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EXHIBIT 1
1,000,000 Shares
ILLINOIS SUPERCONDUCTOR CORPORATION
Common Stock
UNDERWRITING AGREEMENT
March __, 1997
Gruntal & Co., Incorporated
14 Wall Street
New York, NY 10005
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
Illinois Superconductor Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions contained herein, to sell to you
and the other underwriters named on Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as Representative (the
"Representative"), an aggregate of 1,000,000 shares (the "Firm Shares") of the
Company's Common Stock, par value $.001 per share (including preferred stock
purchase rights) (the "Common Stock"). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. In addition, the Company proposes to grant
to the Underwriters an option to purchase up to an additional 150,000 shares
(the "Option Shares") of Common Stock for the purpose of covering
over-allotments in connection with the sale of the Firm Shares. The Firm
Shares and the Option Shares are together called the "Shares."
1. SALE AND PURCHASE OF THE SHARES. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:
(a) The Company agrees to sell to the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at $____ per share (the "Initial Price"),
the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule I to this Agreement.
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(b) The Company grants to the several Underwriters an option
to purchase, severally and not jointly, all or any part of the Option
Shares at the Initial Price. The number of Option Shares to be
purchased by each Underwriter shall be the same percentage (adjusted
by the Representative to eliminate fractions) of the total number of
Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only
to cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on
or before 12:00 noon, New York City time, on the business day before
the Firm Shares Closing Date (as defined below), and on one or more
occasions thereafter within 30 days after the date of this Agreement,
in each case upon written, facsimile or telegraphic notice, or oral or
telephonic notice confirmed by written, facsimile or telegraphic
notice, by the Representative to the Company no later than 12:00 noon,
New York City time, on the business day before the Firm Shares Closing
Date or at least two business days before the Option Shares Closing
Date (as defined below), as the case may be, setting forth the number
of Option Shares to be purchased and the time and date (if other than
the Firm Shares Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm
Shares to the Representative for the respective accounts of the Underwriters,
and payment of the purchase price by wire transfer or by certified or official
bank check or checks payable in same day funds to the Company, shall take place
at the offices of Katten Muchin & Zavis, 525 West Monroe Street, Chicago, IL
60661, at 9:00 a.m., local time, on the [third] [fourth] business day following
the date of this Agreement, or at such time on such other date, not later than
10 business days after the date of this Agreement, as shall be agreed upon by
the Company and the Representative (such time and date of delivery and payment
are called the "Firm Shares Closing Date").
In the event the option with respect to the Option Shares is exercised
in whole or in part on one or more occasions, delivery by the Company of the
Option Shares to the Representative for the respective accounts of the
Underwriters and payment of the purchase price by wire transfer or by certified
or official bank check or checks payable in same day funds to the Company shall
take place at the offices of Katten Muchin & Zavis specified above, at the time
and on the date (which may be the same date as, but in no event shall be
earlier than, the Firm Shares Closing Date) specified in the notice referred to
in Section 1(b) (such time and date of delivery and payment are called the
"Option Shares Closing Date"). The Firm Shares Closing Date and the Option
Shares Closing Date are called, individually, a "Closing Date" and, together,
the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representative shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the
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option as described in Section 1(b) and shall be made available to the
Representative for checking and packaging, at such place as is designated by
the Representative, at least 24 hours prior to the Firm Shares Closing Date (or
the Option Shares Closing Date in the case of the Option Shares).
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The
Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a Registration Statement (as hereinafter defined)
on Form S-3 (No. 333- ________), including a preliminary prospectus relating to
the Shares, and has filed with the Commission the Registration Statement and
such amendments thereof as may have been required to the date of this
Agreement. Copies of such Registration Statement (including all amendments
thereof) and of the related preliminary prospectus have previously been
delivered by the Company to you as the representatives of the Underwriters.
The term "preliminary prospectus" means any preliminary prospectus (as
described in Rule 430 of the Rules) included at any time as a part of the
Registration Statement and any preliminary prospectus filed by the Company with
the consent of the Representative pursuant to Rule 424(a) of the Rules. The
Registration Statement as amended at the time and on the date it becomes
effective (the "Effective Date"), including all exhibits and information, if
any, and all documents incorporated or deemed to be incorporated by reference
therein or deemed to be part of the Registration Statement pursuant to Rule
424(b), Rule 434 and Rule 430A of the Rules or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder, is called the "Registration Statement." The term
"Prospectus" means the prospectus in the form first used to confirm sales of
the Shares (whether such prospectus was included in the Registration Statement
at the time of effectiveness or was subsequently filed with the Commission
pursuant to Rule 424(b) of the Rules) or if the Company relies on Rule 434
under the Securities Act, the "Term Sheet" relating to the Shares, together
with the preliminary prospectus that such Term Sheet supplements. "Term Sheet"
means any term sheet that satisfies the requirements of Rule 434 under the
Securities Act.
All references in this Agreement to financial statements and schedules
and other information which is contained, included or stated in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplement to the
Registration Statement or the Prospectus shall be deemed to mean and include
the filing of any document under the Exchange Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
The Company understands that the Underwriters propose to make a
public offering of the Shares, as set forth in and pursuant to the Prospectus,
as soon after the Effective Date and the date of this Agreement as the
Representative deem advisable. The Company hereby
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confirms that the Underwriters and dealers have been authorized to distribute
or cause to be distributed each preliminary prospectus and are authorized to
distribute the Prospectus (as from time to time amended or supplemented if the
Company furnishes amendments or supplements thereto to the Underwriters).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to each Underwriter as follows:
(a) On the Effective Date the Registration Statement
complied, and on the date of the Prospectus, on the date any
post-effective amendment to the Registration Statement shall
become effective, on the date any supplement or amendment to the
Prospectus is filed with the Commission and on each Closing Date,
the Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) will comply, in all material
respects, with the applicable provisions of the Securities Act and
the Rules and the Company's Registration Statement on Form 8-A
under Exchange Act, will be effective and will comply in all
material respects with the Exchange Act and the rules and
regulations of the Commission thereunder; the Registration
Statement did not, as of the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and on the other dates referred to
above neither the Registration Statement nor the Prospectus, nor
any amendment thereof or supplement thereto, will contain any
untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. No order preventing
or suspending the use of any preliminary prospectus has been
issued by the Commission or any state of the United States or
other United States or foreign regulatory body. When each related
preliminary prospectus was filed with the Commission (whether
filed as part of the Registration Statement or any amendment
thereto or pursuant to Rule 424(a) of the Rules) and when any
amendment thereof or supplement thereto was filed with the
Commission, such preliminary prospectus or amendment thereof or
supplement thereto complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the Company makes no representation
or warranty as to the paragraph with respect to stabilization on
the inside front cover page of the Prospectus and the
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statements contained in the first, second and sixth paragraphs
under the caption "Underwriting" in the Prospectus. The Company
acknowledges that the statements referred to in the previous
sentence constitute the only information furnished in writing by
the Representative on behalf of the several Underwriters
specifically for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus.
(b) The financial statements of the Company (including all
notes and schedules thereto) included in the Registration
Statement and Prospectus present fairly the financial position,
the statements of operations, stockholders' equity, and cash flows
and the other information purported to be shown therein of the
Company; and such financial statements (including all notes and
schedules thereto) have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout
the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made. The
other financial and statistical information and data set forth in
the Registration Statement and the Prospectus is accurately
presented and, to the extent such information and data is derived
from the financial statements and books and records of the
Company, is prepared on a basis consistent with such financial
statements and books and records.
(c) Ernst & Young LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and,
during the periods covered by their reports, were independent
public accountants with respect to the Company as required by the
Securities Act and the Rules.
(d) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the
jurisdictions in which each is incorporated. The Company has no
subsidiaries and does not control, directly or indirectly, any
corporation, partnership, joint venture, association or other
business organization. The Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which
the character or location of its assets or properties (owned,
leased or licensed) or the nature of its business makes such
qualification necessary, except for such jurisdictions where the
failure to so qualify would not have a material adverse effect on
the assets or properties, business, results of operations or
condition (financial or otherwise) of the Company taken as a whole
(a "Material Adverse Effect"). Except as disclosed in the
Registration Statement and the Prospectus, the Company does not
own, lease or license any material asset or property or conduct
any material business outside the United States of America. The
Company has all requisite corporate power and authority, and all
necessary authorizations,
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approvals, consents, orders, licenses, certificates and permits of
and from all governmental or regulatory bodies or any other person
or entity, to own, lease and license its assets and properties and
conduct its businesses as now being conducted and as described in
the Registration Statement and the Prospectus except for such
authorizations, approvals, consents, orders, licenses,
certificates and permits the failure to so obtain would not have a
Material Adverse Effect; no such authorization, approval, consent,
order, license, certificate or permit contains a materially
burdensome restriction other than as disclosed in the Registration
Statement and the Prospectus; and the Company has all such
corporate power and authority, and such authorizations, approvals,
consents, orders, licenses, certificates and permits to enter
into, deliver and perform this Agreement and to issue and sell the
Shares (except as may be required under the Securities Act and
state and foreign Blue sky laws).
(e) The Company owns or possesses adequate and enforceable
rights to use all patents, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications,
licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for or
incidental to the conduct of its business as described in the
Registration Statement and the Prospectus. Except as disclosed in
the Registration Statement and the Prospectus, the Company has not
received any notice of, and to the best of its knowledge is not
aware of, any infringement of or conflict with asserted rights of
others with respect to any Intangibles which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect and the Company does
not know of any reasonable basis therefor. Except as disclosed in
the Registration Statement and the Prospectus, no Intangibles of
the Company are in dispute or are in any conflict with the right
of any other person or entity and the Company (i) has or will have
the right (subject to applicable agreements, which agreements
provide for use to the extent necessary and desirable for the
conduct of its business as currently conducted and as proposed to
be conducted) to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects,
restrictions or equities of any kind whatsoever all licenses and
rights to the Intangibles used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon
or otherwise acting adversely to the right or claimed right of any
other person and (ii) is not or will not become, as the case may
be, obligated or in any way liable for any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any
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Intangibles with respect to the use thereof or in connection with
the conduct of its business or otherwise, except for any such
payments, claims, uses, liens, charges, encumbrances, pledges,
security interests, defects, restrictions and equities which would
not have a Material Adverse Effect.
(f) The Company does not own any real property. The Company
has good and marketable title to each of the items of personal
property which are reflected in the financial statements referred
to in Section 4(b) or are referred to in the Registration
Statement and the Prospectus as being owned by it and valid and
enforceable leasehold interests in each of the items of real and
personal property which are referred to in the Registration
Statement and the Prospectus as being leased by it, in each case
free and clear of all liens, encumbrances, claims, security
interests and defects, other than those described in the
Registration Statement and the Prospectus and those which would
not have a Material Adverse Effect.
(g) Except as described in the Registration Statement and the
Prospectus there is no litigation or governmental or other
proceeding or investigation before any court or before or by any
public body or board pending or, to the Company's best knowledge,
threatened (and the Company does not know of any reasonable basis
therefor) against, or involving the assets, properties or business
of, the Company which could have a Material Adverse Effect.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as described therein, (i) there has not been
any material adverse change in the assets or properties, business,
results of operations, prospects or condition (financial or
otherwise) of the Company, whether or not arising from
transactions in the ordinary course of business; (ii) the Company
has not sustained any material loss or interference with its
assets, businesses or properties (whether owned, leased or
licensed) from fire, explosion, earthquake, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action,
order or decree; (iii) the inventories reflected in the financial
statements of the Company filed with and as part of the
Registration Statement and the Prospectus are currently and
readily merchantable in all material respects, containing no
material amount of slow moving, obsolete or damaged goods which
have not been written down in conformity with generally accepted
accounting principles applied on a basis consistent with prior
periods; and (iv) the accounts receivables, net of allowances,
reflected in the financial statements of the Company
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filed with and as a part of the Registration Statement and the
Prospectus are, except to the extent heretofore collected, fully
collectible and subject to no material counterclaims or set-offs;
and since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, except as reflected
therein, the Company has not (1) issued any securities (other than
the grant of stock options and Common Stock issued upon exercise
of stock options or warrants described in the Registration
Statement and Prospectus) or incurred any liability or obligation,
direct or contingent, for borrowed money, except such liabilities
or obligations incurred in the ordinary course of business, (2)
entered into any transaction not in the ordinary course of
business or (3) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise
acquire any shares of its stock.
(i) There is no document or contract of a character required
to be described in the Registration Statement or Prospectus or to
be filed as an exhibit to the Registration Statement which is not
described or filed as required. Each agreement listed in the
Exhibits to the Registration Statement is in full force and effect
and is valid and enforceable by and against the Company in
accordance with its terms, assuming the due authorization,
execution and delivery thereof by each of the other parties
thereto. Neither the Company nor, to the best of the Company's
knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or
lapse of time or both would constitute such a default, in any such
case which default or event could have a Material Adverse Effect.
No default exists, and no event has occurred which with notice or
lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by
the Company of any other agreement or instrument to which the
Company is a party or by which it or its properties or business
may be bound or affected which default or event could have a
Material Adverse Effect.
(j) The Company is not in violation of any term or provision
of its charter or by-laws, in each case amended to the date
hereof, or of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation, where the consequences of such
violation could have a Material Adverse Effect. Except as
described in the Registration Statement or Prospectus, the Company
does not intend to amend its charter or by-laws.
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(k) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation,
the issuance and sale by the Company of the Shares) will give rise
to a right to terminate or accelerate the due date of any payment
due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an event which with
notice or lapse of time or both would constitute a default) under,
or require any consent or waiver under, or result in the execution
or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company pursuant to the terms of, any
indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it or any
of its material properties or businesses is bound, or any material
franchise, license, permit, judgment, decree, order, statute, rule
or regulation applicable to the Company or violate any provision
of the charter or by-laws of the Company, except for such consents
or waivers which have already been obtained and are in full force
and effect. No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required for the issue and sale of the Shares or
the consummation of the other transactions contemplated by this
Agreement, except the registration under the Securities Act of the
Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(l) The authorized, issued and outstanding capital stock of
the Company and the capital stock reserved or committed for
issuance is as set forth under the captions "Capitalization" and
"Description of Capital Stock" in the Prospectus. All of the
outstanding shares of Common Stock have been duly and validly
issued and are fully paid and nonassessable and none of them was
issued in violation of any preemptive or other similar right or
any federal or state securities laws. The Shares, when issued and
sold pursuant to this Agreement, will be duly and validly issued,
fully paid and nonassessable and none of them will be issued in
violation of any preemptive or other similar right or any federal
or state securities laws. Except as disclosed in the Registration
Statement and the Prospectus, there is no outstanding option,
warrant or other right calling for the issuance of, and there is
no commitment, plan or arrangement to issue, any share of stock of
the Company or any security convertible into, or exercisable or
exchangeable for, such stock. The Common Stock, the Shares and
each other authorized class of capital stock of the Company and
all warrants and securities convertible into classes of capital
stock of the Company,
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conform in all material respects to all statements in relation
thereto contained in the Registration Statement and the
Prospectus. The Company has a sufficient number of authorized but
unissued shares of Common Stock to enable the Company to issue,
without further stockholder action, all the Shares to be sold by
the Company.
(m) Except as disclosed in the Prospectus, no holder of any
security of the Company has the right to have any security owned
by such holder included in the Registration Statement or to demand
registration of any security owned by such holder during the
period ending 90 days after the date of this Agreement. The
provisions of all registration rights agreements described in the
Prospectus have been fully complied with or waived and the sale of
the Shares pursuant to this Agreement will not conflict with any
such registration rights, except such as have been fully complied
with or waived. Each director and officer of the Company has
delivered to the Representative an enforceable written agreement
(a "Lockup Agreement") that such person or entity will not, for a
period of 90 days after the date of this Agreement, offer for
sale, sell, distribute, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or exercise any
registration rights with respect to, any shares of Common Stock
(or any securities convertible into, exercisable for, or
exchangeable for any shares of Common Stock) owned by them,
without the prior written consent of the Representative on behalf
of the several Underwriters. The Company has used its best
efforts to obtain a signed Lockup Agreement from each stockholder
owning 5% or more of the Common Stock and has delivered all
agreements so obtained to the Representative.
(n) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the
Shares by the Company. This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes
and will constitute a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
respective terms, except (i) as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles and (ii) to the
extent that rights to indemnity or contribution under this
Agreement may be limited by federal and state securities laws or
the public policy underlying such laws.
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(o) The Company is not involved in any labor dispute nor, to
the best knowledge of the Company, is any such dispute threatened,
which dispute could have a Material Adverse Effect. Except as set
forth in the Registration Statement and Prospectus, the Company
has not violated any applicable safety or similar law applicable
to its business nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees, nor
any applicable federal or state wages and hours law, nor any
provisions of the Employee Retirement Income Security Act or the
rules and regulations promulgated thereunder, the violation of any
of which could have a Material Adverse Effect.
(p) No transaction has occurred between or among the Company
and any of its officers or directors or any affiliate or
affiliates of any such officer or director that is required to be
described in and is not described in the Registration Statement
and the Prospectus.
(q) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Stock to facilitate the
sale or resale of any of the Shares.
(r) The Company has not ever been denied a license, permit or
authorization material to the operation of its business, and the
operating practices and procedures of the Company is in material
compliance with all applicable federal, state and local laws,
rules and regulations.
(s) Except for matters which, individually or in the
aggregate, would not have a Material Adverse Effect, (i) the
Company has obtained all permits, licenses and other
authorizations which are required under the Environmental Laws (as
defined below), (ii) the Company is in full compliance with all
terms and conditions of all permits, licenses and authorizations
required under the Environmental Laws, (iii) the Company is in
full compliance with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulation, code, plan, consent or other order, decree, judgment,
notice of violation or other notice, or demand letter issued,
entered, promulgated or approved thereunder (collectively, the
"Environmental Requirements"), (iv) no officer of the Company is
aware of nor has he or she received (A) notice (written or oral)
from a governmental authority, citizens group, employee or
otherwise that alleges that the Company is not in full compliance
with one or more Environmental Requirements, or (B) notice
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(written or oral) respecting the Company of any past, present or
future events, conditions, circumstances, activities, practices,
incidents, actions or plans that may interfere with or prevent
continued compliance with all Environmental Requirements, or that
may give rise to any common law or other legal liability or
otherwise form the basis of any claim, action, suit proceeding,
hearing or investigation (each, an "Action"), based on or related
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission,
discharge, release or threatened release, of any chemical,
pollutant, contaminant, or hazardous or toxic material or waste or
petroleum or petroleum products into ambient air, surface water,
ground water or land, and (v) there is no Action relating to any
Environmental Requirement pending or, to the best knowledge of the
Company threatened against or affecting (A) the Company or its
properties, or (B) any person or entity whose liability for such
Action has or may have been retained or assumed either
contractually or by operation of law by the Company.
"Environmental Laws" shall mean federal, state and local laws
relating to pollution or protection of human health or the
environment, including, without limitation, laws (including the
common law) relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants or
hazardous or toxic materials or wastes or petroleum or petroleum
products into ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
chemicals, pollutants, contaminants or hazardous or toxic
materials or wastes or petroleum or petroleum products.
(t) Except as described in the Registration Statement or the
Prospectus, there is no action, suit, investigation or proceeding
pending or to the knowledge of the Company threatened before or by
any federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or
foreign, or arbitrator to which the Company is or may become a
party or of which any property of the Company is subject or
affected that (i) could affect the consummation of the
transactions contemplated under this Agreement, including the
issuance or validity of the Shares, (ii) could have a Material
Adverse Effect or (iii) is required to be disclosed in the
Registration Statement or the Prospectus. All pending legal or
governmental proceedings to which the Company is a party or of
which any of its respective properties are subject or affected
which are not described in the Prospectus, including ordinary
routine litigation incidental to the business, would not have a
Material Adverse Effect.
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(u) The Company has such licenses, permits and other approvals
or authorizations of and from governmental or regulatory
authorities ("Permits") as are materially necessary under
applicable law to own its properties and to conduct its business
in the manner now being conducted and as described in the
Registration Statement and the Prospectus, except such Permits
which individually or in the aggregate would not have a Material
Adverse Effect; and the Company has fulfilled and performed all of
its obligations with respect to such Permits, and no event has
occurred which allows, or after notice or lapse of time or both
would allow, revocation or termination thereof or result in any
other material impairment of the rights of the holder of any such
Permits except such Permits which individually or in the aggregate
would not have a Material Adverse Effect. The Company has never
been denied a Permit of the type referred to in this Section 4(u).
(v) The Company has timely filed all federal, state, local and
foreign tax returns which are required to be filed through the
date hereof, or has received extensions thereof, and has paid all
taxes shown on such returns and all assessments received by it to
the extent that the same are material and have become due. The
Company has no knowledge, nor any reasonable grounds to know, of
any tax deficiencies which could have a Material Adverse Effect;
the Company has paid all taxes which have become due, whether
pursuant to any assessment, or otherwise, and there is no further
liability (whether or not disclosed on such returns) or assessment
for any such tax, and no interest or penalties accrued or accruing
with respect thereto, except as may be set forth or adequately
reserved for in the financial statements included in the
Registration Statement and the Prospectus; the amounts currently
set up as provisions for taxes or otherwise by the Company on its
books and records are sufficient for the payment of all its unpaid
federal, foreign, state, county and local taxes accrued through
the dates as of which they speak, and for which the Company may be
liable in its own right, or as a transferee of the assets of, or
as successor to any other corporation, association, partnership,
joint venture or other entity.
(w) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts
as are customary in the businesses in which they are engaged; and
the Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not
have a Material Adverse Effect.
13.
14
(x) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the results of operations of,
the Company. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance
that (A) transactions are executed in accordance with management's
general or specific authorizations; (B) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (C) access to assets is permitted
only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(y) The Shares have been duly authorized for quotation on the
Nasdaq National Market.
(z) The Company is not an "Investment Company" within the
meaning of the Investment Company Act of 1940.
(aa) Neither the Company nor, to the Company's knowledge, any
employee or agent of the Company have made any payment of funds of
the Company or received or retained any funds in violation of any
law, rule or regulation, which payment, receipt or retention of
funds is of a character required to be disclosed in the
Registration Statement and Prospectus.
(bb) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were
or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the
Exchange Act, and, when read together with the other information
in the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at each Closing Date will
not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject
to each of the following terms and conditions:
14.
15
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a) of this Agreement.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be
in effect and no order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the Commission, and
any requests for additional information on the part of the Commission
(to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Representative.
(c) The representations and warranties of the Company
contained in this Agreement and in the certificates delivered pursuant
to Section 5(d) shall be true and correct when made and on and as of
each Closing Date as if made on such date, and the Company shall have
performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by it at or before such Closing Date.
(d) The Representative shall have received on each Closing
Date a certificate, addressed to the Representative and dated such
Closing Date, of the chief executive officer and the chief financial
officer of the Company to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus and this Agreement and that the representations and
warranties of the Company in this Agreement are true and correct on
and as of such Closing Date with the same effect as if made on such
Closing Date and the Company has performed all covenants and
agreements and satisfied all conditions contained in this Agreement
required to be performed or satisfied by it at or prior to such
Closing Date.
(e) The Representative shall have received at the time this
Agreement is executed and on each Closing Date a signed letter from
Ernst & Young LLP addressed to the Representative and dated,
respectively, the date of this Agreement and each such Closing Date,
in form and substance satisfactory to the Representative and counsel
to the Underwriters, containing statements and information of the type
ordinarily inlcuded in accountant's "comfort letters" to underwriters
with respect to audited financial statements and certain financial
information contained in the Registration Statement and the Prospectus
and confirming that they are independent public accountants with
respect to the Company within the meaning of the Securities Act and
the applicable published rules and regulations thereunder. The letters
shall not disclose any change, or any development involving a
prospective change, in or affecting the business or properties of the
Company which, in the sole judgment of the Representative, makes it
impractical or inadvisable to proceed with the public offering of the
15.
16
Firm Shares or the Option Shares as contemplated by the Prospectus.
References to the Registration Statement and the Prospectus in this
paragraph (e) are to such documents as amended and supplemented at the
date of the letter.
(f) The Representative shall have received on each Closing
Date from Katten Muchin & Zavis, counsel for the Company, an opinion,
addressed to the Representative and dated such Closing Date, and
stating in effect that:
(i) The Company is duly incorporated and is validly
existing in good standing under the laws of the State of Delaware. To
the best of such counsel's knowledge, the Company has no subsidiaries
and does not control, directly or indirectly, any corporation,
partnership, joint venture, association or other business
organization. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which, to the best of such
counsel's knowledge, the character or location of its assets or
properties (owned, leased or licensed) or the nature of its businesses
makes such qualification necessary, except for such jurisdictions
where the failure to so qualify would not, independently or
collectively, have a Material Adverse Effect.
(ii) The Company has all requisite corporate power
and authority to own, lease and license its assets and properties and
conduct its business as now being conducted and as described in the
Registration Statement and the Prospectus; and the Company has all
requisite corporate power and authority and all necessary
authorizations, approvals, consents, orders, licenses, certificates
and permits to enter into, deliver and perform this Agreement and to
issue and sell the Shares other than those required under the
Securities Act and state and foreign Blue Sky laws and those which, if
not obtained, would not have a Material Adverse Effect;
(iii) The Company has authorized and issued capital
stock as described in the Registration Statement and the Prospectus;
the certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the Company; all of
the outstanding shares of Common Stock of the Company reflected in the
Registration Statement and Prospectus have been duly and validly
authorized and have been duly and validly issued and are fully paid
and nonassessable and none of them was issued in violation of any
statutory preemptive or other similar statutory right or, to the best
of such counsel's knowledge, any right of first refusal. The Shares
when issued and sold pursuant to this Agreement will be duly and
validly issued, outstanding, fully paid and nonassessable and none of
them will have been issued in violation of any statutory preemptive or
other similar statutory right. The provisions of all registration
rights, described in the Prospectus or otherwise, have been complied
with or waived and the sale of the Shares pursuant to this Agreement
will not
16.
17
conflict with any such registration rights. To the best of such
counsel's knowledge, except as disclosed in the Registration Statement
and the Prospectus, there is no outstanding option, warrant or other
right calling for the issuance of, and no commitment, plan or
arrangement to issue, any share of stock of the Company or any
security convertible into, exercisable for, or exchangeable for stock
of the Company. The Common Stock and the Shares conform in all
material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. The Company has a
sufficient number of authorized but unissued shares of Common Stock to
enable the Company to issue, without further stockholder action, all
the Shares to be sold by the Company.
(iv) The Company has all requisite corporate power
and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement. All necessary corporate action has
been duly and validly taken by the Company to authorize the execution,
delivery and performance of this Agreement and the issuance and sale
of the Shares by the Company. This Agreement has been duly and
validly authorized, executed and delivered by the Company, and this
Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles and (B) to the extent that rights to
indemnity or contribution under this Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws.
(v) Neither the execution, delivery and performance
of this Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares) will give rise to a
right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or any event which with notice
or lapse of time, or both, would constitute a default) under, or
require consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties or
assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, note or other material agreement or
instrument of which such counsel is aware and to which the Company is
a party or by which it or any of its properties or businesses is
bound, or any material franchise, license, permit, judgment, decree,
order, statute, rule or regulation of which such counsel is aware or
violate any provision of the charter or by-laws of the Company.
17.
18
(vi) The Common Stock, including the Shares, has
been approved for quotation on the Nasdaq National Market subject to
official notice of listing of the Shares.
(viI) To the best of such counsel's knowledge, no
default exists, and no event has occurred which with notice or lapse
of time, or both, would constitute a default, in the due performance
and observance of any term, covenant or condition by the Company of
any indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company is a party or by which it or any of
its assets or properties or businesses may be bound or affected, where
the consequences of such default could have a Material Adverse Effect.
(VIII) To the best of such counsel's knowledge, the
Company is not in violation of any term or provision of its charter or
by-laws.
(ix) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
performance of this Agreement by the Company or the consummation of
the transactions contemplated hereby, except such as have been
obtained under the Securities Act and such as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the several Underwriters (as to which
such counsel need express no opinion) and such as may be required
under the rules of the National Association of Securities Dealers,
Inc. with respect to the underwriting arrangements reflected in this
Agreement (as to which such counsel need express no opinion).
(X) Except as described in the Registration
Statement and the Prospectus, to the best of such counsel's knowledge,
there is no litigation or governmental or other proceeding or
investigation, before any court or before or by any public body or
board pending or threatened against, or involving the assets,
properties or businesses of, the Company which could have a Material
Adverse Effect.
(xi) All contracts and other documents, statutes,
legal or governmental proceedings required to be filed as exhibits to,
or described in, the Registration Statement have been so filed with
the Commission or are fairly described in the Registration Statement,
as the case may be.
(xii) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or supplement
thereto (except for the financial statements and schedules and other
financial and accounting data included therein, as to which such
counsel need expresses no opinion) comply as
18.
19
to form in all material respects with the requirements of the
Securities Act and the Rules.
(xiii) The Registration Statement has become
effective under the Securities Act and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are threatened, pending or
contemplated; and any required filing of the Prospectus, pursuant to
Rule 424(b) of the Rules has been made in accordance with the
provisions thereof.
(xiv) The registration of the Common Stock under
Section 12(g) of the Exchange Act has become effective.
(xv) Each document filed pursuant to the Exchange
Act (other than the financial statements and supporting schedules
included therein, as to which no opinion need be rendered) and
incorporated or deemed to be incorporated by reference in the
Prospectus complied when so filed as to form in all material respects
with the Exchange Act; and such counsel has no reason to believe that
any of such documents, when they were so filed, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such documents were
filed, not misleading."
(xvi) The Company is not an "Investment Company"
within the meaning of the Investment Company Act of 1940.
To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the
Company and public officials and on the opinions of other counsel
reasonably satisfactory to the Representative as to matters which are
governed by laws other than the laws of the States of Illinois and
Delaware and the federal laws of the United States; provided that such
counsel shall state that in their opinion they know of no reason why
the Underwriters and they are not justified in relying on such other
opinions. Copies of such certificates and other opinions shall be
furnished to the Representative and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the Representative and representatives
of the independent certified public accountants of the Company, at
which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, 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 in
the foregoing opinion), on the basis of the foregoing, no facts have
come to
19.
20
the attention of such counsel that have caused such counsel to believe
that the Registration Statement at the time it became effective
(except with respect to the financial statements and notes and
schedules thereto and other financial data, as to which such counsel
need express no belief) contained any 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 as amended or supplemented (except with respect to the
financial statements and notes schedules thereto and other financial
data, as to which such counsel need express no belief) on the date
thereof contained or at the Closing Date contains any untrue statement
of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) The Representative shall have received on each Closing
Date from Marshall, O'Toole, Gerstein, Murray & Borun, patent counsel
for the Company, an opinion, addressed to the Representative and dated
such Closing Date, in form and substance satisfactory to Cooley
Godward LLP, counsel to the Underwriters, and stating in effect that:
(i) The statements under the captions "Risk
Factors- Intellectual Property and Patents" and
"Business-Intellectual Property and Patents," in the
Registration Statement and the Prospectus, to the extent that
they reflect matters of law, summaries of law or regulations,
or patent status, are correct in all material respects,
subject to the qualifications set forth therein; and such
counsel do not know of any statutes, legal and governmental
proceedings, contracts and other documents relating to the
Company's patents and patent applications required to be
described in the Prospectus that are not described as
required;
(ii) The Company's patent applications prepared by
such counsel have been properly prepared and filed on behalf
of the Company and, to the best of such counsel's knowledge,
the Company's other patent applications have been properly
prepared and filed on behalf of the Company; except as set
forth in the Prospectus, each of the patents issued therefrom
and the applications are held by the Company and, except as
set forth in the Prospectus, to the best of such counsel's
knowledge, no other entity or individual has any right or
claim in any of the Company's patents, patent applications or
any patent to be issued therefrom and such counsel is unaware
of any facts which form a basis for a finding of
unenforceability or invalidity of any of the patents or patent
rights owned by, licensed to or used by the Company;
(iii) To the best of such counsel's knowledge, the
Company owns or possesses sufficient rights to use all patents
necessary for the conduct
20.
21
of its business now being or proposed to be conducted as
described in the Prospectus;
(iv) to the best of such counsel's knowledge, (A) the
Company has conducted its business without infringement of any
patents or patent rights of others and (B) there are no
infringements by others of any of the Company's patent or
patent rights which in the judgment of such counsel could
affect materially the use thereof by the Company;
(v) to the best of such counsel's knowledge, there
is not pending or threatened any action, suit or proceeding to
which the Company is a party, before or by any court or
governmental agency or body relating to patents or patent
rights or patent applications;
(vi) Nothing has come to the attention of such
counsel that would lead such counsel to believe that any of
the representations and warranties of the Company contained in
Section 4(e) of this Agreement are not true and correct as of
the Closing Date; and
(vii) Such counsel have reviewed the statements
under the captions "Risk Factors-Intellectual Property and
Patents" and "Business-Intellectual Property and Patents," in
the Registration Statement and the Prospectus, and any further
amendments or supplements thereto made by the Company prior to
the Closing Date, and such counsel have no reason to believe
that either such portions of the Registration Statement, when
such portions became effective, contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the such portions of
the Prospectus and any amendment or supplement thereto, as of
the date thereof, on the date of filing thereof with the
Commission, and the Closing Date, included an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representative
and their counsel and the Underwriters shall have received from Cooley
Godward LLP a favorable opinion, addressed to the Representative and
dated such Closing Date, with respect to the Shares, the Registration
Statement and the Prospectus, and such other related matters, as the
Representative may reasonably request, and the Company shall have
furnished to Cooley Godward LLP such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
21.
22
(i) The Company shall have in place on the Closing Date an
insurance policy which covers the Company as well as its directors and
officers, covering potential liabilities under the Securities Act and
the Exchange Act providing coverage of no less that $__,000,000 and a
term of no less than one year from the date of this Agreement.
(j) The Shares to be purchased on the Closing Date by the
Underwriters shall have been approved for quotation on the Nasdaq
National Market.
(k) All directors and officers of the Company, shall have
agreed in writing, in form and substance satisfactory to the
Representative, that such person or entity will not, for a period 90
days after the date of this Agreement directly or indirectly, except
with prior written consent of the Representative, offer, sell, grant
any option to purchase, or otherwise dispose (or announce any offer,
sale, grant of an option to purchase or other disposition) of any
shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, such shares of Common Stock.
(l) The Representative shall have been furnished with such
additional documents and certificates as the Representative or counsel
for the Underwriters may reasonably request related to this Agreement
and the transactions contemplated hereby.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Representative and to counsel for the Underwriters, in each
case in their reasonable judgment. The Company shall furnish to the
Representative conformed copies of such opinions, certificates, letters and
other documents in such number as the Representative shall reasonably request.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) The Company shall prepare the Prospectus in a form
approved by the Representative and file such Prospectus pursuant to
Rule 424(b) or Rule 434 under the Securities Act within the time
period required thereby following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Securities Act, and shall promptly advise
the Representative (i) when any amendment to the Registration
Statement shall have become effective, (ii) of any request by the
Commission for any amendment of the Registration Statement or the
Prospectus or for any additional information, (iii) of the prevention
or suspension of the use of any preliminary prospectus or the
Prospectus or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (iv)
of the receipt by the
22.
23
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company shall not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished the
Representative a copy for their review prior to filing and shall not
file any such proposed amendment or supplement to which the
Representative reasonably object. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules,
any event occurs as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Securities Act or the Rules, the Company
promptly shall prepare and file with the Commission, subject to the
second sentence of Section 6(a), an amendment or supplement which
shall correct such statement or omission or an amendment which shall
effect such compliance.
(c) The Company shall make generally available to its security
holders and to the Representative as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at
the end of the fiscal quarter of the Company during which the
Effective Date occurs (or 90 days if such 12-month period coincides
with the Company's fiscal year), an earnings statement (which need not
be audited) of the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Securities Act or Rule
158 of the Rules.
(d) The Company shall furnish to the Representative and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments
thereof) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and all amendments thereof and,
so long as delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies of any
preliminary prospectus and the Prospectus and any amendments thereof
and supplements thereto as the Representative may reasonably request.
(e) The Company shall cooperate with the Representative and
its counsel in endeavoring to qualify the Shares for offer and sale
under the laws of such jurisdictions as the Representative may
designate and shall maintain such
23.
24
qualifications in effect so long as required for the distribution of
the Shares; provided, however, that the Company shall not be required
in connection therewith, as a condition thereof, to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation as doing
business in any jurisdiction.
(f) For a period of five years after the date of this
Agreement, the Company shall supply to the Representative, and to each
other Underwriter who may so request in writing, copies of (i) such
financial statements and other periodic and special reports as the
Company may from time to time distribute generally to the holders of
any class of its capital stock and (ii) any information, documentation
or report it shall file or shall be required to file with the
Commission.
(g) Without the prior written consent of the Representative,
for a period of 90 days after the date of this Agreement, the Company
shall not issue, sell or register with the Commission (other than on
Form S-8 or on any successor form), or otherwise dispose of, directly
or indirectly, any equity securities of the Company (or any securities
convertible into or exercisable or exchangeable for equity securities
of the Company), except for (i) the issuance of the Shares pursuant to
the Registration Statement and, as described in footnote 1 to the
table under the caption "Capitalization" in the Preliminary
Prospectus, (ii) the issuance of Common Stock pursuant to the exercise
of options granted under the Company's 1993 Stock Option Plan, (iii)
the issuance of Common Stock pursuant to the exercise of warrants
outstanding as of the date hereof and (iv) the grant of options to
purchase Common Stock under the Company's 1993 Stock Option Plan.
(h) On or before the Firm Shares Closing Date, the Company
shall make all filings required under applicable securities laws and
by the Nasdaq National Market (including any required registration
under the Exchange Act) in order to permit the consummation of the
transactions contemplated hereby.
(i) The Company shall apply the net proceeds of the sale of
the Shares issued and to be sold by it as set forth in the Prospectus.
The Company shall take such steps as shall be necessary to ensure that
for a period of three years from the Effective Date the Company will
not become an "investment company" within the meaning of such term
under the Investment Company Act of 1940, as amended, and the rules
and regulations thereunder.
(j) The Company agrees to pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and
expenses incident to
24.
25
the public offering of the Shares and the performance of the
obligations of the Company under this Agreement including those
relating to: (i) the preparation, printing, filing and distribution of
the Registration Statement including all exhibits thereto, each
preliminary prospectus, the Prospectus, all amendments and supplements
to the Registration Statement and the Prospectus, and the printing,
filing and distribution of this Agreement; (ii) the preparation and
delivery of certificates for the Shares to the Underwriters; (iii) the
registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of the various jurisdictions referred
to in Section 6(e), including the fees and disbursements of counsel
for the Underwriters in connection with such registration and
qualification; (iv) the furnishing (including costs of shipping and
mailing) to the Representative and to the Underwriters of copies of
each preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents required
by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the
Underwriters or by dealers to whom Shares may be sold; (v) the filing
fees of the National Association of Securities Dealers, Inc. in
connection with its review of the terms of the public offering and the
fees and disbursements of counsel for the Underwriters in connection
with such review; (vi) the furnishing (including costs of shipping and
mailing) to the Representative and to the Underwriters of copies of
all reports and information required by Section 6(f); (vi) inclusion
of the Shares for quotation on the Nasdaq National Market; and (viii)
all transfer taxes, if any, with respect to the sale and delivery of
the Shares by the Company to the Underwriters.
(k) During the period beginning on the date hereof and ending
no earlier than the date as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, the Company will
file all documents required to be filed with the Commission pursuant
to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses,
claims,
25.
26
damages or liabilities arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto, or in any
Blue Sky application or other document executed by the Company filed
in any state or other jurisdiction to quantify any or all of the
Shares under the securities laws thereof (any such application
document or information being hereinafter referred to as a "Blue Sky
Application") or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading or (ii) any breach of the representations and warranties
set forth in Section 4 hereof; provided, however, that such indemnity
shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses, claims,
damages or liabilities arising from the sale of the Shares to any
person by such Underwriter if such untrue statement or omission or
alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement, or any Blue Sky Application in reliance upon
and in conformity with information furnished in writing to the Company
by the Representative on behalf of any Underwriter specifically for
use therein. In addition to its other obligations under this Section
7(a), the Company agrees that, as an interim measure while any claim,
action, suit, investigation, inquiry or other proceeding referred to
in this Section 7(a) is pending, it will reimburse the Underwriters on
a monthly basis for all reasonable legal fees or other out-of-pocket
expenses reasonably incurred in connection with investigating or
defending any such claim, action, suit, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have been improper,
the Underwriters shall promptly return it to the Company. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company who signs the Registration
Statement, to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which
was made in any preliminary prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, with
respect to stabilization on the
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inside front cover page of the Prospectus and the statements contained
in the first, second and sixth paragraphs under the caption
"Underwriting" in the Prospectus; provided, however, that the
obligation of each Underwriter (including any controlling person,
director or officer thereof) shall be limited to the net underwriting
commission received by such Underwriter in connection with the sale of
the Shares.
(c) Any party that proposes to assert the right to be
indemnified under this Section 7 will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such
party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 7(a) or 7(b) shall be available to any party
who shall fail to give notice as provided in this Section 7(c) if the
party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure
to give such notice but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from
any liability that it may have to any indemnified party for
contribution or otherwise than under this Section 7. In case any such
action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in,
and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment of counsel by such indemnified party
has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in
which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party) or
(iii) the indemnifying parties shall not have employed counsel to
assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying
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party shall not be liable for any settlement of any action, suit,
proceeding or claim effected without its written consent.
8. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(a) is due in accordance with its terms but for any reason is held to
be unavailable from the Company, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages and liabilities (including
any investigation, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting any contribution received by the
Company from persons other than the Underwriters, such as persons who control
the Company within the meaning of the Securities Act, officers of the Company
who signed the Registration Statement and directors of the Company, who may
also be liable for contribution) to which the Company and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares or, if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection
with the statements or omissions 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 shall be deemed
to be in the same proportion as (x) the total proceeds from the offering (net
of underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus, bear to
(y) the total price to the public of the offering as set forth in the table on
the cover page of the Prospectus, and the relative benefits received by the
Underwriters shall be deemed to be in the same proportion as (x) the
underwriting discounts received by the Underwriters, as set forth in the table
on the cover page of the Prospectus, bear to (y) the total price to the public
of the offering as set forth in the table on the cover page of the Prospectus.
The relative fault of the Company or the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8, (i) in no case shall any Underwriter (except as may be
provided in the Agreement Among Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) the Company shall be liable
and responsible for any amount in excess of such underwriting discount;
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
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controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person, if any, who controls the Company within
the meaning of the Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) in the immediately preceding sentence of this Section 8. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim for contribution may be made against another party or parties under this
Section 8, notify such party or parties from whom contribution may be sought,
but the omission so to notify such party or parties from whom contribution may
be sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise
than under this Section 8. No party shall be liable for contribution with
respect to any action, suit, proceeding or claim settled without its written
consent. The Underwriters' obligations to contribute pursuant to this Section
8 are several in proportion to their respective underwriting commitments and
not joint.
9. TERMINATION. This Agreement may be terminated with respect to
the Shares to be purchased on a Closing Date by the Representative by notifying
the Company at any time
(a) in the absolute discretion of the Representative at or
before such Closing Date: (i) if on or prior to such date, any
domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Representative will in the future
materially disrupt, the securities markets; (ii) if there has occurred
any new outbreak or material escalation of hostilities or other
calamity or crisis the effect of which on the financial markets of the
United States is such as to make it, in the judgment of the
Representative, inadvisable to proceed with the offering; (iii) if
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as to
make it, in the judgment of the Representative, inadvisable or
impracticable to market the Shares; (iv) if trading in the Common
Stock has been suspended by the Commission or trading generally on the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. or
the Nasdaq National Market has been suspended or limited, or minimum
or maximum ranges for prices for securities shall have been fixed, or
maximum ranges for prices for securities have been required, by said
exchanges or by order of the Commission, the National Association of
Securities Dealers, Inc., or any other governmental or regulatory
authority; or (v) if a banking moratorium has been declared by any
state or federal authority, or
(b) at or before such Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.
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If this Agreement is terminated pursuant to any of its
provisions, the Company shall not be under any liability to any Underwriter,
and no Underwriter shall be under any liability to the Company, except that (A)
the Company will reimburse the Underwriters for all out-of-pocket expenses
(including the reasonable fees and disbursements of their counsel) incurred by
them in connection with the proposed purchase and sale of the Shares or in
contemplation of performing their obligations hereunder and (B) no Underwriter
who shall have failed or refused to purchase the Shares agreed to be purchased
by it under this Agreement, without some reason sufficient hereunder to justify
cancellation or termination of its obligations under this Agreement, shall be
relieved of liability to the Company or to the other Underwriters for damages
occasioned by its failure or refusal.
10. SUBSTITUTION OF UNDERWRITERS. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on a
Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representative may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representative may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representative, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date does not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated
to purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section
10 by more than one-ninth of such number of Shares without the written
consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date does not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then the Company shall be entitled to an additional business day
within which it may, but is not obligated to, find one or more
substitute underwriters reasonably satisfactory to the Representative
to purchase such Shares upon the terms set forth in this Agreement.
In any such case, either the Representative or the Company
shall have the right to postpone the applicable Closing Date for a period of
not more than five business days in order that necessary changes and
arrangements (including any necessary amendments or supplements to the
Registration Statement or Prospectus) may be effected by the Representative and
the
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Company. If the number of Shares to be purchased on such Closing Date by such
defaulting Underwriter or Underwriters shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, and none of
the nondefaulting Underwriters or the Company shall make arrangements pursuant
to this Section 10 within the period stated for the purchase of the Shares that
the defaulting Underwriters agreed to purchase, this Agreement shall terminate
with respect to the Shares to be purchased on such Closing Date without
liability on the part of any nondefaulting Underwriter to the Company and
without liability on the part of the Company, except in both cases as provided
in Sections 6(j), 7, 8 and 9. The provisions of this Section 10 shall not in
any way affect the liability of any defaulting Underwriter to the Company or
the nondefaulting Underwriters arising out of such default. A substitute
underwriter hereunder shall become an Underwriter for all purposes of this
Agreement.
11. MISCELLANEOUS. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(j), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters and the Company and their respective heirs, executors,
administrators, successors and assigns, and, to the extent expressed herein,
for the benefit of persons controlling any of the Underwriters, or the Company,
and directors and officers of the Company, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include
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any purchaser of Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the Representative, to Gruntal & Co., Incorporated, 14
Wall Street, New York, NY 10005, Attention: Syndicate Department, or, (b) if to
the Company, to its agent for service as such agent's address appears on the
cover page of the Registration Statement.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
This Agreement (including the Schedules and Exhibits hereto)
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and supersedes all other agreements relating
to the subject matter hereof.
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This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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Please confirm that the foregoing correctly sets forth the
agreement among us.
Very truly yours,
ILLINOIS SUPERCONDUCTOR CORPORATION
By:___________________________________________
Ora E. Smith, President and Chief Executive
Officer
Confirmed:
GRUNTAL & CO., INCORPORATED
Acting on behalf on itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By: GRUNTAL & CO., INCORPORATED
By: ______________________________________
Title
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SCHEDULE I
Name Number of Firm Shares to be
Purchased
Gruntal & Co., Incorporated
----------------------
Total 1,000,000