Exhibit 1
1,389,000 Shares of Common Stock
EVERCEL, INC.
STANDBY UNDERWRITING AGREEMENT
February , 1999
▇▇▇▇▇▇▇ Securities Inc.
Loeb Partners Corporation
c/▇ ▇▇▇▇▇▇▇ Securities Inc.
1325 Avenue of the Americas
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Evercel, Inc., a Delaware corporation (the "COMPANY"), proposes to grant
(the "RIGHTS OFFERING") to its stockholders of record on February __, 1999 (the
"RECORD DATE") rights (the "Rights") to purchase 1,389,000 shares of common
stock, par value $.01 per share ("COMMON STOCK") of the Company, plus up to an
additional 208,350 shares (the "Oversubscription Shares") of Common Stock to
cover exercises of excess oversubscription privileges as more fully described in
Section 4 below, and to issue and to sell to ▇▇▇▇▇▇▇ Securities Inc. and Loeb
Partners Corporation (the "UNDERWRITERS") any and all of the 1,389,000 shares of
Common Stock which had been offered by the Company pursuant to the Rights but
which were not acquired through the exercise of Rights in the Rights Offering
(the "UNSUBSCRIBED SHARES"). In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 208,350 shares (the
"OPTIONAL SHARES") of Common Stock, as provided in Section 2(b) of this
Agreement. The Unsubscribed Shares and, if and to the extent issued, the
Optional Shares are collectively called the "Underwritten Shares." The shares of
Common Stock acquired pursuant to the exercise of Rights (including the
Oversubscription Shares, if and to the extent issued) and the Underwritten
Shares are collectively called the "SHARES."
The Company has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form SB-2 (File No.
333-64931), including a prospectus subject to completion, for the registration
of the Rights and the Shares under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (collectively, the "Act"). The
Company may have filed one or more amendments thereto, including a prospectus
subject to completion, each of which has previously been furnished to the
Underwriters. After the Registration Statement has been declared effective by
the Commission under the Act and after the execution of this Agreement, the
Company will file with the Commission a prospectus in the form most recently
included in an amendment to such registration statement, with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) under the Act and as have been provided to and approved by the
Underwriters prior to execution of this Agreement. 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 Act,
including any information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430A under the Act, is called the "REGISTRATION
STATEMENT." Any prospectus subject to completion included in the Registration
Statement is called a "PRELIMINARY PROSPECTUS." The prospectus first filed with
the Commission pursuant to Rule 424(b) under the Act is called the "PROSPECTUS."
All references in this Agreement to the Registration Statement, a 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 ("▇▇▇▇▇"). For
purposes of the representations and warranties contained herein, to the extent
reference is made to the Prospectus and at the relevant time the Prospectus is
not yet in existence, such reference shall be deemed to be to the most recent
Preliminary Prospectus.
For all periods prior to February ___, 1999, the date of the execution
of that certain Distribution Agreement between the Company and Energy Research
Corporation, a New York corporation, references in this Agreement to the Company
shall include the battery business group of Energy Research Corporation.
The Company hereby confirms its agreements with the Underwriters as
follows:
1. REPRESENTATION AND WARRANTIES. The Company represents and warrants
to and agrees with each Underwriter that:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement has been declared effective by the Commission under the Act. The
Company has complied with all requests of the Commission for additional or
supplemental information. Neither the Commission nor any Blue Sky or securities
authority of any jurisdiction has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto. 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 best knowledge of the Company, are contemplated or
threatened by the Commission.
Each Preliminary Prospectus and the Prospectus when filed
complied or will comply in all material respects with the Act and, if filed by
electronic transmission pursuant to ▇▇▇▇▇ (except as may be permitted by
Regulation S-T under the Act), the text of such electronic transmission was or
will be identical to the text of the copy thereof delivered to the Underwriters
for use in connection with the offer and sale of the Underwritten Shares. Each
of the Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will comply
in all material respects with the 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 Prospectus, as amended or supplemented, as of its date and at all subsequent
times, 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 the light of the circumstances under which they were made, 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 or any post-effective amendment thereto or the Prospectus or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Underwriters expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been or will not be described or
filed as required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Underwriters two complete manually signed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and Preliminary Prospectuses, as amended or supplemented, in such
quantities and at such places as the Underwriters have reasonably requested.
(c) 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 Underwritten Shares, any offering material in
connection with the offering and sale of the Underwritten Shares other than the
Prospectus or the Registration Statement.
(d) INCORPORATION, GOOD STANDING AND QUALIFICATION. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of Delaware with full power and authority to own, lease,
and operate its properties (which term wherever used in this Agreement with
reference to the Company includes material contractual rights, unless otherwise
indicated by the context) and to conduct its business as described in the
Registration Statement and the Prospectus and to enter into and perform its
obligations under this Agreement. The Company is duly qualified to conduct
business as a foreign corporation and is in good standing in all jurisdictions
in which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such jurisdictions
where the failure to so qualify or to be in good standing would not have a
material adverse effect on its business, operations, financial condition, income
or business prospects.
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(e) PREPARATION OF FINANCIAL STATEMENTS. The Company's financial
statements, together with related notes, filed with the Commission as part of
the Registration Statement and included in the Prospectus, present fairly the
financial position, results of operations and cash flows of the Company at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied consistently throughout the periods involved,
except as otherwise expressly stated in the related notes thereto, and all
adjustments necessary for a fair presentation of results for such periods have
been made. No other financial statements or supporting schedules are required to
be included in the Registration Statement. The financial data set forth in the
Registration Statement and the Prospectus under the captions "Prospectus
Summary--Summary Financial Data," "Capitalization" and "Selected Financial Data"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement and
the books and records of the Company.
(f) INDEPENDENT ACCOUNTANTS. KPMG LLP are independent public
accountants within the meaning of the Act and have certified those financial
statements designated as audited which have been filed with the Commission as
part of the Registration Statement and, as experts, have reviewed certain
information of a financial or accounting nature included in the Registration
Statement and the Prospectus.
(g) CAPITALIZATION, AUTHORIZATION OF THE SHARES AND OTHER CAPITAL STOCK
MATTERS. The authorized, issued, and outstanding capital stock of the Company is
as set forth in the Registration Statement and the Prospectus under the caption
"Capitalization." The Common Stock (including the Shares) conforms to the
description thereof contained in the Registration Statement and the Prospectus.
All of the issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
have been issued in compliance with federal and state securities laws. All of
the Rights have been duly authorized and, when issued and distributed as
described in the Registration Statement and the Prospectus, will be legally
issued and valid and binding obligations of the Company having the rights
described in the Registration Statement and the Prospectus. 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. None of the Rights when issued will have
been issued in violation of any preemptive rights, rights of first refusal or
other similar rights. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company other than those described in the Registration
Statement and the Prospectus. The description of the Company's equity incentive
plan and other stock plans or arrangements, and the options or other rights
granted thereunder, set forth in the Registration Statement and the Prospectus
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights. The shares of Common Stock acquired pursuant
to the exercise of Rights have been duly authorized for issuance and sale to the
holders of the Rights and, when any such shares are issued and delivered by the
Company pursuant to the exercise of
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Rights, such shares will be duly and validly issued and fully paid and
nonassessable. The Underwritten Shares have been duly authorized for issuance
and sale to the Underwriters pursuant to this Agreement and, when any
Underwritten Shares are issued and delivered by the Company pursuant to this
Agreement, such shares will be duly and validly issued and fully paid and
nonassessable.
(h) STOCK EXCHANGE LISTING. The Common Stock (including the Shares) has
been approved for listing on the Boston Stock Exchange and the Nasdaq SmallCap
Market.
(i) SUBSIDIARIES AND OTHER ENTERPRISES. Except as described in the
Registration Statement and the Prospectus, the Company has no subsidiaries and
has no ownership or proprietary interest in any other business, corporation,
firm, partnership, joint venture, association or other entity and is not party
to any agreement or understanding, written or oral, regarding the acquisition
of, or of an interest in, any business, corporation, firm, partnership, joint
venture, association or other entity.
(j) TITLE TO PROPERTIES. The Company has good and marketable title to
all properties and assets reflected as owned by it in the financial statements
referred to in Section 1(e) above (or elsewhere in the Registration Statement or
the Prospectus), free and clear of all security interests, mortgages, liens,
charges, encumbrances, restrictions, claims and other defects, except such as
(i) are described in the Registration Statement and the Prospectus or (ii) do
not materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
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 are not material and do not materially interfere with
the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company.
(k) NECESSARY PERMITS, etc. Except as described in the Registration
Statement and the Prospectus, the Company possesses such valid and current
certificates, authorizations or permits issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct its
business, and the Company has not received any notice of any proceeding relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit.
(l) CONSENTS, APPROVALS, etc. No consent, approval, authorization, or
order of, or registration or filing with, any court or any governmental or
regulatory agency or body is required for the consummation by the Company of the
transactions contemplated by this Agreement or by the Registration Statement and
the Prospectus, except such as may be required under the Act or Blue Sky or
securities laws of any jurisdiction and by the National Association of
Securities Dealers, Inc. ("NASD").
(m) TAX LAW COMPLIANCE. The Company has filed all tax returns required
to be filed by it, or has received extensions of the time within which such
returns must be filed, and is not
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in default in the payment of any taxes which have become due pursuant to any law
or any assessment. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1(e) above in
respect of all taxes for all periods as to which the tax liability of the
Company has not been finally determined.
(n) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable federal or state
securities laws or public policy underlying such laws and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(o) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; Compliance with Laws.
The Company is neither in violation of its certificate of incorporation or
bylaws nor in default (or, with the giving of notice or lapse of time, would be
in default) ("DEFAULT") in the performance or observance of any obligation,
agreement, covenant, or condition contained in any bond, debenture, note, or
other evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, or other agreement or instrument to which the Company is a
party or by which the Company or any of its properties or assets may be subject
(each, an "EXISTING INSTRUMENT"), except for such Defaults as would not,
individually or in the aggregate, have a material adverse effect on the
Company's business, operations, financial condition, income or business
prospects. The Company is not in violation of any law, order, rule, regulation,
writ, injunction or decree of any government, governmental instrumentality or
court, domestic or foreign , except for such violations as would not,
individually or in the aggregate, have a material adverse effect on the
Company's business, operations, financial condition, income or business
prospects. The Company's execution, delivery and performance of this Agreement
and consummation of the transactions contemplated hereby and by the Registration
Statement 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
Company's certificate of incorporation or bylaws, (ii) will not conflict with or
constitute a breach of, or Default under, or result in the creation or
imposition of any security interest, mortgage, lien, charge, encumbrance,
restriction, claim or other defect upon any property or assets of the Company
pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, security interests,
mortgages, liens, charges, encumbrances, restrictions, claims or other defects
as would not, individually or in the aggregate, have a material adverse effect
on the Company's business, operations, financial condition, income or business
prospects, and except for such consents as have been obtained and (iii) will not
result in any violation of any law, order, rule, regulation, writ, injunction,
or decree of any government, governmental instrumentality, or court, domestic or
foreign, except for such violations as would not, individually or in the
aggregate, have a material adverse effect on the Company's business, operations,
financial condition, income or business prospects.
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(p) NO MATERIAL ADVERSE CHANGE. Since the respective dates as of which
information is given in the Prospectus and prior to the First Closing Date (as
defined in Section 3(a) below), except as may otherwise be stated in the
Prospectus, (i) there has not been and will not be any material adverse change,
or any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, of the Company, or in
the business, operations, income, properties, management, or business prospects
of the Company, whether or not arising in the ordinary course of business, (ii)
there has not been and will not be any transactions or agreements entered into
by the Company, other than transactions or agreements in the ordinary course of
business or transactions or agreements which are not material to the Company,
(iii) there has not been and will not be any dividend or distribution of any
kind declared, paid, or made by the Company on its capital stock, (iv) the
Company has not incurred and will not incur any liabilities or obligations
(indirect, direct or contingent), except in the ordinary course of business, (v)
there has not been and will not be any change in the capital stock of the
Company or any increase in the long-term indebtedness of the Company and (vi)
the Company has not and will not have sustained a loss of, or damage to, its
properties (whether or not insured) which could reasonably be expected to affect
materially and adversely the business, operations, financial condition, income
or business prospects of the Company.
(q) NO MATERIAL ACTIONS OR PROCEEDINGS. Except as may otherwise be
stated in the Registration Statement and the Prospectus, no action, suit, or
proceeding at law or in equity is pending or, to the knowledge of the Company,
threatened against the Company or any officer or director of the Company or
affecting the Company's properties or assets in, before, or by any court,
governmental commission, board, or other administrative agency, in which an
unfavorable decision, ruling or finding could reasonably be expected,
individually or in the aggregate, to affect materially and adversely the
consummation of the transactions contemplated by this Agreement and the
Registration Statement and the Prospectus or the business, operations, financial
condition, income, properties, management or business prospects of the Company.
(r) NO UNLAWFUL PAYMENTS. Neither the Company nor, to the best
knowledge of the Company and its management after reasonable investigation, any
employee or agent of the Company has made any payment to any official of, or
candidate for, any federal, state or foreign office prohibited by law or of the
character required to be disclosed in the Prospectus, and no funds of the
Company have been set aside to be used for any such payment.
(s) REGISTRATION RIGHTS. Other than as disclosed in the Registration
Statement and the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person the right
to require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the Act.
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(t) NO FINDER'S FEES. No person other than the Underwriters is
entitled, directly or indirectly, to compensation from the Company or from the
Underwriters for services as a finder in connection with the transactions
contemplated by this Agreement or the Registration Statement or the Prospectus.
(u) INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
sufficient patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, franchises, and other intangible
properties and assets (all of the foregoing being herein called "INTANGIBLES")
reasonably necessary to conduct its business as presently conducted and as the
Registration Statement and the Prospectus indicate it contemplates conducting.
All Intangibles material to the Company's business that the Company owns or has
pending, or which it is licensed, are in good standing and the Company has not
received any notice that any such Intangibles are contested. The Company has not
granted any other person any right to use any Intangible used in the business of
the Company as presently conducted or as the Registration Statement and the
Prospectus indicate it contemplates conducting (except as may be so designated
in the Registration Statement or the Prospectus). The Company has not infringed,
is not infringing, and has not received notice of infringement with respect to
asserted Intangibles of others. To the knowledge of the Company, there is no
infringement by others of Intangibles of the Company. To the knowledge of the
Company, there is no Intangible of others that has had or may in the future have
a materially adverse effect on the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company.
(v) INSURANCE. The Company is insured by recognized, financially sound
and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed 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 and acts of vandalism. The Company has no reason to believe that it
will not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not have a material adverse effect on the Company's
business, operations, financial condition, income or business prospects (without
taking into account cost changes in the insurance industry unrelated to the
Company).
(w) NO PRICE STABILIZATION OR MANIPULATION. Neither the Company, nor to
the Company's best knowledge, any of its affiliates (other than as described in
the Registration Statement and the Prospectus under the caption "The Standby
Underwriting"), has taken or will take, directly or indirectly, any action
designed to or that could be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Underwritten Shares.
(x) RELATED PARTY TRANSACTIONS. There are no related-party transactions
involving the Company or any other person required to be described in the
Registration Statement and the Prospectus which have not been described as
required.
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(y) ACCOUNTING SYSTEMS. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles as applied in the United States and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(z) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as would not,
individually or in the aggregate, have a material adverse effect on the
Company's business, operations, financial condition, income or business
prospects, (i) 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) or wildlife, 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 permits or other governmental authorizations required for
the operation of the business of the Company under applicable Environmental
Laws, or noncompliance with the terms and conditions thereof, nor has the
Company received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, 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, no investigation
with respect to which the Company has received written notice, and no written
notice received by the Company from any person or entity alleging potential
liability for investigatory costs, cleanup costs, governmental responses costs,
natural resources 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 location owned, leased or operated by the Company,
now or in the past (collectively, "Environmental Claims"), pending or, to the
best of the Company's knowledge, threatened against the Company or any person or
entity whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law; and (iii) to the best of
the Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could 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 such
Environmental Claim the Company has retained or assumed either contractually or
by operation of law.
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(aa) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under 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 in all material respects with ERISA. "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 or is reasonably
expected to occur 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 under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
2. SALE AND PURCHASE OF SHARES.
(a) UNSUBSCRIBED SHARES. On the basis of the representations,
warranties, and agreements and subject to the terms and conditions stated in
this Agreement, the Company agrees to issue and sell to the Underwriters, and
the Underwriters agree, severally and not jointly, to purchase from the Company,
any and all Unsubscribed Shares at the purchase price of $6.00 per share (the
"SUBSCRIPTION PRICE") in the percentages set forth opposite their names on
SCHEDULE A, subject to deduction of fees payable by the Company pursuant to
Section 6 of this Agreement.
(b) Optional Shares. In addition, on the basis of the representations,
warranties, and agreements and subject to the terms and conditions stated in
this Agreement, the Company hereby grants an option to the Underwriters to
purchase, severally and not jointly, up to an aggregate of 208,350 Optional
Shares from the Company at the purchase price per share equal to the
Subscription Price in the percentages set forth opposite their names on SCHEDULE
A. The number of Optional Shares subject to such option shall be reduced by the
number of Oversubscription Shares, if any, sold by the Company pursuant to the
Oversubscription Option (as defined in Section 4 below). The option granted
hereunder may be exercised in whole or in part at any time and from time to time
upon written or facsimile notice, or verbal or telephonic notice confirmed by
written or facsimile notice, by the Underwriters to the Company within 30 days
from the date on which the Company's transfer agent provides the Underwriters
with a final accounting of the number of shares of Common Stock sold pursuant to
the exercise of Rights in the Rights Offering. Such notice from the Underwriters
to the Company shall set forth the aggregate number of Optional Shares as to
which the Underwriters are exercising the option. If any Optional Shares are to
be purchased, each Underwriter agrees, severally and not jointly, to purchase
the percentage of Optional Shares (subject to such adjustments to eliminate
fractional shares as ▇▇▇▇▇▇▇ Securities Inc. may determine) set
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forth opposite its name on SCHEDULE ▇. ▇▇▇▇▇▇▇ Securities Inc. may cancel the
option at any time prior to its exercise by giving written notice of such
cancellation to the Company.
3. Delivery and Payment.
(a) THE FIRST CLOSING DATE. Delivery of certificates for the
Unsubscribed Shares to be purchased by the Underwriters and payment therefor
shall be made at the offices of ▇▇▇▇▇▇▇ Securities Inc.,1325 Avenue of the
Americas, New York, New York (or such other place as may be agreed to by the
Company and the Underwriters) at 9:00 a.m. New York time, on the fifth business
day after the date on which the Company's transfer agent provides the
Underwriters with a final accounting of the number of shares of Common Stock
sold pursuant to the exercise of Rights in the Rights Offering (the time and
date of such closing are called the "FIRST CLOSING DATE"). The First Closing
Date may be changed by the agreement of the Underwriters and the Company.
(b) THE SECOND CLOSING DATE. Delivery of certificates for the Optional
Shares, if any, to be purchased by the Underwriters and payment therefor shall
be made at the offices of ▇▇▇▇▇▇▇ Securities Inc.,1325 Avenue of the Americas,
New York, New York (or such other place as may be agreed to by the Company and
the Underwriters) at 9:00 a.m. New York time, on the fifth business day after
the date on which the Underwriters provide notice to the Company pursuant to
Section 2(b) of this Agreement that the Underwriters have elected to exercise
their option with respect to all or a portion of the Optional Shares (the time
and date of such closing are called the "SECOND CLOSING DATE," and the First
Closing Date and the Second Closing Date are each referred to as a "CLOSING
DATE"). The Second Closing Date may be changed by the agreement of the
Underwriters and the Company.
(c) PUBLIC OFFERING OF THE SHARES. The Underwriters hereby advise the
Company that the Underwriters intend to offer for sale to the public upon the
terms described in the Prospectus, their respective portions of the Underwritten
Shares as soon after this Agreement has been executed as the Underwriters, in
their sole judgment, have determined is advisable and practicable.
(d) PAYMENT FOR THE UNDERWRITTEN SHARES. Payment for the Underwritten
Shares purchased by the Underwriters pursuant to Section 2 of this Agreement
shall be made on the First Closing Date (and, if applicable, the Second Closing
Date) by certified check payable in immediately available funds drawn to the
order of the Company or by wire transfer of immediately available funds to the
order of the Company. The amount of such payments shall be reduced, in
accordance with Section 6(b) of this Agreement, by the amounts payable by the
Company to the Underwriters pursuant to Section 6(a) of this Agreement.
(e) DELIVERY OF THE UNDERWRITTEN SHARES. The Company shall deliver, or
cause to be delivered, to the Underwriters on the First Closing Date (and, if
applicable, the Second Closing Date) certificates for the Unsubscribed Shares
(and, in the case of the Second Closing Date, the Optional Shares) to be
purchased by the Underwriters pursuant to Section 2 of this Agreement against
payment therefor in accordance with Section 3(d) and Section 6(b) of this
Agreement. The
11
certificates for such Underwritten Shares shall be in definitive form and
registered in such names and denominations as the Underwriters shall have
requested at least two full business days prior to the relevant Closing Date and
shall be made available for inspection on the business day preceding the
relevant Closing Date at a location in New York City as the Underwriters may
designate. Time shall be of the essence, and delivery at substantially the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
4. RIGHTS OFFERING. The Company shall issue to each shareholder of
record on the Record Date one right for each share of Common Stock held on that
date. Each right will be exercisable to purchase one share of Common Stock at
the Subscription Price. The Rights Offering will commence as soon as practicable
after the execution of this Agreement and shall remain open until 5:00 p.m. New
York time on March ___, 1999, or such later date to which the Company may extend
the Rights Offering, subject to the consent of the Underwriters, at which time
the Rights Offering will terminate. Each holder of rights who elects to exercise
all of his rights may also subscribe for an unlimited number of additional
shares of Common Stock that are not otherwise purchased by holders of Rights.
The Company has the option (the "OVERSUBSCRIPTION OPTION") to sell up to an
additional 208,350 Oversubscription Shares solely to cover exercises of such
oversubscription privileges exceeding the 1,389,000 shares of Common Stock
underlying the Rights.
5. ADDITIONAL COVENANTS OF THE COMPANY. The Company further covenants
and agrees with each Underwriter that:
(a) SECURITIES ACT COMPLIANCE; REVIEW OF PROPOSED AMENDMENTS AND
SUPPLEMENTS. The Company will promptly notify the Underwriters in writing (i) of
the receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing of any
post-effective amendment to the Registration Statement or any amendment or
supplement to any Preliminary Prospectus or the Prospectus, (iii) of the time
and date that any post-effective amendment to the Registration Statement becomes
effective, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any post-effective amendment
thereto, (v) of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, (vi) of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction or (vii) of any proceedings to
remove, suspend or terminate from listing or quotation the Common Stock from any
securities exchange 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 Act and will use its reasonable efforts to confirm that any filings made by
the Company under such Rule 424(b) were received in a timely manner by the
Commission. During such period beginning on the date hereof and ending on the
later of the First Closing Date or such date as of which, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), prior to amending or supplementing the Registration Statement
or the Prospectus, the Company shall furnish to the Underwriters for review a
copy of
12
each such proposed amendment or supplement, and the Company shall not
file any such proposed amendment or supplement to which the Underwriters or
their counsel object.
(b) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS 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 in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if in the opinion of the Underwriters or counsel for the
Underwriters it is otherwise necessary to amend or supplement the Prospectus to
comply with law, the Company agrees to promptly prepare (subject to Section 5(a)
hereof), file with the Commission and furnish at its own expense to the
Underwriters and to dealers, amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with law.
(c) COPIES OF EACH PRELIMINARY PROSPECTUS, THE PROSPECTUS AND ANY
AMENDMENTS AND SUPPLEMENTS. The Company agrees to furnish the Underwriters and
counsel for the Underwriters, without charge, during the Prospectus Delivery
Period, as many copies of each Preliminary Prospectus, the Prospectus and any
amendments and supplements thereto as the Underwriters may reasonably request.
(d) BLUE SKY COMPLIANCE. The Company will cooperate in taking such
action as may be necessary to qualify or register the Shares for offer and sale
under (or obtain exemptions from the application of) the Blue Sky or securities
laws of such jurisdictions as the Underwriters may designate and to continue
such qualifications, registrations and exemptions in effect so long as may be
required for the purposes of the distribution of the Shares. In each
jurisdiction where the Shares may be qualified for offer and sale, the Company
will file such statements or reports as may be required by the laws of the
jurisdiction. No qualification will be required if as a result the Company would
be required to qualify as a foreign corporation to do business in any
jurisdiction where it is not already so qualified, to file any general consent
to service of process under the laws of any jurisdiction, or to subject itself
to taxation as doing business in any jurisdiction. The Company will advise the
Underwriters 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 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 best efforts
to obtain the withdrawal thereof at the earliest possible moment.
(e) FUTURE REPORTS TO THE UNDERWRITERS. During the period of three
years from the First Closing Date, upon request by the Underwriters the Company
will deliver to the Underwriters as soon as practicable after the end of each
fiscal year copies of each annual report to the security holders of the Company,
and upon request by the Underwriters will deliver to the Underwriters:
13
(1) within 90 days after the close of each fiscal year of the
Company, a financial report of the Company and its subsidiaries, if
any, on a consolidated basis, all such reports to include such
information and in such form as the Company shall be required to
include in reports for that fiscal year to be filed with the
Commission, and all to be certified by independent public accountants;
(2) within 45 days after the end of each quarterly fiscal period of
the Company other than the last quarterly fiscal period in any fiscal
year, copies of the financial statements of the Company and its
subsidiaries, if any, on a consolidated basis, for that period and as
of the end of that period, including such information and in such form
as the Company shall be required to include in reports for that period
to be filed with the Commission, all subject to year-end adjustment,
certified by the principal financial or accounting officer of the
Company;
(3) copies of all other statements, documents, or other information
which the Company shall mail or otherwise make available to any class
of its security holders, or shall file with the Commission, the NASD,
the Nasdaq Stock Market or any securities exchange; and
(4) such other information as may reasonably be requested with
reference to the properties, business, and affairs of the Company and
its subsidiaries.
(f) EARNINGS STATEMENT. As soon as practical, but in any event not
later than the first day of the fifteenth full calendar month following the
effective date of the Registration Statement, the Company will make generally
available to its security holders, in accordance with Section 11(a) of the Act,
and to the Underwriters, an earnings statement of the Company and its
subsidiaries, if any, in reasonable detail and covering a period of at least 12
months beginning after the effective date of the Registration Statement and will
advise the Underwriters that such statement has been so made available.
(g) USE OF PROCEEDS. The Company will apply the net proceeds from the
sale of the Shares sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) EXCHANGE ACT REGISTRATION. As soon as practicable, but in any
event not later than the effective date of the Registration Statement, the
Company will file with the Commission its registration statement to register
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Common Stock of the Company and, after making such filing,
will take all actions required by the applicable rules of the Commission to
cause such registration to become effective.
(i) PERIODIC REPORTING OBLIGATIONS. During the Prospectus
Delivery Period the Company shall file, on a timely basis, with the Commission
and, if required, any securities exchange on which the Common Stock is listed or
quoted, all reports and documents required to be filed under the Exchange Act or
the rules of any such securities exchange. Additionally, the Company shall
include in its filings with the Commission all disclosure as may be required
under Rule 463 under the Act.
(j) TRANSFER AGENT. The Company shall engage and maintain, at
its expense, a transfer agent and registrar for the Common Stock reasonably
acceptable to the Underwriters.
(k) PUBLICITY. During the pendency of the Rights Offering, no
news releases or other publicity about the Company will be permitted without the
prior approval of legal counsel to the Underwriters and the Company.
14
(l) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. During
the period of 180 days following the date of the Prospectus, the Company will
not, without the prior written consent of ▇▇▇▇▇▇▇ Securities Inc. (which consent
may be withheld at the sole discretion of ▇▇▇▇▇▇▇ Securities Inc.), directly or
indirectly, sell, offer, contract or grant any option to sell, pledge, transfer
or establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or
announce the offering of, or file any registration statement under the Act in
respect of, any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable or exercisable for or convertible into
shares of Common Stock (other than pursuant to the Rights Offering and as
otherwise contemplated by this Agreement with respect to the Shares); PROVIDED,
HOWEVER, that the Company may issue shares of its Common Stock or options to
purchase its Common Stock, or shares of Common Stock upon exercise of options,
pursuant to any stock option, stock bonus or other stock plan or arrangement
described in the Prospectus and may issue shares of Common Stock in connection
with the acquisition of additional battery companies, but only if the holders of
such shares, options, or shares issued upon exercise of such options, agree in
writing not to sell, offer, dispose of or otherwise transfer any such shares or
options during such 180-day period without the prior written consent of ▇▇▇▇▇▇▇
Securities Inc. (which consent may be withheld at the sole discretion of ▇▇▇▇▇▇▇
Securities Inc.).
6. FEES; EXPENSES.
(a) Fees. As compensation to the Underwriters for their services in
connection with the transactions contemplated by this Agreement and their
commitment hereunder, the Company hereby agrees to pay to the Underwriters the
following fees:
(1) $312,525.00 (representing 3.75% of the Subscription Price for
each of the 1,389,000 shares of Common Stock underlying the Rights);
(2) 5.25% of the Subscription Price for each Unsubscribed Share
purchased by the Underwriters pursuant to Section 2(a) of this
Agreement;
(3) 3.75% of the Subscription Price for each Oversubscription Share
sold by the Company pursuant to the Oversubscription Option; and
(4) 9.00% of the Subscription Price for each Optional Share
purchased by the Underwriters pursuant to Section 2(b) of this
Agreement.
(b) PAYMENT OF FEES. Payment of the fees payable by the Company to the
Underwriters pursuant to Section 6(a) of this Agreement shall be made as
follows:
(5) In the event that the aggregate amount of fees payable by the
Company pursuant to Sections 6(a)(i), (ii) and (iii) is less than the
aggregate purchase price for the Unsubscribed Shares being purchased
by the Underwriters pursuant to Section 2(a) of this Agreement, then
the aggregate amount of such fees shall reduce the amount payable on
the First Closing Date by the Underwriters to the
15
Company pursuant to Section 3(d) of this Agreement for the purchase
of the Unsubscribed Shares being purchased by the Underwriters
pursuant to Section 2(a) of this Agreement.
(6) In the event that the aggregate amount of fees payable by the
Company pursuant to Sections 6(a)(i), (ii) and (iii) is greater than
the aggregate purchase price for the Unsubscribed Shares being
purchased by the Underwriters pursuant to Section 2(a) of this
Agreement, then the aggregate amount of such fees shall be paid as
follows: (a) such amount shall first be applied toward the purchase
price of the Unsubscribed Shares being purchased by the Underwriters
pursuant to Section 2(a) of this Agreement, such that no amount shall
be payable on the First Closing Date by the Underwriters to the
Company pursuant to Section 3(d) of this Agreement, and (b) payment
for the remaining portion of such fees shall be made on the First
Closing Date by wire transfer of immediately available funds according
to the instructions of the Underwriters.
(7) The fees, if any, payable by the Company pursuant to Section
6(a)(iv) shall reduce the amount, if any, payable on the Second
Closing Date by the Underwriters to the Company pursuant to Section
3(d) of this Agreement for the purchase of the Optional Shares being
purchased by the Underwriters pursuant to Section 2(b) of this
Agreement.
(c) EXPENSES. The Company agrees, whether or not the transactions
contemplated under this Agreement are consummated, to pay all fees, costs, and
expenses incurred by the Company in connection with or incident to the issuance,
purchase, sale and delivery of the Shares including, without limitation (i) the
expenses and fees incident to the preparation, printing and filing of the
Registration Statement and all amendments and all exhibits thereto with the
Commission; (ii) fees and expenses of the Company's counsel and accountants;
(iii) costs of printing and preparing appropriate filing documents and as many
copies of the appropriate selling documents as the Underwriters may deem
necessary, and any subsequent distribution thereof, and related expenses,
including all amendments and supplements to such documents; (iv) the preparation
and publication of tombstone advertising if mutually agreed to by the Company
and the Underwriters; (v) direct expenses incurred in connection with so-called
"road show" activities; (vi) all expenses and disbursements associated with the
due diligence inquiries of the Company's counsel; (vii) charges of any escrow
agent, information agent, solicitation firm, or other professionals assisting
the Company in connection with the Rights Offering; (viii) all fees and expenses
of the transfer agent and registrar of the Common Stock; (ix) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters; (x) all due diligence fees and expenses of
the Underwriters and all fees and expenses of the Underwriters' counsel, up to
an aggregate of $75,000; (xi) all filing fees, 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 Blue Sky laws
(whether by the Company upon the exercise of Rights issued in the Rights
Offering or by the Underwriters); (xii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection with,
the NASD's review and approval of the Underwriters' participation in the
offering and distribution of the Shares; (xiii) the fees and expenses associated
with listing or quoting the Shares on a securities exchange and the Nasdaq
SmallCap Market; and (xiv) all other fees, costs and expenses referred to in
Item 25 of Part II of the Registration Statement.
16
(d) FEE OF QUALIFIED INDEPENDENT UNDERWRITER. In addition to the
other fees payable pursuant to this Section 6, the Company shall pay to ▇▇▇▇▇▇▇
Securities Inc. a fee of $10,000 in consideration for the agreements of
▇▇▇▇▇▇▇ Securities Inc. contained in Section 10 of this Agreement, payable on
the First Closing Date.
(e) OTHER COSTS AND EXPENSES. Except as provided in this Section
6 and in Section 8 of this Agreement, the Underwriters will pay all of their own
costs and expenses, including stock transfer taxes levied upon resale of any of
the Underwritten Shares, and any advertising expenses connected with any offers
it may make.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters
under this Agreement will be subject to the accuracy in all material respects of
the representations and warranties of the Company set forth in this Agreement as
of the date hereof and, with respect to the Unsubscribed Shares, as of the First
Closing Date as though then made, and, with respect to the Optional Shares, as
of the Second Closing Date as though then made, to the timely performance by the
Company of its covenants and obligations hereunder in all material respects and
to the following additional conditions:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO
OBJECTION FROM NASD. Prior to the First Closing Date, the Company shall have
filed the Prospectus with the Commission (including the information required by
Rule 430A under the Act) in the manner and within the time period required by
Rule 424(b) under the Act; or the Company shall have filed a post-effective
amendment to the Registration Statement containing the information required by
such Rule 430A, and such post-effective amendment shall have become effective.
No stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment to the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or the Underwriters, contemplated or threatened by the
Commission, and any request for additional information made by the Commission
(to be included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction of counsel for the
Underwriters. The NASD shall have raised no obligation to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) BLUE SKY COMPLIANCE. The shares of Common Stock to be
acquired pursuant to the exercise of Rights (including the Oversubscription
Shares, if and to the extent issued) shall have been qualified or registered for
sale under (or the Company shall have obtained exemptions from the application
of) the Blue Sky or securities laws of the jurisdictions set forth on SCHEDULE
B, and the Underwritten Shares shall have been qualified or registered for sale
under (or the Company shall have obtained exemptions from the application of)
the Blue Sky or securities laws of the jurisdictions set forth on SCHEDULE C.
(c) AMENDMENTS TO THE REGISTRATION STATEMENT AND THE PROSPECTUS.
No amendments to the Registration Statement or the Prospectus to which the
Underwriters or the Underwriters' counsel shall have reasonably objected shall
have been filed, and any such amendments as said counsel shall have reasonably
requested shall have been filed.
(d) ADEQUACY OF DISCLOSURE; NO MATERIAL ADVERSE CHANGE. The
Underwriters shall not have discovered and disclosed in writing to the Company
prior to the First Closing Date and, with respect to the Optional Shares, the
Second Closing Date, that the Registration Statement or the Prospectus, or any
amendment or supplement to the Registration Statement or the Prospectus,
contains an untrue statement of fact which, in the opinion of counsel for the
Underwriters, is material or omits to state a fact which, in the opinion of such
counsel, is required to be stated in the Registration Statement or the
Prospectus or is necessary to make the statements in the Registration Statement
or the Prospectus not misleading. Prior to the First Closing Date and, with
respect to the Optional Shares, prior to the Second Closing Date, in the
judgment of the Underwriters there shall not have occurred any material adverse
change, or any development that could reasonably be expected to result in a
material adverse change,
17
in the Company's business, operations, financial condition, income or business
prospects, whether or not arising from transactions in the ordinary course of
business.
(e) ACCOUNTANTS' COMFORT LETTERS. On the date of execution of
this Agreement and on the each of the First Closing Date and the Second Closing
Date, the Underwriters shall have received from KPMG LLP a letter addressed to
the Underwriters dated the date of this Agreement or the First Closing Date or
the Second Closing Date, as the case may be, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Act and (i) in the letter dated the date of this Agreement, stating their
conclusions and findings with respect to the audited financial statements and
certain other financial, accounting and statistical information and other
matters contained in the Registration Statement as have been approved by the
Underwriters prior to the execution of this Agreement and (ii) in the letters
dated the First Closing Date and the Second Closing Date, reaffirming the
statements made by them in their letter dated the date of this Agreement. The
specified date referred to in the letter dated the date of this Agreement for
the carrying out of procedures shall be no more than five days prior to the date
of this Agreement. The specified date referred to in the letters dated the First
Closing Date and the Second Closing Date for the carrying out of procedures
shall be no more than five days prior to such Closing Date.
The Underwriters shall have received an additional two conformed copies
of each such accountants' letter.
(f) OPINION OF COUNSEL FOR THE COMPANY. On each of the First
Closing Date and the Second Closing Date the Underwriters shall have received
from Brown, Rudnick, Freed & Gesmer, counsel for the Company, a written opinion
dated as of such Closing Date to the effect that:
(i) To the best of such counsel's knowledge, there are
no contracts or other documents required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement
which have not been described or filed as required.
(ii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Delaware with full power and authority to own, lease, and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus and to enter into and perform its
obligations under this Agreement. The Company is duly qualified to
conduct business as a foreign corporation and is in good standing in the
State of Connecticut.
(iii) The authorized, issued, and outstanding capital
stock of the Company is as set forth in the Registration Statement and
the Prospectus under the caption "Capitalization." The Common Stock
(including the Shares) conforms to the description thereof contained in
the Registration Statement and the Prospectus. All of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal securities laws. All of the
Rights have been duly authorized and, when issued and distributed as
described in the Registration Statement and the Prospectus, will be
legally issued and valid and binding obligations of the Company having
the rights described in the Registration Statement and the Prospectus.
None of the outstanding shares of Common Stock were issued in violation
of any statutory preemptive rights or any preemptive rights under the
Company's certificate of incorporation or bylaws or, to such counsel's
knowledge, rights of first refusal or other similar rights to subscribe
for or purchase securities of the Company. None of the
18
Rights when issued will have been issued in violation of any statutory
preemptive rights or any preemptive rights under the Company's
certificate of incorporation or bylaws, or, to such counsel's knowledge,
rights of first refusal or other similar rights. There are no authorized
or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock
of the Company known to such counsel other than those described in the
Registration Statement and the Prospectus. The description of the
Company's equity incentive plan and other stock plans or arrangements,
and the options or other rights granted thereunder, set forth in the
Registration Statement and the Prospectus fairly presents the
information required to be shown with respect to such plans,
arrangements, options and rights. The shares of Common Stock acquired
pursuant to the exercise of Rights have been duly authorized for
issuance and sale to the holders of the Rights and, when any such shares
are issued and delivered by the Company pursuant to the exercise of
Rights, such shares will be duly and validly issued and fully paid and
nonassessable. The Underwritten Shares have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and,
when any Underwritten Shares are issued and delivered by the Company
pursuant to this Agreement, such shares will be duly and validly issued
and fully paid and nonassessable.
(iv) To the best of such counsel's knowledge, except as
described in the Registration Statement and the Prospectus, the Company
has no subsidiaries and has no ownership or proprietary interest in any
other business, corporation, firm, partnership, joint venture,
association or other entity and is not party to any agreement or
understanding, written or oral, regarding the acquisition of, or of an
interest in, any business, corporation, firm, partnership, joint
venture, association or other entity.
(v) To the best of such counsel's knowledge, the
Company has not received any notice of any proceeding relating to the
revocation or modification of, or non-compliance with, any certificate,
authorization or permit issued by any federal, state, local or foreign
regulatory agency or body relating to the conduct of the Company's
business.
(vi) No consent, approval, authorization, or order of,
or registration or filing with, any court or any governmental or
regulatory agency or body having jurisdiction over the Company or over
any of its properties or operations is required for the consummation by
the Company of the transactions contemplated by this Agreement, except
such as may be required under the Act, the Exchange Act, the Blue Sky or
securities laws of any jurisdiction, the NASD, the Nasdaq SmallCap
Market and the Boston Stock Exchange.
(vii) This Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms.
(viii) The Company's execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby (i) have been duly authorized by
19
all necessary corporate action and will not result in any violation of
the provisions of the Company's certificate of incorporation or bylaws,
(ii) will not conflict with or constitute a breach of, or Default under,
or result in the creation or imposition of any security interest,
mortgage, lien, charge, encumbrance, restriction, claim or other defect
upon any property or assets of the Company pursuant to, or require the
consent of any other party to, any Existing Instrument known to such
counsel, except for such conflicts, breaches, Defaults, security
interests, mortgages, liens, charges, encumbrances, restrictions, claims
or other defects as would not, individually or in the aggregate, have a
material adverse effect on the Company's business, operations, financial
condition, income or business prospects, and except for such consents as
have been obtained and (iii) will not result in any violation of any
law, order, rule, regulation, writ, injunction, or decree known to such
counsel of any government, governmental instrumentality, or court,
domestic or foreign (other than state securities or Blue Sky laws or
applicable anti-fraud provisions of federal securities laws, as to which
we express no opinion except as otherwise set forth herein), except for
such violations as would not, individually or in the aggregate, have a
material adverse effect on the Company's business, operations, financial
condition, income or business prospects.
(ix) Except as may otherwise be stated in the
Registration Statement and the Prospectus, to the best of such counsel's
knowledge no action, suit, or proceeding at law or in equity is pending
or threatened against the Company or any officer or director of the
Company or affecting the Company's properties or assets in, before, or
by any court, governmental commission, board, or other administrative
agency, in which an unfavorable decision, ruling or finding could
reasonably be expected, individually or in the aggregate, to affect
materially and adversely the consummation of the transactions
contemplated by this Agreement and the Registration Statement and the
Prospectus or the business, operations, financial condition, income,
properties, management or business prospects of the Company.
(x) Other than as disclosed in the Registration
Statement and the Prospectus, to the best of such counsel's knowledge
there are no contracts, agreements or understandings between the Company
and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Act.
(xi) The Registration Statement and Prospectus
associated with the Rights Offering complied as to form in all material
respects with applicable Federal securities laws, and the Rights
Offering has closed.
In addition, such counsel shall also state that such counsel has
participated in conferences with representatives of the Underwriters, officers
and representatives of the Company and representatives of the independent public
accountants of the Company, at which conferences the contents of the
20
Registration Statement and the Prospectus and related matters were discussed and
that, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
above), on the basis of the foregoing, no facts have come to the attention of
such counsel which lead such counsel to believe that the Registration Statement
at the time it became effective or at the First Closing Date or the Second
Closing Date contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus at the First Closing
Date or the Second Closing Date included or includes an 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; PROVIDED, that such counsel need not express any
comment with respect to the financial statements, supporting schedules or other
financial and statistical data contained in the Registration Statement or the
Prospectus.
The Underwriters shall have received an additional two conformed copies
of such counsel's opinion.
(g) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of the
First Closing Date and the Second Closing Date the Underwriters shall have
received from Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., counsel for the Underwriters, an
opinion, in form and substance satisfactory to the Underwriters, dated as of
such Closing Date, with respect to such matters as are customarily contained in
such opinions, and the Company shall have furnished to the Underwriters' counsel
such documents, certificates, and opinions as they may reasonably have requested
for the purpose of enabling them to pass upon such matters. The Underwriters
shall have received an additional two conformed copies of such counsel's
opinion.
(h) OFFICERS' CERTIFICATE. On each of the First Closing Date and
the Second Closing Date the Underwriters shall have received a certificate,
dated as of such Closing Date, of the President and the Chief Financial Officer
of the Company to the effect that:
(1) The representations and warranties of the Company contained
in Section 1 of this Agreement are true and correct with the same force
and effect as though expressly made on and as of such Closing Date and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under this Agreement
on or prior to such Closing Date;
(2) No stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment to the
Registration Statement has been issued, and, to the best of the
knowledge of the respective signers, no proceeding for that purpose has
been instituted or is contemplated or threatened;
(3) Each signer of the certificate has carefully examined the
Registration Statement and the Prospectus, and, to his or her best
knowledge, neither the Registration Statement nor the Prospectus
includes any untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein not misleading,
and since the effective date of the Registration Statement there
21
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth;
(4) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and, except as
set forth or contemplated in the Prospectus: (a) the Company has not
incurred any obligations or any direct or contingent material
liabilities or commitments, except in the ordinary course of business,
(b) the Company has not entered into any material transaction not in the
ordinary course of business, (c) the Company has not paid or declared
any dividends or other distributions on its capital stock, and (d) there
has not been any change in the capital stock of the Company, any
increase in the long-term indebtedness of the Company, any increase in
the short-term indebtedness of the Company except in the ordinary course
of business, or any material adverse change in the business, prospects,
financial position, net assets, or results of operations, present or
prospective, of the Company;
(5) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the conduct
of the business and operations of the Company have not been materially
interfered with by strike, fire, flood, hurricane, accident, or other
calamity (whether or not insured) or by any court or governmental
action, order, or decree, and the properties of the Company have not
sustained any material loss or damage (whether or not insured) as a
result of any such occurrence; and
(6) For the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any material adverse
change, or development that could reasonably be expected to result in a
material adverse change, in the Company's business, operations,
financial condition, income or business prospects, whether or not
arising from transactions in the ordinary course of business.
(i) LITIGATION AND OTHER PROCEEDINGS. On the First Closing Date
and, with respect to the Optional Shares, the Second Closing Date, the Company
shall not be a party to or involved in any arbitration, litigation, or
governmental proceeding which is then pending, or to the knowledge of the
Company threatened, of a character which could reasonably be expected to affect
the Company adversely or which would be required to be disclosed in the
Registration Statement, other than that which is disclosed in the Prospectus.
(j) LOSSES. Prior to the First Closing Date and, with respect to
the Optional Shares, the Second Closing Date, the Company shall not have
sustained any loss or interference with its business on account of fire, flood,
accident, or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order, or degree which, in the
judgment of the Underwriters, materially and adversely affects the business of
the Company.
(k) TENDER AND DELIVERY OF UNDERWRITTEN SHARES. All of the
Underwritten Shares being purchased by the Underwriters shall be tendered for
delivery in accordance with the terms and provisions of this Agreement.
(l) LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY.
On the date hereof, the Company shall have furnished to the Underwriters an
agreement in the form of EXHIBIT A hereto from each director, officer and each
beneficial owner of 5% or more of the Common Stock as of the Record Date
(determined according to Rule 13d-3 under the Exchange Act, except that a
180-day period shall be used rather than the 60-day period set forth therein),
and such agreement shall be in full force and effect on the First Closing Date
and, with respect to the Optional Shares, the Second Closing Date.
(m) ADDITIONAL DOCUMENTS. The Company shall have furnished to
the Underwriters such other certificates, documents, and opinions as the
Underwriters may have reasonably requested (including certificates of officers
of the Company) as to the accuracy in all material respects, at and as of the
First Closing Date and, with respect
22
to the Optional Shares, the Second Closing Date, of the representations and
warranties of the Company in this Agreement, the performance by the Company of
its obligations under this Agreement, and other conditions concurrent and
precedent to the obligations of the Underwriters under this Agreement.
(n) SECRETARY'S CERTIFICATE. On each of the First Closing Date
and the Second Closing Date, the Underwriters shall have received a written
certificate executed by the Secretary of the Company dated as of such date, in
customary form and having customary contents.
If any condition specified in this Section 7 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Underwriters by notice to the Company at any time on or prior to the First
Closing Date or, with respect to the Optional Shares, prior to the Second
Closing Date, which termination shall be without liability on the part of any
party to any other party, except that Section 6(b) and Section 8 shall at all
times be effective and shall survive such termination.
The opinions, letters and certificates mentioned in this section or
elsewhere in this Agreement will be deemed to be in compliance with the
provisions of this Agreement only if they are in all material respects
satisfactory to the Underwriters and counsel for the Underwriters.
Any certificate signed by an officer of the Company and delivered to the
Underwriters or counsel for the Underwriters will be deemed a representation and
warranty by the Company to the Underwriters as to the statements made in the
certificate.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the 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 (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A under the Act, or any application or other instrument
filed in any jurisdiction in order to qualify or register the Shares for offer
and sale under (or obtain exemptions from the application of) the Blue Sky or
securities laws of such jurisdiction ("BLUE SKY APPLICATION"), 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) upon any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto)
or any Blue Sky Application, 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; or (iii) in whole
or in part upon any inaccuracy in the representations and warranties of the
Company contained herein; (iv) in whole or in part upon any failure of the
Company to perform its obligations hereunder or under law; or (v) with respect
to any loss, claim, damage, liability or expense incurred by ▇▇▇▇▇▇▇ Securities
Inc., in whole or in part its responsibilities as a qualified independent
underwriter in accordance with Rule 2720 of the Conduct Rules of the NASD with
respect to the Rights Offering and the offering of Shares by the Underwriters;
and to reimburse each Underwriter and each such controlling person for any and
all expenses (including the reasonable fees and disbursements of counsel chosen
by ▇▇▇▇▇▇▇ Securities Inc.) as such expenses are reasonably incurred by such
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 expressly for use in the Registration Statement, any
Preliminary Prospectus or the
23
Prospectus (or any amendment or supplement thereto); and PROVIDED, FURTHER, that
with respect to any Preliminary Prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the person asserting
any loss, claim, damage, liability or expense purchased Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely delivered
to the Underwriter pursuant to Section 5 of this Agreement and a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. 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, ITS DIRECTORS AND OFFICERS.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act,
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 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 such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary 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 expressly for use therein; and to
reimburse the Company, or any such director, officer, or controlling person for
any and all expenses (including the reasonable fees and expenses of counsel
chosen by the Company) as such expenses are 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 or the
Prospectus (or any amendment or supplement thereto) are the statements set forth
in the table after the first paragraph and in the fourth, seventh and eighth
paragraphs under the caption "The Standby Underwriting" in the Prospectus; and
the Underwriters confirm that such statements are correct. The indemnity
agreement set forth in this Section 8(b) shall be in addition to any liabilities
that each Underwriter 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 result of 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, 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
24
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, 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 next 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 (▇▇▇▇▇▇▇ Securities in the case of Section 8(b) and Section 8(e))
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the 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. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 8(c) hereof, the indemnifying party agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement or, if such indemnifying party in
good faith disputes the amount of such fees and expenses due to the indemnified
party and such indemnifying party shall have failed to provide the indemnified
party with reasonable security for payment of such disputed amounts. 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.
(e) CONTRIBUTION. If the indemnification provided for in
Sections 8(a) through 8(d) 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 shall contribute to the aggregate amount paid or payable by
such indemnified party, as incurred, as a result of any losses, claims, damages,
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 or
inaccuracies in the representations and warranties herein which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, 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 net proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Company and the total underwriting discount and fees received by the
Underwriters, in each case as set forth on the front cover page of the
Prospectus bear to the aggregate Price to Public of the Shares as set forth on
such cover. 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 or any such
inaccurate or alleged inaccurate representation or warranty 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.
25
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(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 8(e); 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.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 8(e).
Notwithstanding the provisions of this Section 8(e), no Underwriter
shall be required to contribute any amount in excess of the underwriting fees
and 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 8(e) are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in SCHEDULE A. For
purposes of this Section 8(e), each officer and employee of an Underwriter and
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement and each person, if any,
who controls the Company with the meaning of the Act and the Exchange Act shall
have the same rights to contribution as the Company.
9. SURVIVAL OF AGREEMENTS, ETC. The respective indemnities, agreements,
representations, warranties, and other statements of the Company, of its
officers and of the Underwriters, as set forth in this Agreement, or made by
them pursuant to this Agreement, will remain in full force and effect,
regardless of any investigation (or any statement as to the results of any such
investigation) made by or on behalf of the Company (or any of its officers or
directors) or any Underwriter, or any controlling person of any of them, and
will survive delivery of and payment for the Shares sold hereunder and any
termination of this Agreement.
10. QUALIFIED INDEPENDENT UNDERWRITER. ▇▇▇▇▇▇▇ Securities Inc. hereby confirms
its agreement to act in connection with the Rights Offering and the offering of
Shares by the Underwriters as a qualified independent underwriter within the
meaning of Rule 2720 of the Conduct Rules of the NASD and represents that
▇▇▇▇▇▇▇ Securities Inc. satisfies or will satisfy at the times designated in
Rule 2720(b)(15) the requirements set forth therein. ▇▇▇▇▇▇▇ Securities Inc.
agrees to undertake the legal responsibilities and liabilities of an underwriter
under the Act, specifically those under Section 11 of the Act. ▇▇▇▇▇▇▇
Securities Inc. hereby consents to be named in the Registration Statement and
the Prospectus as having acted as qualified independent underwriter.
11. TERMINATION. Prior to the First Closing Date this Agreement may be
terminated by the Underwriters by notice given to the Company at any time (i) if
any calamitous domestic or international event or act or occurrence has
disrupted the general securities market in the United States; (ii) if trading in
the Common Stock (on a when-issued basis) shall have been suspended by the
Commission, the Nasdaq SmallCap Market or the Boston Stock Exchange; (iii) if
trading on the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, the Boston Stock Exchange or in the
over-the-counter market shall have been suspended, or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by order
of the Commission or any other government authority having jurisdiction; (iv) if
the United States shall have become involved in a war or major hostilities
which, in the Underwriters' opinion, affects the general securities market in
the United States; (v) if a banking moratorium has been declared by any New
York, Connecticut or federal authority; (vi) if the Company shall have sustained
a loss material to the Company by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act, whether or not such loss
shall have been insured, or from any labor dispute or any legal or governmental
proceeding;
26
(vii) if, in the reasonable judgment of the Underwriters, there shall have been
such material adverse change, or any development involving a prospective
material adverse change in the financial condition, net worth or results of
operations of the Company since December 31, 1998 or in the business prospects
or conditions of the Company since the date of the Prospectus, or that
materially and adversely impacts this Agreement; (viii) if the Dow ▇▇▇▇▇
Industrial Average shall have fallen by 12.5% or more from its closing price on
the day immediately preceding the First Closing Date; (ix) if there shall be
such material adverse market conditions (whether occurring suddenly or gradually
between the date hereof and the First Closing Date) affecting the markets
generally as in the Underwriters' reasonable judgment would make it inadvisable
to proceed with the offering, sale or delivery of the Shares; (x) if the Rights
shall not have been mailed to the stockholders of the Company prior to 5:00 p.m.
New York time on February ___, 1999 [5 DAYS AFTER DATE OF THIS AGREEMENT],
provided that the Underwriters may not terminate this Agreement pursuant to this
subsection (x) unless they shall have provided notice to the Company of such
termination prior to the Company having mailed the Rights to the stockholders of
record of the Company; (xi) if the Rights Offering shall not have closed by
April 30, 1999; or (xiii) if the Company shall have amended in any material
respect the terms of the Rights Offering from the terms described in the
Prospectus without the express written consent of the Underwriters. Except as
set forth in Section 6(c) of this Agreement, any termination pursuant to this
Section 11 shall be without liability on the part of the Company to any
Underwriter, and any Underwriter to the Company, provided that the provisions of
Section 8 shall at all times be effective and shall survive such termination.
12. NOTICES. Any notice under this Agreement to the respective persons indicated
will be sufficient if given or confirmed in writing or by telegraph addressed as
respectively indicated or to such other address as shall be indicated by a
notice given to each of the following persons:
(i) To the Underwriters addressed to:
▇▇▇▇▇▇▇ Securities Inc.
1325 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
With a copy to:
Loeb Partners Corporation
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Bagatelle
and
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(ii) To the Company addressed to:
Evercel, Inc.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
With a copy to:
27
Brown, Rudnick, Freed & Gesmer
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
13. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon
the Underwriters, the Company, and their successors and assigns. Nothing
expressed in this Agreement is intended, or will be construed, to give any
person other than the persons mentioned in the preceding sentence any legal or
equitable right, remedy, or claim under this Agreement, this Agreement and all
conditions and provisions in this Agreement being intended to be and being for
the sole and exclusive benefit of the persons mentioned in the preceding
sentence. Notwithstanding the preceding sentence, the representations,
warranties, indemnities and contribution obligations of the Company included in
this Agreement will also be for the benefit of any person who controls any
Underwriters within the meaning of Section 15 of the Act and the indemnities and
contribution obligations of the Underwriters will also be for the benefit of
each officer of the Company who signs the Registration Statement, each director
of the Company and any person who controls the Company within the meaning of
Section 15 of the Act. No purchaser of any Shares from any Underwriters will be
deemed a successor because of such purchase.
14. 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. 1.
15. APPLICABLE LAW; VENUE. This Agreement will be construed in accordance with
the internal laws of the State of New York, without regard to conflicts of law
principles. The Company hereby irrevocably consents to the jurisdiction of the
courts of the State of New York and the United States District Court for the
Southern District of New York, as well as to the jurisdiction of all courts from
which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising
hereunder or with respect to the transactions contemplated hereby, and expressly
consents to service of process by registered mail and waives any and all
objections it may have as to venue in any of such courts.
16. GENERAL PROVISIONS. 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. This Agreement may be executed in two or more
counterparts, each one of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
may not be amended or modified unless in writing by all of the parties hereto,
and no condition herein (express or implied) may be waived unless waived in
writing by each party whom the condition is meant to benefit. The section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
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 and contribution provisions of Section 8, and is fully informed
regarding said provisions. Each of the parties hereto further acknowledges that
the provisions of Sections 8 hereto fairly allocate the risks in light of the
ability of the parties to
28
investigate the Company, its affairs and its business in order to assure that
adequate disclosure has been made in the Registration Statement, any Preliminary
Prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Act and the Exchange Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
If this Agreement correctly sets forth our understanding, please
indicate your acceptance in the space provided below for that purpose.
Respectfully,
EVERCEL, INC.
By:
---------------------------
Name:
Title:
Accepted as of the day and
year first above written:
▇▇▇▇▇▇▇ SECURITIES INC.
For itself and on behalf of
Loeb Partners Corporation
By
--------------------------------
Name:
Title:
30
EVERCEL
SCHEDULE A
UNDERWRITERS %
------------ ---
Loeb Partners Corporation...............................................................50
▇▇▇▇▇▇▇ Securities Inc..................................................................50
SCHEDULE B
SCHEDULE C
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
February , 1999
▇▇▇▇▇▇▇ Securities Inc.
Loeb Partners Corporation
c/▇ ▇▇▇▇▇▇▇ Securities Inc.
1325 Avenue of the Americas
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Standby Underwriting Agreement (the "Standby Agreement") among Evercel, Inc., a
Delaware corporation (the "COMPANY"), and you (the "UNDERWRITERS"), relating to
the grant by the Company to holders of its Common Stock, $.01 par value per
share (the "COMMON STOCK"), transferable subscription rights (the "Rights") to
subscribe for and purchase additional shares of Common Stock. The Rights will
expire on March ___, 1999 (the "Expiration Date").
The undersigned recognizes that the Standby Agreement will be of benefit
to the undersigned and will benefit the Company by, among other things,
assisting the Company in raising additional capital for its operations. The
undersigned acknowledges the Underwriters are relying on the representations and
agreements of the undersigned contained in this letter in entering into the
Standby Agreement with the Company.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of ▇▇▇▇▇▇▇ Securities
Inc. (which consent may be withheld in its sole discretion), directly or
indirectly, sell, offer, contract or grant any option to sell (including without
limitation any short sale), pledge, transfer, establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Securities Exchange Act
of 1934, or otherwise dispose of any shares of Common Stock, options or warrants
to acquire shares of Common Stock, or securities exchangeable or exercisable for
or convertible into shares of Common Stock currently or hereafter owned either
of record or beneficially (as defined in Rule 13d-3 under Securities Exchange
Act of 1934, as amended) by the undersigned, or publicly announce the
undersigned's intention to do any of the foregoing, for a period commencing on
the date hereof and continuing through the close of trading on the date 180 days
after the Expiration Date. The undersigned also agrees and consents to the entry
of stop transfer instructions with the Company's transfer agent and registrar
against the
▇▇▇▇▇▇▇ Securities Inc.
Loeb Partners Corporation
Page 2
transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned. If for any reason the Standby Agreement (i) shall not have been
entered into prior to March 31, 1999 or (ii) shall be terminated prior to the
First Closing Date (as defined in the Standby Agreement), the agreement set
forth above shall be terminated.
Printed Name of Holder:
---------------------------------
By:
------------------------------
Signature
Printed Name of Person Signing
(If different from Holder):
---------------------------------
(AND INDICATE CAPACITY OF PERSON SIGNING IF SIGNING AS CUSTODIAN, TRUSTEE, OR ON
BEHALF OF AN ENTITY)
--------------------------------------------------------------------------------