matter claimed by any U.S. patent owned by or licensed to the Company;
(ix) to the Company's Knowledge, there is no prior art that may render any U.S.
patent held by the Company invalid, nor is there any prior art that may render
any U.S. patent application held by the Company unpatentable; (x) the Company
has paid all annuity, maintenance, renewal and issue fees that are due, within
the required time period, and has claimed small entity status only as
appropriate, in connection with all patents, patent applications and registered
forms of Intellectual Property owned by the Company; (xi) the Company has taken
commercially reasonable steps to protect the rights of the Company in its
confidential information and any trade secret or confidential information of
third parties used by the Company; (xii) where appropriate, the Company has
taken commercially reasonable steps to require its employees, agents,
consultants, contractors or other persons to execute appropriate instruments of
assignment in favor of the Company as assignee to convey to the Company
8
ownership of Intellectual Property developed by such employees, agents,
consultants, contractors or other persons on behalf of the Company; and (xiii)
none of the Intellectual Property necessary for the conduct of the Company's
business as described in both the Disclosure Package and the Prospectus
constitutes a "subject invention", "computer software", "form, fit and function
data" or "technical data" as such terms are defined in the Company's contract
with the United States Postal Service (Contract No. 3BMHRD-05-H-1620).
(s) All Necessary Permits, etc.
Except as disclosed in both the Disclosure Package and the Prospectus:
(i) the Company possesses such valid and current certificates, authorizations or
permits issued by the appropriate local, state, federal or foreign regulatory
agencies or bodies necessary to conduct its business as currently conducted,
except for such certificates, authorizations or permits the failure of which to
obtain would not, individually or in the aggregate, result in a Material Adverse
Change; and (ii) the Company has not received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Change.
(t) Title to Properties.
Except as disclosed in both the Disclosure Package and the Prospectus,
the Company has good and legal title to all the properties and assets owned by
it, in each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except: (i) such as would not
materially and adversely affect the value of such property and assets; and (ii)
such as would not materially interfere with the current use of such property and
assets by the Company. The real property, improvements, equipment and personal
property held under lease by the Company are held under valid and enforceable
leases, with such exceptions as would not materially interfere with the current
use of such real property, improvements, equipment or personal property by the
Company.
(u) Tax Law Compliance.
The Company has accurately prepared and timely filed all federal,
state, local, foreign and other tax returns (or timely filed applicable
extensions therefore) that have been required to be filed by it with the
appropriate governmental authorities in all jurisdictions in which such tax
returns are required to be filed and has timely paid or made provision for the
payment of all taxes, assessments, governmental or other similar charges,
including without limitation, all sales and use taxes, fines, penalties, and all
taxes that the Company is obligated to withhold from amounts owing to employees,
creditors and third parties, with respect to the periods covered by such tax
returns (whether or not such amounts are shown as due on any tax return),
except, in all cases, for any such tax, assessment or similar charge that the
Company is contesting in good faith by appropriate proceedings and except in any
case in which the failure to so file or pay would not in the aggregate result in
a Material Adverse Change. The Company has made adequate charges, accruals and
reserves in the applicable financial statements referred to in Section 1(l)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined. No deficiency assessment with
9
respect to a proposed adjustment of the Company's federal, state, or other taxes
is pending or, to the Company's Knowledge, threatened. There is no material tax
lien, whether imposed by any federal, state, or other taxing authority,
outstanding against the assets, properties or business of the Company. No audits
or other administrative proceedings or court proceedings are presently pending
nor, to the Company's Knowledge, threatened against the Company with regard to
any taxes or returns of such entities, and no taxing authority has notified the
Company that it intends to investigate its tax affairs.
(v) Company Not an "Investment Company."
The Company is not, and after receipt of payment for the Shares and the
application thereof will not be, an "investment company" within the meaning of
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
intends to conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(w) Insurance.
Except as disclosed in both the Disclosure Package and the Prospectus,
the Company is insured by recognized and reputable institutions, with policies
in such amounts and with such deductibles and covering such risks as are
adequate and customary for its business including, but not limited to, policies
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and earthquakes. Except as
disclosed in both the Disclosure Package and the Prospectus, the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a reasonable cost as and when such policies expire.
(x) Related Party Transactions.
No relationship, direct or indirect, exists that is required by Item
404 of Regulation S-K under the Securities Act to be described in the Disclosure
Package or the Prospectus that has not been so described.
(y) No Unlawful Contributions or Other Payments.
Neither the Company nor any employee or agent acting on behalf of the
Company has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any
applicable law or of the character required to be disclosed in both the
Disclosure Package and the Prospectus.
(z) Company's Accounting System and Internal Controls; Disclosure
Controls and Procedures.
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or
10
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act),
which: (i) are designed to ensure that material information relating to the
Company is made known to the Company's principal executive officer and its
principal financial officer by others within the Company, particularly during
the periods in which the periodic reports required under the Exchange Act are
being prepared; (ii) have been evaluated for effectiveness as of the end of the
last fiscal period covered by the Registration Statement; and (iii) are
effective in all material respects to perform the functions for which they were
established. There are no significant deficiencies or material weaknesses in the
design or operation of the Company's internal controls over financial reporting
(as such term is defined in Rule 13a-15(f) under the Exchange Act) that are
reasonably likely to adversely affect the Company's ability to record, process,
summarize and report financial information to management and the Board of
Directors. The Company is not aware of any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal control over financial reporting. Since the most recent
evaluation of the Company's disclosure controls and procedures described above,
there have been no significant changes in internal control over financial
reporting or in other factors that could significantly affect internal control
over financial reporting.
(aa) Compliance with Environmental Laws.
Except as otherwise disclosed in both the Disclosure Package and the
Prospectus, or as would not otherwise require disclosure under federal
securities laws: (i) to the Company's Knowledge, the Company is not in violation
of any federal, state, local or foreign law or regulation relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environment Concern
(collectively, "Environmental Laws"), which violation includes, but is not
limited to, noncompliance with any environmental permits or other environmental
governmental authorizations required for the operation of the business of the
Company under applicable Environmental Laws, or noncompliance with the terms and
conditions thereof except where such violation would not cause a Material
Adverse Change, nor has the Company received any written communication from a
Governmental Authority that alleges that the Company is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed with
a court or Governmental Authority or investigation with respect to which the
Company has received notice alleging potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource damages,
property damages, personal injuries, attorneys' fees or penalties arising out
of, based on or resulting from the presence, or release into the environment, of
any Materials of Environmental Concern at any location or alleging a potential
or actual violation of Environmental Laws (collectively, "Environmental
Claims"), pending or, to the Company's Knowledge, threatened against the
Company; and (iii) to the Company's Knowledge, there are
11
no past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that reasonably
would result in a violation of any Environmental Law or form the basis of a
potential Environmental Claim against the Company or against any person or
entity whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law that would result in a
Material Adverse Change.
(bb) ERISA Compliance.
The Company and any "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively, "ERISA"))
established or maintained by the Company or its "ERISA Affiliates" (as defined
below) are in compliance with ERISA in all material respects. "ERISA Affiliate"
means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company is a member. No "reportable event" (as defined
under ERISA) has occurred with respect to any "employee benefit plan"
established or maintained by the Company or any of its ERISA Affiliates. No
"employee benefit plan" established or maintained by the Company or any of its
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfunded benefit liabilities" (as defined in ERISA Section
4001(a)(18)).
(cc) Brokers.
Except as otherwise disclosed in both the Disclosure Package and the
Prospectus, there is no broker, finder or other party that is entitled to
receive from the Company any brokerage or finder's fee or other fee or
commission as a result of any transactions contemplated by this Agreement.
(dd) No Outstanding Loans or Other Indebtedness.
There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company, except as disclosed in both the Disclosure Package and
the Prospectus.
(ee) No Labor Disputes.
No labor dispute with the employees of the Company exists or, to the
Company's Knowledge, is threatened or imminent.
(ff) Compliance with Laws.
In addition to the representations and warranties of the Company
contained in Sections 1(s), 1(u), 1(y), 1(aa), 1(bb), 1(gg), 1(ii) and 1(jj)
hereof, the Company has complied in all material respects with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business.
12
(gg) Sarbanes-Oxley.
The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 that are effective and applicable to the Company and
is actively taking (or will take) all reasonable steps necessary to ensure that
it will be in material compliance with other provisions of the Sarbanes-Oxley
Act of 2002 as and when such provisions become applicable to the Company.
(hh) Off-Balance Sheet Transactions.
There are no off-balance sheet transactions, arrangements, obligations
(including contingent obligations), or any other similar relationships with
unconsolidated entities or other persons.
(ii) Compliance with the FCPA.
Neither the Company nor any of its directors, officers, agents,
employees or affiliates acting on behalf of the Company has taken any action,
directly or indirectly, that would result in a violation by such persons of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the "FCPA"), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any "foreign official" (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA and the Company has
conducted its business in compliance with the FCPA. The Company does not have
any operations outside of the North America.
(jj) Compliance with Regulation M.
Neither the Company nor any "affiliated purchaser" of the Company (as
such term is defined in Regulation M under the Exchange Act ("Regulation M") has
taken, directly or indirectly, any action designed to or that might reasonably
be expected to result in a violation of Regulation M or cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(kk) Material Contracts.
Each of the Company's Existing Instruments that consist of written or
oral contracts, commitments, understandings, sales orders, purchase orders or
other agreements or arrangements with its ten largest customers based upon the
revenue generated by each such customer during the fiscal year ended December
31, 2005 (each a "Material Contract" and, collectively, the "Material
Contracts") is in full force and effect and constitutes the legal, valid and
binding obligation of the Company and, to the Company's Knowledge, the other
party thereto. All of the Material Contracts are enforceable against the Company
in accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and by equitable
limitations on the availability of specific remedies. Except as described in
both the
13
Disclosure Package and the Prospectus, no termination notice has been delivered
by any party to any other party with respect to any Material Contract. The
Company has delivered to the Underwriters true and complete copies of each
Material Contract and a complete and accurate written description of any
Material Contract that has not been reduced to writing.
Any certificate signed by an officer of the Company and delivered to
the Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
set forth therein.
The Company acknowledges that the Underwriters and, for purposes of the
opinion to be delivered pursuant to Section 5 hereof, counsel to the
Underwriters, will rely upon the accuracy and truthfulness of the foregoing
representations and hereby consents to such reliance.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) Agreements to Sell and Purchase.
(i) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to the
Underwriters, and each Underwriter agrees, severally and not
jointly, to purchase from the Company, at a purchase price of
$[___] per share (the "Purchase Price"), that number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I
hereto. Payment for the Firm Shares to be sold hereunder shall be
made by wire transfer of immediately available funds against
delivery of such Firm Shares for the respective accounts of the
several Underwriters at 9:00 a.m., eastern standard time, on March
[__], 2006, or at such other time on the same or such other date,
as shall be designated by the Representative. The time and date of
such payment are hereinafter referred to as the "First Closing
Date."
(ii) Upon written notice from the Representative given to the
Company from time to time not more than 30 days subsequent to the
date of the Prospectus, the Underwriters may purchase all or less
than all of the Overallotment Shares at the Purchase Price. The
Company agrees to issue and sell to the Underwriters up to the
total number of Overallotment Shares specified herein. On each day,
if any, that Overallotment Shares are to be purchased (each an
"Option Closing Date"), such Overallotment Shares shall be
purchased for the account of each Underwriter in the same
proportion as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I bears to the total number of Firm
Shares (subject to adjustment by the Representative to eliminate
fractions) and may be purchased by the Underwriters only for the
purpose of covering overallotments made in connection with the sale
of the Firm Shares. No Overallotment Shares shall be sold or
delivered unless the Firm Shares previously have been, or
simultaneously are, sold and delivered. The right to purchase the
Overallotment Shares or any portion thereof may be exercised from
time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by the
Representative to the Company.
14
(b) Public Offering of the Common Shares.
The Representative hereby advises the Company that the Underwriters
intend to offer for sale to the public, as disclosed in the Prospectus, the
Shares as soon after this Agreement has been executed as the Representative, in
its sole judgment, has determined is advisable and practicable, subject to the
requirements of the Securities Act.
(c) Delivery of the Shares.
The Company shall deliver, or cause to be delivered, to the
Representative, through the facilities of the Depository Trust Company ("DTC"),
for the account of the Underwriters, the Firm Shares at the First Closing Date,
against receipt of a wire transfer of immediately available funds for the amount
of the purchase price therefor. The Company shall also deliver, or cause to be
delivered, to the Representative, through the facilities of DTC, for the account
of the Underwriters, any Overallotment Shares the Underwriters have agreed to
purchase on the First Closing Date or any Option Closing Date, as the case may
be, against receipt of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The certificates for the Shares shall be
in definitive form and registered in such names and denominations as the
Representative shall have requested prior to the First Closing Date (or Option
Closing Date, as the case may be) and shall be made available for inspection on
the business day preceding the First Closing Date (or Option Closing Date, as
the case may be) at the office of DTC or its designated custodian or at such
other location in New York City as the Representative may designate (the
"Designated Office"). The documents to be delivered on the First Closing Date
(or Option Closing Date, as the case may be) on behalf of the parties hereto
pursuant to this Agreement shall be delivered at the offices of King & Spalding
LLP, 1185 Avenue of the Americas, New York, NY 10036 (or at such other location
as the Underwriters may designate) and the Shares shall be delivered at the
Designated Office, all on the First Closing Date (or Option Closing Date, as the
case may be). Time shall be of the essence, and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriters.
(d) Delivery of Prospectus.
Not later than 12:00 p.m. on the second business day following the date
hereof, the Company shall deliver or cause to be delivered, copies of the
Prospectus in such quantities and at such places as the Representative shall
reasonably request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Underwriters as follows:
(a) Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the later
of the First Closing Date (or any Option Closing Date, as the case may be) or
such date, as in the opinion of counsel for the Underwriters, the Prospectus
(or, in lieu thereof, the notice referred to in Rule 172(a) under the Securities
Act) is no longer required by law to be delivered in connection with sales by
any Underwriter or dealer (the "Prospectus Delivery Period"), prior to amending
or
15
supplementing the Registration Statement (including any registration statement
filed under Rule 462(b) under the Securities Act), the Prospectus or the
Disclosure Package, including any amendment or supplement through incorporation
by reference of any report filed under the Exchange Act, the Company shall
promptly furnish to the Representative for review a copy of each such proposed
amendment or supplement and shall permit the Representative a reasonable
opportunity to comment thereon, and shall consider in good faith any reasonable
comments made by, or changes reasonably requested by, or reasonable objections
to the filing of any such amendment or supplement communicated to the Company by
the Representative or their attorneys or advisors.
(b) Securities Act Compliance.
During the Prospectus Delivery Period, the Company shall promptly
advise the Representative in writing of: (i) the receipt of any comments of, or
requests for additional or supplemental information from, the Commission; (ii)
any filing of any post-effective amendment to the Registration Statement or any
amendment or supplement to the Disclosure Package or the Prospectus; (iii) the
time and date that any post-effective amendment to the Registration Statement
becomes effective; and (iv) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereto or of any order preventing or suspending the use of the
Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus, or
of any proceedings to remove, suspend or terminate from listing or quotation the
Common Stock from any securities exchange or market upon which it is listed for
trading or included or designated for quotation, or of the threatening or
initiation of any proceedings for any of such purposes. If the Commission shall
enter any such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. Additionally,
the Company agrees that it shall comply with the provisions of Rules 424(b) and
430A, as applicable, under the Securities Act.
(c) Amendments and Supplements and Other Securities Act Matters.
If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus or Disclosure Package in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if in
the opinion of the Representative and counsel for the Underwriters it is
otherwise necessary to amend or supplement the Prospectus or the Disclosure
Package to comply with applicable law, the Company agrees to promptly prepare
(subject to Section 3(a) hereof), file with the Commission and furnish at its
own expense to the Underwriters and to dealers, amendments or supplements to the
Prospectus or the Disclosure Package so that the statements in the Prospectus or
the Disclosure Package as so amended or supplemented will not when it (or, in
lieu thereof, the notice referred to in Rule 172(a) under the Securities Act) is
so delivered, include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, be
misleading or so that the Prospectus or the Disclosure Package, as amended or
supplemented, will comply with the Securities Act.
16
(d) Copies of any Amendments and Supplements.
The Company agrees to furnish to each Underwriter, without charge,
during the Prospectus Delivery Period, as many copies of the Preliminary
Prospectus, the Prospectus or any Issuer Free Writing Prospectus, and any
amendments and supplements thereto as the Underwriter may reasonably request.
(e) Blue Sky Compliance.
The Company shall cooperate with the Underwriters and counsel for the
Underwriters to qualify or register the Shares for sale under (or obtain
exemptions from the application of) the state securities or blue sky laws or
other jurisdictions reasonably designated by the Representative, shall comply
with such laws and shall use its reasonable best efforts to continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Shares. The Company shall not be required to qualify as
a foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Shares for offering,
sale or trading in any jurisdiction or any initiation or, to the extent it has
Knowledge thereof, threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company shall use its reasonable best efforts to obtain the
withdrawal thereof at the earliest possible moment.
(f) Earnings Statement.
As soon as practicable, but not later than the dates such information
is required to be filed with the Commission, the Company will make generally
available, including, but not limited to, by filing on EDGAR, to its security
holders an earnings statement of the Company (which need not be audited)
complying with Section 11(a) of the Securities Act.
(g) Exchange Act Compliance.
During the Prospectus Delivery Period, the Company will file all
documents required to be filed with the Commission pursuant to Section 13, 14 or
15 of the Exchange Act in the manner and within the time periods required by the
Exchange Act.
(h) Agreement Not to Offer or Sell Additional Securities.
During a period of ninety (90) days from the date set forth on the
cover page of the Prospectus (the "Initial Lockup-Period"), the Company will
not, without the prior written consent of the Representative, directly or
indirectly: (i) offer, sell, contract to sell, pledge, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or file any registration statement under the Securities Act
with respect to any of the foregoing; or (ii) enter into any swap, hedge or any
other arrangement that transfers, in whole or in part, directly or indirectly,
the economic consequences of ownership of the Common Stock, whether any such
17
swap or transaction described in clauses (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, except
(A) grants of employee or director stock options or issuances of restricted
Common Stock pursuant to the terms of an equity compensation plan in effect on
the date hereof, (B) issuances of Common Stock pursuant to the exercise of
employee or director stock options outstanding on the date hereof and (C) the
filing of a registration statement on Form S-8 under the Securities Act
registering the Common Stock issuable pursuant to clauses (A) and (B) above;
provided, however, that if (1) during the last 17 days of the Initial Lock-up
Period, the Company releases earnings results or publicly announces material
news or a material event relating to the Company or (2) prior to the expiration
of the Initial Lock-up Period, the Company announces that it will release
earnings results during the 16-day period beginning on the last day of the
Initial Lock-up Period, then in each case the Initial Lock-up Period will be
extended until the expiration of the 18-day period beginning on the date of
release of the earnings results or the public announcement of the other material
news or material event, as applicable, unless the Representative waives in
writing such extension (the Initial Lock-up Period, as extended, the "Lock-up
Period"). The Company has obtained agreements substantially in the form of
EXHIBIT C hereto from each of the persons listed on EXHIBIT D hereto.
(i) No Manipulation of Price.
Neither the Company nor any "affiliated purchaser" of the Company (as
such term is defined in Regulation M) will take, directly or indirectly, any
action designed to or that might reasonably be expected to result in a violation
of Regulation M or cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Shares.
(j) Additional Documents.
On or before each of the First Closing Date and any Option Closing
Date, as the case may be, the Company will provide to the Representative and
counsel for the Underwriters such information, documents and opinions as they
may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
(k) Press Releases During the Prospectus Delivery Period.
The Company shall furnish to the Representative for review a copy of
any press release that the Company or any of its affiliates proposes to issue
with respect to or that otherwise references the offering of the Shares, and,
except as required by law, shall not issue any such press release or make any
public statement with respect to or otherwise referring to the offering of the
Shares without the approval of the Representative, which approval shall not be
unreasonably withheld, delayed or conditioned.
18
(l) Use of Proceeds.
The Company shall apply the net proceeds from the sale of the Shares
sold by it in the manner described under the caption "Use of Proceeds" in the
Prospectus and the Disclosure Package.
(m) Investment Limitation.
The Company shall not invest, or otherwise use the net proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company to register as an investment company under the Investment
Company Act.
(n) Free Writing Prospectuses.
The Company agrees to: (i) furnish a copy of each proposed Free Writing
Prospectus to the Representative and counsel for the Underwriters and obtain the
consent of the Representative prior to referring to, using or filing with the
Commission any Free Writing Prospectus pursuant to Rule 433(d) under the
Securities Act; and (ii) to comply with the requirements of Rules 164 and 433 of
the Securities Act applicable to any Issuer Free Writing Prospectus, including
timely filing with the Commission, legending and record keeping, as applicable.
The Representative may, in its sole discretion, waive in writing the
performance of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 4. PAYMENT OF EXPENSES.
The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (a) all
expenses incident to the issuance and delivery of the Shares (including all
printing and engraving costs), (b) all fees and expenses of the registrar and
transfer agent of the Common Stock, (c) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Shares to the
Underwriters, (d) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (e) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each Preliminary
Prospectus, the Prospectus, any Issuer Free Writing Prospectus and all
amendments and supplements thereto, and this Agreement, (f) all filing fees,
including reasonable attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Shares for offer and sale under the state securities or blue sky laws or the
laws of any foreign jurisdiction, and, if reasonably requested by the
Underwriters, preparing and printing a "Blue Sky Survey" or memorandum, and any
supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (g) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the Shares, including without limitation, expenses associated with
the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior written approval of the Company, travel and lodging expenses of the
19
officers of the Company and, with the prior written approval of the Company, any
such consultants, (h) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters (with such fees and expenses of counsel
not to exceed $30,000) in connection with, the NASD's review and approval of the
Underwriters' participation in the offering and distribution of the Shares, (i)
the fees and expenses associated with listing the Shares on the Nasdaq National
Market, and (j) all other fees, costs and expenses referred to in Item 14 of
Part II of the Registration Statement. With respect to the costs of any aircraft
chartered in connection with any road show with the Company's prior approval,
one-third of such costs shall be borne by the Underwriters and two-thirds of
such costs shall be borne by the Company; provided, however, that in the event
the Underwriters' "use" of any such aircraft is less than or greater than
one-third, an equitable adjustment shall be made so that the allocation of the
costs for such aircraft reflects the actual usage by the Company, on the one
hand, and the Underwriters, on the other hand. For purposes of the previous
sentence of this Section 4, use shall be determined based upon the quotient, the
numerator of which is the number of miles flown by representatives of the
Underwriters (with the miles of each such person being aggregated for these
purposes), and the denominator of which is the total number of miles flown by
all persons (with the miles of each such person being aggregated for these
purposes). Except as provided in this Section 4, Section 6, Section 8 and
Section 9 hereof, the Underwriters shall pay their own expenses, including,
without limitation, the fees and disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The Underwriters are only obligated to purchase and pay for the Shares
as provided herein on the First Closing Date and any Option Closing Date, as the
case may be, if: (i) the representations and warranties of the Company set forth
in Section 1 of this Agreement that are qualified as to materiality or Material
Adverse Change are true and correct in all respects and those not so qualified
are true and correct in all material respects, as of the date hereof and as of
the First Closing Date as though then made and, with respect to any Option
Closing Date, as of such Option Closing Date as though then made; and (ii) the
Company has complied in all material respects with all the agreements and
covenants on its part to be performed hereunder and has satisfied all the
conditions on its part to be satisfied hereunder and to each of the following
conditions:
(a) Accountants' Comfort Letter. The Underwriters shall have received
from Eisner LLP, an independent registered public accounting firm for the
Company, a letter dated the date of the Preliminary Prospectus and a letter
dated the date hereof, addressed to the Underwriters, in form and substance
reasonably satisfactory to the Underwriters, containing statements and
information of the type ordinarily included in an accountant's "comfort letter"
to underwriters, delivered according to Statement of Auditing Standards No. 72
and Statement of Auditing Standard No. 100 (or any successor bulletins), with
respect to the audited and unaudited financial statements and certain financial
information contained in or incorporated by reference into the Registration
Statement, the Disclosure Package and the Prospectus.
(b) Compliance with Registration Requirements; No Stop Order; No
Objection of NASD. For the period from and after the date of this Agreement and
prior to the First Closing Date and any Option Closing Date, as the case may be:
20
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required
by Rule 424(b) under the Securities Act;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment to the Registration
Statement shall be in effect and no proceedings for such purpose
shall have been instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change. For the period from and after the date
of this Agreement and prior to the First Closing Date and any Option Closing
Date, as applicable, in the reasonable judgment of the Representative, there
shall not have occurred any Material Adverse Change that makes it impractical or
inadvisable to proceed with the completion of the public offering or the sale
and payment for the Shares.
(d) Opinion of Counsel for the Company. On the First Closing Date and
any Option Closing Date, as the case may be, the Underwriters shall have
received the favorable opinion of: (i) Lowenstein Sandler PC, counsel for the
Company, dated the First Closing Date and, with respect to any Option Closing
Date, dated such Option Closing Date, in each case, substantially to the effect
set forth in EXHIBIT A; and (ii) Troutman Sanders LLP, special intellectual
property counsel for the Company, dated the First Closing Date and, with respect
to any Option Closing Date, dated such Option Closing Date, in each case,
substantially to the effect set forth in EXHIBIT B.
(e) Opinion of Counsel for the Underwriters. On the First Closing Date
and any Option Closing Date, as the case may be, the Underwriters shall have
received from King & Spalding LLP, counsel for the Underwriters, such opinion or
opinions, dated the First Closing Date and, with respect to any Option Closing
Date, dated such Option Closing Date, with respect to such matters as the
Representative may reasonably require.
(f) Company Officers' Certificate. On the First Closing Date and any
Option Closing Date, as the case may be, the Underwriters shall have received a
written certificate executed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the First Closing Date and, with respect
to any Option Closing Date, dated such Option Closing Date, to the effect set
forth in subsections (b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to the First Closing Date and any Option Closing Date, as the
case may be, there has not occurred any Material Adverse Change;
(ii) the representations and warranties of the Company set forth in
Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of the First
Closing Date and, with respect to any
21
Option Closing Date, as though expressly made on and as of such
Option Closing Date;
(iii) the Company has complied in all material respects with all
the agreements and covenants on its part to be performed hereunder
and has satisfied all the conditions on its part to be satisfied
hereunder at or prior to the First Closing Date and, with respect
to any Option Closing Date, at or prior to such Option Closing
Date; and
(iv) they have reviewed the Registration Statement, the Disclosure
Package and the Prospectus and nothing has come to their attention
that would lead them to believe that: (A) the Registration
Statement, as of each effective date, contained an untrue statement
of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; or (B) the Disclosure Package or the Prospectus, as of
their respective issue or filing dates, the First Closing Date or
any Option Closing Date, as the case may be, contained or contains,
as of such date, any untrue statement of a material fact, or
omitted or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(g) Bring-down Comfort Letter. On the First Closing Date and any Option
Closing Date, as the case may be, the Underwriters shall have received from
Eisner LLP, an independent registered public accounting firm for the Company, a
letter dated such date, in form and substance satisfactory to the Underwriters,
to the effect that they reaffirm the statements made in the letters furnished by
them pursuant to subsection (a) of this Section 5, except that the specified
date referred to therein for the carrying out of procedures shall be no more
than three business days prior to the First Closing Date and, with respect to
any Option Closing Date, no more than three business days prior to any Option
Closing Date.
(h) Lock-up Agreements. Prior to the date of this Agreement, the
Representative shall have received agreements substantially in the form of
EXHIBIT C hereto signed by each of the persons listed on EXHIBIT D hereto.
(i) The Company shall have furnished to the Representative such further
certificates and documents as the Representative shall reasonably request.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representative by notice to the Company at any time on or prior to the First
Closing Date or any Option Closing Date, as the case may be, which termination
shall be without liability on the part of any party to any other party, except
that Section 4, Section 6, Section 8, Section 9 and Sections 13 through 18 shall
at all times be effective and shall survive such termination, provided, however,
that if such termination occurs after the First Closing Date, this Agreement
will not terminate as to the Shares purchased at the First Closing or any
Overallotment Shares purchased on any Option Closing Date prior to such
termination.
22
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
If (a) this Agreement is terminated by the Representative pursuant to
Section 5 or (b) the sale to the Underwriters of the Shares on the First Closing
Date (or any Option Closing Date, as the case may be) is not consummated because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof (except to the extent
due to any material breach by the Underwriters), the Company agrees to reimburse
the Underwriters upon demand up to an aggregate of $75,000 for all out-of-pocket
expenses that shall have been reasonably incurred by the Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall become effective upon the execution and delivery
of this Agreement by the parties hereto.
SECTION 8. INDEMNIFICATION.
(a) Indemnification by the Company. The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and the respective directors, officers, employees and agents of
each Underwriter and Control person from and against any loss, claim, damage,
liability or expense, as incurred, to which the Underwriter or such controlling
person may become subject, under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or any
amendment thereto, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, Issuer Free Writing
Prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and, in the case of (i) and (ii) above, to reimburse
each Underwriter and each such controlling person for any and all reasonable
expenses (including reasonable legal fees and disbursements of counsel) as such
expenses are incurred by the Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that
the foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Underwriters through the
Representative expressly for use in the Registration Statement any Preliminary
Prospectus, Issuer Free Writing Prospectus or the
23
Prospectus (or any amendment or supplement thereto), it being understood and
agreed that the only such information furnished to the Company consists of the
information described as such in the penultimate sentence of Section 8(b) below.
The indemnity agreement set forth in this Section 8(a) shall be in addition to
any liabilities that the Company may otherwise have.
(b) Indemnification of the Company and its Directors and Officers. The
Underwriters agree to indemnify and hold harmless the Company, each of its
directors, officers, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Underwriters), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or any
amendment thereto, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, Issuer Free Writing
Prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, in the case of each of (i) and (ii) above to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, Issuer Free Writing Prospectus or the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company by the Underwriters
through the Representative expressly for use therein; and to reimburse the
Company, or any such director, officer or controlling person for any legal and
other expense reasonably incurred by the Company, or any such director, officer
or controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The Company hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the Registration
Statement, any Preliminary Prospectus, Issuer Free Writing Prospectus or the
Prospectus (or any amendment or supplement thereto) is the concession and
reallowance figures appearing in the fourth paragraph under the caption
"Underwriting" in the Prospectus and the information contained in the sixth
paragraph, twelfth paragraph and thirteenth paragraph under the caption
"Underwriting" in the Disclosure Package and the Prospectus. The indemnity
agreement set forth in this Section 8(b) shall be in addition to any liabilities
that the Underwriters may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of
24
such failure. In case any such action is brought against any indemnified party
and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it shall elect, jointly with all other indemnifying
parties similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; 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 a conflict may arise
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, which approval shall not be unreasonably withheld, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses 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 immediately
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel (together
with local counsel), approved by the indemnifying party, representing the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time, in light of
the circumstances, after notice of commencement of the action, in each of which
cases the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
(a) If the indemnification provided for in Section 8 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the aggregate amount
paid or payable by such indemnified party, as incurred, as a result of any
losses, claims, damages,
25
liabilities or expenses referred to therein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Underwriters, on the other hand, from the offering of the Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, in connection with the statements or omissions herein that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Underwriters, on the other hand, in
connection with the offering of the Shares pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total gross proceeds less
underwriting discounts and commissions from the offering of the Shares pursuant
to this Agreement received by the Company, and the total underwriting
commissions received by the Underwriters, bear to the aggregate public offering
price of the Shares. The relative fault of the Company, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(b) The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(d), any legal or
other reasonable fees or expenses incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(d) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
(c) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in this Section 9.
(d) Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the underwriting
commissions received by such Underwriter in connection with the Shares
underwritten by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each officer and
employee of the Underwriters and each person, if any, who controls the
Underwriters within the meaning of the Securities Act and the Exchange Act shall
have the same rights to contribution as the Underwriters, and each director of
the Company, each officer of the Company, and each person, if any, who controls
the Company within the meaning of the Securities Act and the Exchange Act shall
have the same rights to contribution as the Company.
26
SECTION 10. TERMINATION OF THIS AGREEMENT.
Prior to the First Closing Date, this Agreement may be terminated by
the Representative by notice given to the Company if at any time: (a) trading or
quotation in any of the Company's securities shall have been suspended or
materially limited by the Commission or by the Nasdaq National Market, or
trading in securities generally on the New York Stock Exchange or the Nasdaq
National Market shall have been suspended or materially limited, or minimum or
maximum prices shall have been generally established on any of such stock
exchanges or markets by the Commission or the NASD or any other Governmental
Authority, or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States; (b) a general
banking moratorium shall have been declared by any of federal or New York
authorities; (c) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States' or international political, financial or economic conditions, in any
such case that, in the reasonable judgment of the Representative is material and
adverse and makes it impracticable or inadvisable to market the Shares in the
manner and on the terms disclosed in the Disclosure Package or the Prospectus or
to enforce contracts for the sale of securities; (d) in the reasonable judgment
of the Representative there shall have occurred any Material Adverse Change; or
(e) the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character that in the judgment of the
Representative would, individually or in the aggregate, result in a Material
Adverse Change. Any termination pursuant to this Section 10 shall be without
liability on the part of (i) the Company to the Underwriters, (ii) the
Underwriters to the Company, or (iii) of any party hereto to any other party
except that the provisions of Section 8, Section 9 and Section 11 shall at all
times be effective and shall survive such termination.
SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and of the Underwriters set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
regardless of (a) any investigation, or statement as to the results thereof,
made by or on behalf of the Underwriters, the officers or employees of the
Underwriters, any person controlling the Underwriters, any person controlling
the Company, or the officers and employees of the Company or of any person
controlling the Company, (b) acceptance of the Shares and payment for them
hereunder and (c) termination of this Agreement.
SECTION 12. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS.
(a) If one or more of the Underwriters shall fail at the First Closing
Date or any Option Closing Date to purchase the Shares that it or they are
obligated to purchase under this Agreement (the "Defaulted Shares"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted Shares in
such amounts as may be agreed upon and upon the terms herein set forth; if,
however, the Representative shall not have completed such arrangements within
such 24 hour period, then:
27
(i) if the number of Defaulted Shares does not exceed 10% of the
number of Shares to be purchased on such date, each of the non
defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non defaulting Underwriters; or
(ii) if the number of Defaulted Shares exceeds 10% of the number of
Shares to be purchased on such date, this Agreement (with respect
to the First Closing Date) or, with respect to any Option Closing
Date, the obligation of the Underwriters to purchase and of the
Company to issue and sell the Overallotment Shares to be purchased
and sold on such Option Closing Date shall terminate without
liability on the part of any non defaulting Underwriter or the
Company.
(b) No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
(c) In the event of any such default that does not result in a
termination of this Agreement or, in the case of an Option Closing Date, that
does not result in a termination of the obligation of the Underwriters to
purchase and the Company to issue and sell the Overallotment Shares, as the case
may be, either (i) the Representative or (ii) the Company shall have the right
to postpone the First Closing Date or the relevant Option Closing Date, as the
case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or the Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 12.
SECTION 13. NOTICES.
All communications hereunder shall be in writing and shall be mailed,
hand delivered or telecopied and confirmed to the parties hereto as follows:
If to the Underwriters:
Morgan Keegan & Company, Inc.
50 N. Front Street
Memphis, Tennessee 38103
Facsimile: 901-579-4341
Attention: Alper Cetingok
with a copy to (which shall not constitute notice):
King & Spalding LLP
1700 Pennsylvania Avenue, NW
Washington, D.C. 20006
Facsimile: (202) 626-3737
Attention: David A. Gibbons
If to the Company:
28
I.D. Systems, Inc.
One University Plaza
Hackensack, NJ 07601
Facsimile: (201) 996-9144
Attention: Jeffrey Jagid, Chief Executive Officer
with copies to (which shall not constitute notice):
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07608
Facsimile: (973) 597-2400
Attention: Steven Skolnick
Lowenstein Sandler PC
1251 Avenue of the Americas
New York, NY 10020
Facsimile: (212) 262-7402
Attention: Michael D. Maline
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. ARM'S LENGTH RELATIONSHIP; NO FIDUCIARY DUTY.
The Company acknowledges and agrees that (a) the purchase and sale of
the Shares pursuant to this Agreement, including the determination of the public
offering price of the Shares and any related discounts and commissions, is an
arm's length commercial transaction between the Company, on the one hand, and
the several Underwriters, on the other hand, (b) in connection with the offering
contemplated hereby and the process leading to such transaction each Underwriter
is and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary of the Company, its stockholders, creditors, employees or any
other party, (c) no Underwriter has assumed or will assume an advisory or
fiduciary responsibility in favor of the Company with respect to the offering
contemplated hereby or the process leading thereto (irrespective of whether such
Underwriter has advised or is currently advising the Company on other matters)
and no Underwriter has any obligation to the Company with respect to the
offering contemplated hereby except the obligations expressly set forth in this
Agreement, (d) the Underwriters and their respective affiliates may be engaged
in a broad range of transactions that involve interests that differ from those
of the Company and that the several Underwriters have no obligation to disclose
any such interests to the Company and (e) the Underwriters have not provided any
legal, accounting, regulatory or tax advice with respect to the offering
contemplated hereby and the Company has consulted its own legal, accounting,
regulatory and tax advisors to the extent it deemed appropriate. The Company
acknowledges that the Underwriters disclaim any implied duties (including any
fiduciary duty), covenants or obligations arising from the Underwriters'
performance of the duties and obligations expressly set forth herein. The
Company hereby waives and releases, to the fullest extent permitted by
29
law, any claims that the Company may have against the several Underwriters with
respect to any breach or alleged breach of agency or fiduciary duty.
SECTION 15. SUCCESSORS.
This Agreement will inure to the benefit of and be binding upon the
parties hereto, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 8 and Section 9, and in each case
their respective successors, and personal representatives, and no other person
will have any right or obligation hereunder. The term "successors" shall not
include any purchaser of the Shares as such from the Underwriters merely by
reason of such purchase.
SECTION 16. PARTIAL UNENFORCEABILITY.
The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
SECTION 17. GOVERNING LAW PROVISIONS.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York applicable to agreements made and to
be performed in such state.
SECTION 18. GENERAL PROVISIONS.
(a) This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof.
(b) This Agreement may not be amended or modified unless in writing by
all of the parties hereto. No waiver of any condition of this Agreement or any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the party making such waiver, nor shall such waiver be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent default, misrepresentation, or breach of warranty or
covenant.
(c) The Section headings herein are for the convenience of the parties
only and shall not affect the construction or interpretation of this Agreement.
(d) Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in
30
order to assure that adequate disclosure has been made in the Registration
Statement and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
(e) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' officers and employees, any controlling persons
referred to herein, the Company's directors and the Company's officers and its
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement.
(f) This Agreement may be executed 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 Agreement.
[The following page is the signature page.]
31
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
I.D. SYSTEMS, INC.
By: _______________________________
Jeffrey Jagid
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Underwriters as of the date first above written.
MORGAN KEEGAN & COMPANY, INC.
Acting on behalf of themselves and as the
Representative of the several Underwriters
By: __________________________
Name:
Title:
S-1
SCHEDULE I
UNDERWRITERS
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
Morgan Keegan & Company, Inc..............................
Cowen & Co., LLC..........................................
Jefferies & Company, Inc..................................
Total............................................ -------------------
2,500,000
===================
SCHEDULE II
ISSUER FREE WRITING PROSPECTUSES
[None.]
SCHEDULE III
Public Offering Price Per Share $[ ]
Underwriting Discount Per Share $[ ]
EXHIBIT A
OPINION OF LOWENSTEIN SANDLER PC
(i) The Company is validly existing as a corporation in good standing under
the laws of the State of Delaware and has the corporate power and
authority to own its properties and to conduct its business as
described in both the Disclosure Package and the Prospectus and to
enter into and perform its obligations under the Underwriting
Agreement.
(ii) The authorized capital stock of the Company is as set forth in both the
Disclosure Package and the Prospectus under the caption "Description of
Capital Stock." All of the outstanding shares of Common Stock issued
after July 6, 1999, have been duly authorized and validly issued, are
fully paid and nonassessable and, to our knowledge, have been issued in
compliance in all material respects with federal and state securities
laws. To our knowledge, none of the outstanding shares of Common Stock
were issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities
of the Company.
(iii) The Shares have been duly authorized for issuance and sale pursuant to
the Underwriting Agreement and, when issued and delivered by the
Company against payment therefor pursuant to the Underwriting
Agreement, will be validly issued, fully paid and nonassessable.
(iv) The issuance of the Shares is not subject to any statutory preemptive
rights or, to our knowledge, other similar rights of any securityholder
of the Company.
(v) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The Registration Statement has been declared effective by the
Commission under the Securities Act. No stop order suspending the
effectiveness of the Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to
such counsel's knowledge, are threatened by the Commission. To our
knowledge, no order preventing or suspending the use of Disclosure
Package or the Prospectus has been issued and no proceeding for that
purpose has been instituted or threatened by the Commission or by the
state securities authority of any jurisdiction. The Company is eligible
to use Form S-3 for the offering of Shares contemplated by the
Underwriting Agreement.
(vii) The Disclosure Package and the Prospectus when first filed with the
Commission complied in all material respects with the requirements of
the Securities Act. The Registration Statement, at the time it became
effective, complied in all material respects with the requirements of
the Securities Act.
(viii) The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with
any applicable requirements of
A-1
the certificate of incorporation and by-laws of the Company and with
the requirements of the Nasdaq National Market.
(ix) To such counsel's knowledge, there is no legal or governmental action,
suit or proceeding pending or threatened against or affecting the
Company that is required to be disclosed in the Preliminary Prospectus
or the Prospectus that has not been so disclosed.
(x) The information in both the Preliminary Prospectus and Prospectus under
"Description of Capital Stock" and in the Registration Statement under
Item 15, to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and bylaws, legal proceedings, or
legal conclusions, has been reviewed by us and is correct in all
material respects.
(xi) All descriptions in both the Preliminary Prospectus and the Prospectus
of Existing Instruments are accurate in all material respects; to such
counsel's knowledge, there are no franchises, contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments required
to be described or referred to in both the Preliminary Prospectus and
the Prospectus or to be filed as exhibits to the Registration Statement
other than those described or referred to therein or filed as exhibits
thereto.
(xii) No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental or regulatory authority
or agency that in our experience is normally applicable to transactions
of the type contemplated by the Underwriting Agreement, is required for
the Company's execution, delivery and performance of the Underwriting
Agreement and consummation of the transactions contemplated thereby and
by both the Preliminary Prospectus and the Prospectus, except such as
(a) have been obtained or made by the Company and are in full force and
effect under the Securities Act, and (b) may be required by applicable
state securities or blue sky laws and from the NASD, as to which we
express no opinion.
(xiii) The Company's execution, delivery and performance of the Underwriting
Agreement and consummation of the transactions contemplated hereby and
by both the Disclosure Package and the Prospectus (a) will not result
in any violation of the provisions of the Company's charter or bylaws,
(b) will not conflict with or constitute a breach of, or Default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, or
require the consent of any other party to, any Existing Instrument
listed on Annex A to such counsel's opinion, (c) will not result in any
violation of the General Corporation Law of the State of Delaware or
any statute of the United States, the State of New York or the State of
New Jersey or any rule or administrative regulation of any governmental
agency or body of the United States, the State of New York or the State
of New Jersey that in our experience is normally applicable to
transactions of the type contemplated by the Underwriting Agreement or
(d) to our knowledge, violate or conflict with any judgment, order or
decree of any court of judicial body having jurisdiction over the
Company or its property, except that no opinion is given in this
paragraph with respect to any federal or state securities law or any
rule or regulation issued pursuant to any federal or state securities
law.
A-2
(xiv) To such counsel's knowledge, no person has rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by the Underwriting Agreement,
except for such rights as have been duly waived.
(xv) The Company is not, and after receipt of payment for the Shares and the
application thereof will not be, an "investment company" within the
meaning of Investment Company Act.
In the course of the preparation and/or review of the Registration
Statement, the Disclosure Package and the Prospectus, we have participated in
conferences and telephone conversations with your representatives and those of
the Company, your counsel, the Company's independent auditors, and certain
officers and employees of the Company, during which conferences and
conversations the contents of the Registration Statement, the Disclosure Package
and Prospectus and related matters were discussed. The limitations inherent in
the independent verification of factual matters and the nature of the
determinations involved in our review are such that we do not assume any
responsibility for the accuracy, completeness or fairness of the statements made
or the information contained or incorporated by reference in the Registration
Statement, the Disclosure Package or Prospectus.
On the basis of the foregoing, we advise you that no facts have come to
our attention that caused us to believe that either (i) the Registration
Statement or any amendment thereto, at the time such Registration Statement or
any such amendment became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) the
Prospectus or any amendment or supplement thereto as of its date, at the time
any such amended or supplemented prospectus was issued or at the First Closing
Date or any Option Closing Date, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) the Disclosure Package or any amendment
thereto as of the date of this Agreement contained any untrue statement of
material fact or omitted 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, except that we express no view or belief with respect to (A) the
Patent Disclosure (as defined in Exhibit B) or (B) the financial statements or
financial schedules or other financial data, in each case, included in or
incorporated by reference into, or omitted from, the Registration Statement, the
Disclosure Package or the Prospectus.
A-3
EXHIBIT B
OPINION OF TROUTMAN SANDERS LLP
Such counsel are generally familiar with the Patents owned or used by
the Company in its business and the manner of its use thereof and have read (a)
the Existing Instruments listed on Annex A to the extent relating to the Patents
owned or used by the Company and (b) the statements under "Risk Factors - If we
are unable to protect our intellectual property rights, our financial condition
and results of operations could be materially and adversely affected", "Risk
Factors - The U.S. government's right to use technology developed by us with
government funds could limit our intellectual property rights" and "Business -
Intellectual Property - Patents" (collectively, the "Patent Disclosure")
contained in the Registration Statement, the Disclosure Package and the
Prospectus, and such counsel has no reason to believe that the Patent Disclosure
contained in either: (i) the Registration Statement or any amendment thereto, at
the time such Registration Statement or any such amendment became effective,
contained any untrue statement of a material fact or omitted any material fact
that is required to be stated in such Patent Disclosure or necessary to make the
statements contained in such Patent Disclosure not misleading; (ii) the
Prospectus or any amendment or supplement thereto as of its date, at the time
any such amended or supplemented prospectus was issued or at the First Closing
Date or any Option Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits any material fact in order to make the
statements in such Patent Disclosure, in light of the circumstances under which
they were made, not misleading; or (iii) the Disclosure Package or any amendment
thereto as of the date of this Agreement, contained any untrue statement of a
material fact or omitted any material fact in order to make the statements in
such Patent Disclosure, in light of the circumstances under which they were
made, not misleading.
B-1
EXHIBIT C
FORM OF LOCK-UP AGREEMENT
January __, 2006
Morgan Keegan & Company, Inc.
Jefferies & Company, Inc.
SG Cowen & Co., LLC
c/o Morgan Keegan & Company, Inc.
50 N. Front Street, 19th Floor
Memphis, TN 38103
Dear Sirs:
As an inducement to the several underwriters, for whom Morgan Keegan &
Company, Inc. is acting as the representative (the "REPRESENTATIVE"), to enter
into an underwriting agreement (the "UNDERWRITING AGREEMENT") with I.D. Systems,
Inc., a Delaware corporation (the "COMPANY"), pursuant to which an offering will
be made for the common stock, par value $0.01 per share (the "SECURITIES"), of
the Company or any successor (by merger or otherwise) thereto, the undersigned
hereby agrees that during the period specified in the following paragraph (the
"LOCK-UP PERIOD"), the undersigned will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any shares of Securities
or securities convertible into or exchangeable or exercisable for any shares of
Securities, enter into a transaction that would have the same effect, or enter
into any swap, hedge or other arrangement that transfers, in whole or in part,
any of the economic consequences of ownership of the Securities, whether any
such aforementioned transaction is to be settled by delivery of the Securities
or such other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or to enter into
any such transaction, swap, hedge or other arrangement, without, in each case,
the prior written consent of the Representative. In addition, the undersigned
agrees that, without the prior written consent of the Representative, it will
not, during the Lock-Up Period, make any demand for or exercise any right with
respect to, the registration of any Securities or any security convertible into
or exercisable or exchangeable for the Securities.
The initial Lock-Up Period will commence on the date of this Lock-Up
Agreement and continue to and include the date that is 90 days after the public
offering date set forth on the cover page of the final prospectus used to sell
the Securities (the "PUBLIC OFFERING DATE") pursuant to the Underwriting
Agreement; provided, however, that if (1) during the last 17 days of the initial
Lock-Up Period, the Company releases earnings results or publicly announces
other material news or a material event relating to the Company or (2) prior to
the expiration of the initial Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of
the initial Lock-Up Period, then in each case the initial Lock-Up Period will be
extended until the expiration of the 18-day period beginning on the date of
release of the earnings results or the public announcement of the other material
news or material event, as applicable, unless the Representative waives, in
writing, such extension.
C-1
The undersigned hereby acknowledges and agrees that written notice of
any extension of the Lock-Up Period pursuant to the previous paragraph will be
delivered by the Representative to the Company (in accordance with the
Underwriting Agreement) and that any such notice properly delivered will be
deemed to have been given to, and received by, the undersigned. The undersigned
further agrees that, prior to engaging in any transaction or taking any other
action that is subject to the terms of this Lock-Up Agreement during the period
from the date of this Lock-Up Agreement to and including the 34th day following
the expiration of the initial Lock-Up Period, it will give notice thereof to the
Company and will not consummate such transaction or take any such action unless
it has received written confirmation from the Company that the Lock-Up Period
(as it may have been extended pursuant to the previous paragraph) has expired.
The undersigned's acquisition or exercise of any stock option issued by
the Company pursuant to the Company's existing stock option plans, or the
exercise of any warrant issued or granted to the undersigned that is outstanding
on the date hereof, including any exercise effected by the delivery of
Securities held by the undersigned to the Company, shall not be subject to this
Agreement; provided, however, that any Securities received upon the exercise of
any such option or warrant will also be subject to this Agreement. A transfer of
Securities by gift, will or intestacy to a family member, affiliate or trust may
be made, but only to the extent the transferee agrees to be bound in writing by
the terms of this Agreement prior to such transfer and no filing by any party
(donor, donee, transferor or transferee) under the Securities Exchange Act of
1934, as amended, shall be required or shall be voluntarily made in connection
with such transfer (other than a filing on a Form 5 made after the expiration of
the Lock-Up Period).
In furtherance of the foregoing, the Company and its transfer agent and
registrar are hereby authorized to decline to make any transfer of shares of
Securities if such transfer would constitute a violation or breach of this
Agreement
This Agreement constitutes the entire agreement among the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof.
This Agreement shall be binding on the undersigned and the successors,
heirs, personal representatives and assigns of the undersigned. This Agreement
shall lapse and become null and void if (1) the Company or the Representative
decides not to proceed with the offering of the Securities prior to the
execution of the Underwriting Agreement, (2) the Underwriting Agreement (other
than the provisions thereof that shall survive termination) shall terminate or
be terminated prior to payment for and delivery of the Securities to be sold
thereunder or (3) the Public Offering Date shall not have occurred on or before
June 30, 2006.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF.
Very truly yours,
---------------------
[NAME OF STOCKHOLDER]
C-2
EXHIBIT D
PERSONS TO EXECUTE LOCK-UP AGREEMENTS
Jeffrey M. Jagid
Kenneth S. Ehrman
Ned Mavrommatis
Frederick F. Muntz
Michael L. Ehrman
Lawrence Burstein
Michael Monaco
Beatrice Yormark
D-1