2,000,000 Shares of Common Stock
CELERITY SYSTEMS, INC.
UNDERWRITING AGREEMENT
, 1997
Hampshire Securities Corporation
640 Fifth Avenue, 4th Floor
New York, New York 10019
Gentlemen:
The undersigned, Celerity Systems, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
confirms its agreement with Hampshire Securities Corporation (the
"Underwriter"), as follows:
1. Introduction.
(a) The Company proposes to issue and sell to the Underwriter an
aggregate of 2,000,000 shares of common stock, par value $0.001 per share, of
the Company (the "Common Stock"). Such 2,000,000 shares of Common Stock are
hereinafter referred to as the "Firm Stock."
(b) Solely for the purpose of covering over-allotments, if any, the
Company proposes to grant to the Underwriter an option (the "Over-allotment
Option") to purchase 300,000 shares of Common Stock. Such shares of Common Stock
are hereinafter referred to as the "Additional Stock." The Firm Stock and the
Additional Stock are hereinafter referred to collectively as the "Stock."
(c) The Company proposes to sell to the Underwriter 200,000 warrants
(the "Underwriter's Warrants") to purchase up to an aggregate of 200,000 shares
of Common Stock (the "Warrant Shares") for a purchase price of $0.001 per
warrant, or an aggregate purchase price of $200.00. The Underwriter's Warrants
will have an exercise price per share equal to 165% of the public offering price
per share. The Underwriter's Warrants shall be substantially in the form last
filed with the National
Association of Securities Dealers, Inc. ("NASD"). The Underwriter's Warrants and
the Warrant Shares are hereinafter referred to collectively as the
"Underwriter's Securities." The Stock and the Underwriter's Securities are
hereinafter referred to collectively as the "Securities."
2. Representations and Warranties.
The Company, represents and warrants to, and agrees with, the
Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have filed one
or more amendments thereto, on Form SB-2 (Registration No. 333-33509), including
in such registration statement and each such amendment a related preliminary
prospectus, for the registration of the Stock under the Securities Act of 1933,
as amended (the "Securities Act"). As used in this Agreement, the term
"Registration Statement" shall refer to such registration statement referred to
in the first sentence of this Section 2(a), as amended, on file with the
Commission at the time such registration statement is declared by the Commission
to be effective under the Securities Act (including the prospectus, financial
statements, and exhibits filed as a part thereof, provided, however, that such
registration statement, at the time it is declared by the Commission to be
effective under the Securities Act, may omit such information as is permitted to
be omitted from such registration statement when it becomes effective under the
Securities Act pursuant to Rule 430A of the General Rules and Regulations of the
Commission under the Securities Act (the "Regulations"), which information (the
"Rule 430A Information") shall be deemed to be included in such registration
statement when a final prospectus is filed with the Commission in accordance
with Rules 430A and 424(b)(1) or (4) of the Regulations); the term "Preliminary
Prospectus" shall refer to each prospectus included in the Registration
Statement, or any amendments thereto, before the Registration Statement is
declared by the Commission to be effective under the Securities Act, the form of
prospectus omitting Rule 430A Information included in the Registration Statement
when the Registration Statement becomes effective under the Securities Act, if
applicable (the "Rule 430A Prospectus"), and any prospectus filed by the Company
with the consent of the Underwriter pursuant to Rule 424(a) of the Regulations,
and the term "Prospectus" shall refer to (x) if the Company relies on Rule 434
of the Regulations, the Term Sheet (as defined below) relating to the Stock that
is first filed pursuant to Rule 424(b)(7) of the Regulations, together with the
Preliminary Prospectus identified therein that the Term Sheet supplements, or
(y) if the Company does not rely on Rule 434 of the Regulations, the final
prospectus forming a part of the Registration Statement in the form first filed
with the Commission pursuant to Rule 424(b)(1) or (4) of the Regulations or, if
no such filing is required, the form of final prospectus forming a part of the
Registration Statement. "Term Sheet" shall mean any term sheet thereof satisfies
the requirements of Rule 434 of the Regulations. The date on which the
Registration Statement is declared effective by the Commission is referred to as
the "Effective Date." For purposes of this Agreement, all references to the
Registration Statement, Prospectus, Preliminary Prospectus or Term Sheet or to
any
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amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval system ("EDGAR").
(b) When the Registration Statement becomes effective under the
Securities Act, and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 3(a)) and each Additional Closing Date (as
defined in Section 3(b)), and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriter or a
dealer, and during such longer period until any post-effective amendment thereto
shall become effective under the Securities Act, the Registration Statement (and
any post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement to the Registration Statement or the Prospectus) will contain all
statements which are required to be stated therein in accordance with the
Securities Act and the Regulations, will comply with the Securities Act and the
Regulations in all material respects, and will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which such statements were made, not misleading, and no
event will have occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has not then
been set forth in such an amendment or supplement; if a Rule 430A Prospectus is
included in the Registration Statement at the time it is declared by the
Commission to be effective under the Securities Act, the Prospectus filed
pursuant to Rules 430A and 424(b)(1) or (4) of the Regulations will contain all
Rule 430A Information and all statements which are required to be stated therein
in accordance with the Securities Act or the Regulations, will comply with the
Securities Act and the Regulations in all material respects, and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and each Preliminary Prospectus, as of the date filed with the Commission,
contained all statements required to be stated therein, in the light of the
circumstances under which such statements were made, in accordance with the
Securities Act and the Regulations, complied with the Securities Act and the
Regulations in all material respects, 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 to make the statements therein, in the light of the
circumstances under which such statements were made, not misleading, except that
no representation or warranty is made in this Section 2(b) with respect to
statements or omissions made in reliance upon, and in conformity with, written
information furnished to the Company as stated in Section 8(b) with respect to
the Underwriter by, or on behalf of, the Underwriter expressly for inclusion in
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto. Each Preliminary Prospectus and the
Prospectus delivered to the Underwriter for use in connection with the offering
of the Stock will, at the time of delivery, be identical to the electronically
transmitted copies thereof filed
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with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T under the Securities Act.
(c) Neither the Commission nor the "blue sky" or securities
authority of any jurisdiction has issued an order (a "Stop Order") suspending
the effectiveness of or preventing or suspending the use of, the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, refusing to permit the effectiveness of the Registration
Statement, or suspending the registration, qualification or exemption of the
Securities nor has any of such authorities instituted or to the best knowledge
of the Company threatened to institute any proceedings with respect to a Stop
Order.
(d) Any contract, agreement, instrument, lease, or license required
to be described in the Registration Statement or the Prospectus has been
described therein. Any contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration Statement has been filed
with the Commission as an exhibit to the Registration Statement.
(e) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware, with full power and authority, and all
necessary consents, authorizations, approvals, orders, licenses, certificates
and permits of and from, and declarations and filings with, all federal, state,
local and other governmental authorities and all courts and other tribunals, to
own, lease, license, and use its properties and assets and to conduct its
business in the manner described in the Registration Statement and the
Prospectus, except where the failure to obtain such consents, authorizations,
approvals, orders, licenses, certificates and permits would not, individually or
in the aggregate, have a material adverse effect on the business, assets,
results of operations or financial condition of the Company (a "Material Adverse
Effect"). The Company is duly qualified to do business as a foreign corporation
and is in good standing as such in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct of its business
makes such qualification necessary, except where the failure to so qualify will
not have a Material Adverse Effect. A complete and correct copy of the
Certificate of Incorporation and By-Laws of the Company, as currently in effect,
have been delivered to you, and no changes therein will be made subsequent to
the date hereof and prior to the Closing Date.
(f) The Company has no subsidiaries (as defined in the Regulations).
(g) The authorized capital stock of the Company consists of
15,000,000 shares of Common Stock, of which 2,082,239 shares of Common Stock are
issued and outstanding, and 3,000,000 shares of Preferred Stock, par value $0.01
per share, no shares of which are outstanding. Each outstanding share of Common
Stock is validly authorized and issued, fully paid, and nonassessable, without
any personal liability attaching to the ownership thereof, and has not been
issued and is not owned or held in violation of any preemptive or similar rights
of shareholders. There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or
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other right calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of capital stock of the
Company, except as may be properly described in the Prospectus. There is
outstanding no security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, capital stock of the Company, except
as may be properly described in the Prospectus. The certificates evidencing the
shares of Common Stock are in due and proper form.
(h) The financial statements of the Company included in the
Registration Statement and the Prospectus fairly present, with respect to the
Company, the financial position, the results of operations, the cash flows, and
the other information purported to be shown therein 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
consistently applied throughout the periods involved, and are in accordance with
the books and records of the Company. Coopers & Lybrand L.L.P., the accountants
whose report on the audited financial statements is filed with the Commission as
a part of the Registration Statement, are, and during the periods covered by its
report included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the Regulations. The selected and summary
financial information included in the Registration Statement and the Prospectus
present fairly the information shown therein and have been compiled on a basis
substantially consistent with the financial statements presented therein. No
other financial statements are required by Form SB-2 or otherwise to be included
in the Registration Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the Company
from the latest information set forth in the Registration Statement or the
Prospectus, except as may be described in the Prospectus.
(i) The Company has a duly authorized and outstanding capitalization
as disclosed in the Prospectus under "Capitalization" and will have the adjusted
capitalization set forth therein at the Closing Date (based on the assumptions
set forth therein). The financial information and data set forth in the
Prospectus under "Prospectus Summary," "Risk Factors," "Use of Proceeds,"
"Dilution," "Capitalization," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business," and "Management," are fairly presented and prepared on a basis
consistent with the audited financial statements of the Company.
(j) There is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, or, to the best
knowledge of the Company, threatened with respect to the Company or any of its
operations, businesses, properties, or assets, except as may be described in the
Prospectus or such as individually or in the aggregate do not now have, and will
not in the future have, a Material Adverse Effect. The Company is not in
violation of, or in default with respect
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to, any law, rule, regulation, order, judgment, or decree, except as may be
described in the Prospectus or such as in the aggregate do not now have, and
will not in the future have, a Material Adverse Effect nor is the Company
currently required to take any action in order to avoid any such violation or
default.
(k) The Company has good and marketable title to all properties and
assets which the Prospectus indicates are owned by it, free and clear of all
liens, security interests, pledges, charges, encumbrances, and mortgages
(collectively "Liens"), except as may be described in the Prospectus. The
Company does not own any real property. No real property, leased, licensed, or
used by the Company lies in an area which is, or to the knowledge of the Company
will be, subject to zoning, use, or building code restrictions which would
prohibit the present or contemplated use thereof in a material respect, and, no
state of facts relating to the actions or inaction of another person or entity
or his or its ownership, leasing, licensing, or use of any real or personal
property exists or will exist which would prevent, the continued effective,
leasing, licensing, or use of such real property in any material respect in the
business of the Company as presently conducted or as the Prospectus indicates it
contemplates conducting, except as may be described in the Prospectus.
(l) Except as described in the Prospectus, neither the Company, nor
to the knowledge of the Company, any other party is now, or is expected by the
Company to be, in violation or breach of, or in default with respect to, any
provision of any contract, agreement, instrument, lease, license, arrangement,
or understanding to which the Company is a party, and each such contract,
agreement, instrument, lease, license, arrangement, and understanding is in full
force and effect and, to the knowledge of the Company, is the legal, valid, and
binding obligation of the parties thereto and is enforceable as to them in
accordance with its respective terms, except in each case, that which would not
have a Material Adverse Effect. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating, except
where the failure of such possession would not have a Material Adverse Effect.
The Company is not in violation or breach of, or in default with respect to, any
term of its Certificate of Incorporation and By-Laws.
(m) The Company owns or possesses adequate licenses or other rights
to use, free and clear of all liens, charges, claims, encumbrances and
restrictions of any kind whatsoever, all patents, patent rights, inventions,
trade secrets, technology, licenses, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names, and copyrights
described or referred to in the Prospectus as owned or used by it or which are
necessary for the conduct of its business as currently conducted as described in
the Prospectus. The Company does not own any patent or patent rights. To the
best knowledge of the Company, all such patents, patent rights, licenses,
trademarks, service marks, and copyrights are valid and enforceable, are not
being infringed by any third parties which infringement could, singly or in the
aggregate, have a Material Adverse Effect, and are uncontested by any third
party. Except as disclosed in the Registration Statement and the Prospectus, the
Company is not obligated or under any liability whatsoever to make any payments
by
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way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, tradename, copyright, trade
secret, know-how, technology or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise. The
Company has no knowledge of, nor has it received any notice of, infringement of,
or conflict with, asserted rights of others with respect to any patents, patent
rights, inventions, trade secrets, licenses, know-how, proprietary techniques,
including processes and substances, trademarks, service marks, trade names, or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling, or finding could have a Material Adverse Effect.
(n) The Company owns and has the right to use all trade secrets,
know-how (including all other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), inventions, designs,
processes, works of authorship, computer programs and technical data and
information that are material to its business, properties and operations as
currently conducted.
(o) Neither the Company, nor, to the best knowledge of the Company,
any director, officer, agent, employee, or other person associated with, or
acting on behalf of, the Company has, directly or indirectly used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, violated any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) The Company has all requisite power and authority to execute,
deliver, and perform this Agreement and the Underwriter's Warrants. All
necessary corporate proceedings of the Company have been duly taken to authorize
the execution, delivery and performance by the Company of this Agreement and the
Underwriter's Warrants. This Agreement has been duly authorized, executed, and
delivered by the Company and is the legal, valid, and binding obligation of the
Company, and is enforceable as to the Company in accordance with its terms. The
Underwriter's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Company for the execution, delivery, or performance by the
Company of this Agreement or the Underwriter's Warrants, except filings under
the Securities Act which have been or will be made before the Closing Date, and
except as may be required by the NASD or under "blue sky" or securities laws,
which have been obtained at or prior to the date of this Agreement. No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the
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Company is a party, or to which any of its properties or assets are subject, is
required for the execution, delivery, or performance of this Agreement and the
Underwriter's Warrants, and the execution, delivery, and performance of this
Agreement and the Underwriter's Warrants will not violate, result in a breach
of, conflict with, result in the creation or imposition of any lien, charge, or
encumbrance upon any properties or assets of the Company pursuant to the terms
of, or, with or without the giving of notice or the passage of time or both,
entitle any party to terminate or call a default under, any such contract,
agreement, instrument, lease, license, arrangement, or understanding, or
violate, result in a breach of, or conflict with any term of the Certificate of
Incorporation and By-Laws of the Company or violate, result in a breach of, or
conflict with, any law, rule, regulation, order, judgment, or decree binding on
the Company or to which any of its operations, businesses, properties, or assets
are subject.
(q) The Stock is validly authorized and, when issued and delivered
in accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders, and the Underwriter will receive good title to the Stock
purchased by it, free and clear of all liens, security interests, pledges,
charges or encumbrances, stockholders' agreements, and voting trusts. The Stock
conforms to all statements relating thereto contained in the Registration
Statement and the Prospectus.
(r) The Warrant Shares are validly authorized and have been duly and
validly reserved for issuance and, when issued and delivered upon exercise of
the Underwriter's Warrants in accordance with the terms thereof, will be validly
issued, fully paid, and nonassessable, without any personal liability attaching
to the ownership thereof, and will not be issued in violation of any preemptive
or similar rights of stockholders, and the holders of the Underwriter's Warrants
will receive good title to the securities purchased by them upon the exercise of
the Underwriter's Warrants, free and clear of all liens, security interests,
pledges, charges or encumbrances, stockholders' agreements and voting trusts.
The Underwriter's Securities conform in all material respects to all statements
relating thereto contained in the Registration Statement and the Prospectus.
(s) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as may
otherwise be described in the Registration Statement or Prospectus, the Company
has not (i) issued any securities or incurred any liability or obligation,
primary or contingent, for borrowed money, (ii) entered into any material
transaction not in the ordinary course of business, (iii) declared or paid any
dividend on its shares of Common Stock, or (iv) experienced any changes or any
development which could reasonably be expected to have a Material Adverse
Effect.
(t) Neither the Company, nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the termination of the offering contemplated by this
Agreement, any action designed
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to stabilize or manipulate the price of any security of the Company, or which
has caused or resulted in, or which might in the future reasonably be expected
to cause or result in, stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the Stock.
(u) The Company has obtained from each of its directors, officers
(other than its Vice President of Operations) and stockholders designated by the
Underwriter a written agreement, in form and substance satisfactory to counsel
for the Underwriter, that, for a period of 18 months from the Effective Date he,
she, or it will not, without the prior written consent of the Underwriter offer,
pledge, sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any security
or other instrument which by its terms is convertible into, or exercisable or
exchangeable for, shares of Common Stock or other securities of the Company,
including, without limitation, any shares of Common Stock issuable pursuant to
the terms of any employee stock options, provided, however, that such persons
may offer, sell, contract to sell, grant an option for the sale of, or otherwise
dispose of all or any part of his, her, or its shares of Common Stock or other
such security or instrument of the Company during such period if such
transaction is private in nature and the transferee of such shares of Common
Stock or other securities or instruments agrees, prior to such transaction, to
be bound by all of the provisions of such agreement.
(v) The Company is not, and does not intend to conduct its business
in a manner in which it would be required to register as, an "investment
company" as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations promulgated thereunder.
(w) All issuances and sales of securities by the Company prior to
the date hereof were exempt from registration under the Securities Act and
complied in all respects with the provisions of all applicable federal and state
securities laws. No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement, which right has not been waived,
except as set forth in the Prospectus, and no holder of any security of the
Company has the right to demand registration of any security owned by such
holder during the period ending 18 months after the date of the Prospectus,
except as set forth in the Prospectus.
(x) Except as may be set forth in the Prospectus, the Company has
not incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(y) No officer, director, or to the knowledge of the Company, any
shareholder of the Company has any affiliation or association with the NASD or
any member thereof, except as disclosed in writing to the Underwriter.
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(z) The Company has filed all necessary federal, state, local, and
municipal, and all foreign income and franchise tax returns and other reports
required to be filed and has paid all taxes shown as due thereon and all
assessments received by it to the extent that the same have become due. The
provisions for income taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement and the Prospectus are
sufficient for all accrued and unpaid foreign and domestic taxes, whether or not
disputed, and for all periods to and including the dates of such financial
statements, and there is no material tax deficiency which has been, or, to the
knowledge of the Company, might be, asserted against the Company. Except as
disclosed in writing to the Underwriter, or set forth in the Registration
Statement and the Prospectus, the Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the period for
assessment or collection of any income taxes and the Company is not a party to
any pending action or proceeding by any foreign or domestic governmental agency
for assessment or collection of taxes, and no claims for assessment or
collection of overdue taxes have been asserted against the Company.
(aa) To the best knowledge of the Company, none of the activities or
business of the Company is in violation of, or will cause the Company to
violate, any law, rule, regulation, or order of the United States, or any
country, municipality or locality, or of any agency or body of the United States
or of any state, municipality or locality thereof, the violation of which would
have a Material Adverse Effect.
(ab) The Common Stock has been approved for quotation on the Nasdaq
Smallcap Market subject to official notice of issuance.
(ac) The Company maintains insurance covering its properties,
operations, personnel and businesses. The Company has not been refused any
casualty insurance coverage sought or applied for; 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. All such insurance is outstanding and duly in
force on the date hereof.
(ad) The Company is in compliance with all applicable laws or
regulations relating to pollution or protection of human health or the
environment ("Environmental Laws") in the states and countries in which it has
facilities or operates, except where the failure to be in compliance would not
have a Material Adverse Effect. The Company has not authorized, conducted or has
knowledge of the generation, transportation, storage, use, treatment, disposal
or release of any hazardous substance, hazardous waste, hazardous material,
hazardous constituent, toxic substance, pollutant, contaminant, petroleum
product, natural gas, liquified gas or synthetic gas, defined or regulated under
any Environmental Law on, in or under any property currently leased or by any
means controlled by the Company (the "Real Property") in violation of any
applicable law, except for any violation which would not have a Material Adverse
Effect; there is no pending or, to the Company's knowledge, threatened claim,
action, litigation
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or any administrative agency proceeding involving the Company or any of its
properties, nor has the Company received any written notice, or any oral notice
to any executive officer of the Company or any other employee responsible for
receipt of any such notice, from any governmental entity or third party, that
(A) alleges a violation of any Environmental Laws by the Company or any person
or entity whose liability for a violation of an Environmental Law the Company
has retained or assumed either contractually or by operation of law, which
liability or violation could be reasonably expected to have a Material Adverse
Effect, (B) alleges the Company is a liable party under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et
seq., or any state superfund law, (C) alleges possible contamination of the
environment by the Company or (D) alleges possible contamination of the Real
Property.
(ae) 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.
(af) The Company is not involved in any labor dispute and, to the
knowledge of the Company, no such dispute is threatened.
(ag) The Company is not presently doing business with the government
of Cuba or with any person or affiliate located in Cuba. If, at any time after
the date on which the Registration Statement is declared by the Commission to be
effective under the Securities Act or with the Florida Department of Banking and
Finance (the "Florida Department"), whichever is later, and prior to the end of
the period referred to in the first clause of Section 2(b) hereof, the Company
commences engaging in business with the government of Cuba or with any person or
affiliate located in Cuba, the Company will so inform the Florida Department
within 90 days after such commencement of business in Cuba, and, during the
period referred to in Section 2(b) hereof, will inform the Florida Department
within 90 days after any change occurs with respect to previously reported
information.
3. Purchase, Sale, and Delivery of the Stock and the
Underwriter's Warrants.
(a) On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, the Firm
Stock.
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The purchase price per share of the Firm Stock to be paid by the
Underwriter shall be $______. The initial public offering price per share of the
Firm Stock shall be $______.
Payment for the Firm Stock by the Underwriter shall be made by
certified or official bank check or wire transfer and payable in immediately
available funds payable to the order of the Company, at the offices of Hampshire
Securities Corporation, 640 Fifth Avenue, 4th Floor, New York, New York 10019,
or at such other place in the New York City metropolitan area as the Underwriter
shall determine and advise the Company by at least two full days' notice in
writing, upon delivery of the Firm Stock to the Underwriter for its account.
Such delivery and payment shall be made at 10:00 a.m., New York City local time,
on the third or fourth business day (as permitted under Rule 15c6-1 under the
Securities Exchange Act of 1934, as amended) following the time of the initial
public offering, as defined in Section 11(a) hereof, or at such other time as
shall be agreed upon between the Underwriter and the Company. The time and date
of such delivery and payment are hereinafter referred to as the "Closing Date."
Certificates representing the Firm Stock shall be registered in such
name or names and in such authorized denominations as the Underwriter may
request in writing at least two full business days prior to the Closing Date.
The Company shall permit the Underwriter to examine and package such
certificates for delivery at least one full business day prior to the Closing
Date.
(b) The Company hereby grants to the Underwriter an Over-allotment
Option to purchase up to 300,000 shares of Common Stock, as may be necessary to
cover over-allotments, at the same purchase price per share to be paid by the
Underwriter to the Company for the Firm Stock as provided for in this Section 3.
The Over-allotment Option may be exercised only to cover over-allotments in the
sale of Stock by the Underwriter. The Over-allotment Option may be exercised by
the Underwriter on the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, at any time and from time to time on or before the
45th day following the Effective Date by written notice by the Underwriter to
the Company. Such notice shall set forth the aggregate number of shares of
Additional Stock as to which the Over-allotment Option is being exercised, the
name or names in which the certificates representing the Additional Stock are to
be registered, the authorized denominations in which the Additional Stock are to
be registered, and the time and date, as determined by the Underwriter, when
such shares of Additional Stock are to be delivered (each such time and date are
hereinafter referred to as an "Additional Closing Date"), provided, however,
that no Additional Closing Date shall be earlier than the Closing Date nor
earlier than the second business day after the date on which the notice of the
exercise of the Over-allotment Option shall have been given nor later than the
eighth business day after the date on which such notice shall have been given.
-12-
In the event that the Company declares or pays a dividend or a
distribution on the shares of Common Stock, whether in the form of cash, shares
of Common Stock or other consideration, prior to the Additional Closing Date,
such dividend or distribution shall also be paid on the Additional Stock on the
later of the Additional Closing Date and the date on which such dividend or
distribution is payable.
Payment for the Additional Stock by the Underwriter shall be made by
certified or official bank check or wire transfer and payable in immediately
available funds, payable to the order of the Company at the offices of Hampshire
Securities Corporation, 640 Fifth Avenue, 4th Floor, New York, New York 10019,
or at such other place in the New York City metropolitan area as the Underwriter
shall determine and advise the Company by at least two full days' notice in
writing, upon delivery of the Additional Stock to the Underwriter.
Certificates for the Additional Stock shall be registered in such
name or names and in such authorized denominations as the Underwriter may
request in writing at least two full business days prior to the Additional
Closing Date with respect thereto. The Company shall permit the Underwriter to
examine and package such certificates for delivery at least one full business
day prior to the Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to the Underwriter
and/or its designees on the Closing Date the Underwriter's Warrants to purchase
the Warrant Shares for an aggregate purchase price for the Underwriter's
Warrants equal to $200.00.
Delivery and payment for the Underwriter's Warrants shall be made on
the Closing Date. The Company shall deliver to the Underwriter, upon payment
therefor, certificates representing the Underwriter's Warrants in the name or
names and in such authorized denominations as the Underwriter may request. The
Underwriter's Warrants shall be exercisable for a period of four years
commencing one year from the date on which the Registration Statement was
declared effective under the Securities Act at an initial exercise price per
Warrant Share equal to $____.
4. Offering. The Underwriter is to make a public offering of the
Firm Stock as soon, on or after the date on which the Registration Statement
becomes effective under the Securities Act, as the Underwriter deems it
advisable so to do. The Firm Stock is to be initially offered to the public at
the initial public offering price as provided for in Section 3(a) (such price
being hereinafter referred to as the "public offering price"). After the initial
public offering, the Underwriter may from time to time increase or decrease the
public offering price, in the sole discretion of the Underwriter, by reason of
changes in general market conditions or otherwise.
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5. Covenants. The Company covenants with the Underwriter that it
will:
(a) Use its best efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as possible, and notify
the Underwriter and counsel to the Underwriter immediately, and confirm such
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto, (ii) of the receipt by the Company of any comments from the
Commission or the "blue sky" or securities authority of any jurisdiction
regarding the Registration Statement, any post-effective amendment thereto, the
Prospectus, or any amendment or supplement thereto, (iii) of the filing with the
Commission of any supplement to the Prospectus, and (iv) of the receipt by the
Company of any notification with respect to a Stop Order by the Commission. The
Company will use its best efforts to prevent the issuance of any Stop Order and,
if any Stop Order is issued, to obtain the lifting thereof as promptly as
possible. If the Registration Statement has become or becomes effective under
the Securities Act with a form of prospectus omitting Rule 430A information, or
filing of the Prospectus with the Commission is otherwise required under Rule
424(b) of the Regulations, the Company will file with the Commission the
Prospectus, properly completed, pursuant to Rule 424(b) of the Regulations
within the time period prescribed and will provide evidence satisfactory to the
Underwriter of such timely filing.
(b) During the time when a prospectus relating to the Firm Stock or
the Additional Stock is required to be delivered hereunder or under the
Securities Act or the Regulations, comply with all requirements imposed upon it
by the Securities Act, as now existing and as hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Firm Stock and the Additional Stock
in accordance with the provisions hereof and the Prospectus. If, at any time
when a prospectus relating to the Firm Stock or the Additional Stock is required
to be delivered hereunder or under the Securities Act or the Regulations, any
event shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or of counsel for the Underwriter, the Registration
Statement or the Prospectus as then amended or supplemented contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or
if, in the opinion of either of such counsel, it is necessary at any time to
amend or supplement the Registration Statement or the Prospectus to comply with
the Securities Act or the Regulations, the Company will immediately notify the
Underwriter and promptly prepare and file with the Commission an appropriate
amendment or supplement (in form and substance reasonably satisfactory to the
Underwriter and counsel to the Underwriter) which will correct such statement or
omission or which will effect such compliance and will use its best efforts to
have any such amendment declared effective under the Securities Act as soon as
possible. The Company will not file any amendment of or supplement to the
Registration Statement or Prospectus which is not approved by the Underwriter
after reasonable notice from the Company to the Underwriter, which approval
shall not be unreasonably withheld or delayed.
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(c) Deliver without charge to the Underwriter such number of copies
of each Preliminary Prospectus as may reasonably be requested by such
Underwriter and, as soon as the Registration Statement, or any amendment
thereto, becomes effective under the Securities Act or a supplement is filed
with the Commission, deliver without charge to the Underwriter one signed copy
of the Registration Statement, including exhibits, or such amendment thereto, as
the case may be, and two copies of any supplement thereto, and deliver without
charge to the Underwriter such number of copies of the Prospectus, the
Registration Statement, and amendments and supplements thereto, if any, without
exhibits, as the Underwriter may request for the purposes contemplated by the
Securities Act.
(d) Endeavor in good faith, in cooperation with the Underwriter, at
or prior to the time the Registration Statement becomes effective under the
Securities Act, to qualify the Stock for offering and sale under the "blue sky"
or securities laws of such jurisdictions as may be designated by the
Underwriter, provided, however, that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction to which it is not then subject or which would
require shares of Common Stock owned by any shareholder of the Company to be
escrowed or locked-up, except as agreed in advance by the Company, the
Underwriter and each such shareholder. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriter agrees
in writing that such action is not at the time necessary or advisable, file and
make such statements or reports at such times as are or may be required by the
laws of such jurisdiction.
(e) Make generally available, within the meaning of Section 11(a) of
the Securities Act and the Regulations, to its security holders 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 certified by
independent certified public accountants unless required by the Securities Act
or the Regulations, but which shall satisfy the provisions of Section 11(a) of
the Securities Act and the Regulations, covering a period of at least 12 months
beginning after the date on which the Registration Statement was declared
effective under the Securities Act. The Company will furnish to its stockholders
a copy of its annual reports containing financial statements audited by the
Company's independent accountants and quarterly reports containing unaudited
financial information for the first three quarters of each year.
(f) For a period of 18 months after the date of the Prospectus, not,
without the prior written consent of the Underwriter, offer, issue, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or other securities of the
Company, or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, shares of Common Stock, except as
contemplated by Section 3 hereof and except for (i) the issuance of stock
options, or shares of Common Stock issuable upon the exercise
-15-
thereof, which have been or may be granted pursuant to the Company's existing
stock option plans, up to an aggregate of 378,929 shares of Common Stock, as
described in the Prospectus, (ii) upon the exercise of warrants and options
outstanding on the date hereof, as described in the Prospectus, (iii) the
issuance of the Warrant Shares upon exercise of the Underwriter's Warrants, and
(iv) a private transaction in which the transferee prior to the transfer agrees
to be bound by all the provisions of such agreement.
(g) For a period of five years after Effective Date furnish the
Underwriter without charge, the following:
(i) within 90 days after the end of each fiscal year, one copy
of financial statements certified by independent certified public accountants,
including a balance sheet, statement of income, and statement of changes in cash
flows of the Company and its then existing subsidiaries, if any, with supporting
schedules, prepared in accordance with generally accepted accounting principles
as at the end of such fiscal year and for the 12 months then ended, which may be
on a consolidated basis;
(ii) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the Commission or
the NASD, one copy of each annual and interim financial and other report or
communication sent by the Company to its stockholders or filed with, or
furnished to, the Commission or the NASD;
(iii) upon request, as soon as practicable, one copy of every
press release and every material news item and article in respect of the
Company, including any subsidiary, or its affairs which was released by the
Company; and
(iv) such additional documents and information with respect to
the Company, and its affairs, as the Underwriter may from time to time
reasonably request, provided, however, that such additional documents and
information shall be received by the Underwriter on a confidential basis, unless
otherwise disclosed to the public, and shall not be used in violation of the
laws of the federal securities laws and the rules and regulations promulgated
thereunder.
(h) Apply the net proceeds received by the Company from the offering
contemplated by this Agreement in the manner set forth under the heading "Use of
Proceeds" in the Prospectus.
(i) Furnish to the Underwriter as early as practicable prior to the
Closing Date and each Additional Closing Date, if any, as the case may be, but
not less than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have been
read by the Company's independent certified public accountants, as stated in
their letters to be furnished pursuant to Section 7(f) hereof.
-16-
(j) File no amendment or supplement to the Registration Statement or
Prospectus at any time, whether before or after the date on which the
Registration Statement was declared effective under the Securities Act, unless
such filing shall comply with the Securities Act and the Regulations, and unless
the Underwriter shall previously have been advised of such filing and furnished
with a copy thereof, and the Underwriter shall have approved such filing in
writing, such approval not to be unreasonably withheld. Until the later of (i)
the completion by the Underwriter of the distribution of the Stock (but in no
event more than nine months after the date on which the Registration Statement
shall have been declared effective under the Securities Act) and (ii) 25 days
after the date on which the Registration Statement shall have been declared
effective under the Securities Act, the Company will prepare and file with the
Commission, promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or the Prospectus which, in the
Underwriter's reasonable opinion and the reasonable opinion of its counsel, may
be necessary or advisable in connection with the distribution of the Stock.
(k) File timely with the Commission an appropriate form with respect
to the registration of the shares of Common Stock pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") to become
effective under the Exchange Act concurrently with the effectiveness of the
Registration Statement under the Securities Act and comply with all
registration, filing, and reporting requirements of the Exchange Act, which may
from time to time be applicable to the Company.
(l) Comply with all provisions of all undertakings contained in the
Registration Statement.
(m) Prior to the later of 25 days after the Effective Date or any
Additional Closing Date, as the case may be, issue no press release or, subject
to Sections 5(b) and (j) hereof, any other communication directed to the general
public or the stockholders of the Company as a whole, directly or indirectly,
and hold no press conference with respect to the Company, the financial
condition, results of operations, business, properties, assets, liabilities or
future prospects of the Company or this offering, without the prior written
consent of the Underwriter, which consent shall not be unreasonably withheld.
(n) Make all filings required to maintain the inclusion of the
Company Stock on the Nasdaq Smallcap Market (or the Nasdaq National Market, as
the case may be) for at least five years from the date of this Agreement.
(o) On the Closing Date, sell to the Underwriter, the Underwriter's
Warrants at an aggregate purchase price of $200.00, which Underwriter's Warrants
shall be substantially in the form last filed with the NASD.
-17-
(p) Until expiration of the Underwriter's Warrants, keep reserved
sufficient shares of Common Stock for issuance upon exercise of the
Underwriter's Warrants.
(q) Deliver to the Underwriter, without charge, within a reasonable
period after the last Additional Closing Date or the expiration of the period
during which the Underwriter may exercise the Over-allotment Option, a total of
five sets of bound volumes of the Registration Statement and all related
materials to the individuals designated by the Underwriter or counsel to the
Underwriter.
(r) For a period of three years from the Effective Date, provide, at
its sole expense, to the Underwriter copies of the Company's daily transfer
sheets, if so requested by the Underwriter.
(s) For a period of three years from the Effective Date, the Company
shall use its best efforts to cause two persons to be elected to the Company's
Board of Directors who are deemed to be independent of the Company's management
within the meaning of the rules of the Nasdaq Smallcap Market.
(t) For a period of three years from the Effective Date, the
Underwriter shall have the right to appoint a designee as an observer of the
Company's Board of Directors. Such observer will have the right to attend all
meetings of the Board of Directors. Such observer shall be entitled to receive
reimbursement for all out-of-pocket expenses incurred in attending such
meetings, including, but not limited to, food, lodging and economy
transportation. The Underwriter shall be given notice of such meetings at the
same time and in the same manner as directors of the Company are informed. To
the extent permitted by law, the Underwriter and such observer shall be
indemnified to the same extent as the independent directors of the Company. The
Company will use its best efforts to purchase directors and officers insurance
in an amount of not less than $2,000,000; provided, however, that the Company
shall not be required to pay more than $50,000 per year in order to maintain
such insurance, and if insurance in such amount is not available at such cost,
the Company shall purchase that amount of such insurance which is available at a
cost of $50,000 per year.
(u) Maintain key-person life insurance payable to the Company on the
life of Kenneth D. Van Meter, President and Chief Executive Officer of the
Company, and Glenn West, Executive Vice President and Chief Technical Officer of
the Company, each in the amount of at least $1,000,000, for a period of time
equal to three years from the Effective Date, or such shorter time if the
employment agreements between the Company and such officers are no longer in
effect.
(v) Cause stockholders owning at least five percent (5%) of the
Company's outstanding shares of Common Stock as of the date hereof, and use its
best efforts to cause stockholders owning at least five percent (5%) of the
Company's outstanding shares of Common Stock immediately following the Closing
Date, to grant to the Underwriter a preferential right for a period of eighteen
months following the
-18-
Effective Date to sell for the account of such holder any securities sold
pursuant to Rule 144 under the Securities Act. Each of such holders shall agree
to consult with the Underwriter with regard to any such sale and will offer the
Underwriter the exclusive opportunity to sell such securities on terms at least
as favorable to such holder as such holder can secure elsewhere. If the
Underwriter fails to accept in writing any such proposal for sale by such holder
within five (5) business days after receipt of a notice containing such
proposal, then the Underwriter shall have no claim or right with respect to any
such sales contained in such notice. If, thereafter, such proposal is modified
in any material respect, such holders shall adopt the same procedure as with
respect to the original proposal.
(w) Until the expiration of three years from the Effective Date, the
Company will not effect a change in the independent certified public accountants
for the Company unless either the Company has received the Underwriter's prior
written consent or such substitute independent certified public accountant is
one of the "big six" firms.
6. Payment of Expenses. The Company hereby agrees to pay all
expenses (other than fees and disbursements of counsel for the Underwriter,
except as provided in subdivision (c) of this Section 6) in connection with (a)
the preparation and printing of the Registration Statement including all
amendments thereto, the Prospectus, this Agreement and related other
underwriting documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments or supplements
thereto supplied to the Underwriter in quantities as hereinabove stated, (b) the
issuance, sale, transfer, and delivery (as applicable) of the Securities,
including any transfer or other taxes payable thereon, (c) the qualification of
the Securities under state or foreign "blue sky" or securities laws, including
the costs of printing and mailing any preliminary and final "Blue Sky Survey"
and the fees and disbursements of counsel for the Underwriter in connection
therewith in the amount of up to $30,000 ($45,000 if Nasdaq National Market
listing is not obtained) plus disbursements in connection therewith, (d) the
filing fees payable to the NASD, and the jurisdictions in which such
qualification is sought, (e) any fees relating to the listing of the shares of
Common Stock on the Nasdaq Smallcap Market, (f) the cost of printing
certificates representing shares of Common Stock and the Underwriter's Warrants
(g) the fees of the transfer agent for the shares of Common Stock, (h) the cost
of publication of "tombstone" advertisements with respect to the offering, (i)
all expenses relating to the "roadshow" except the Underwriter' travel and
lodging, and (j) a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds of the sale of the Firm Stock and any Additional Stock
with respect to which the Over-allotment Option has been exercised to the
Underwriter on the Closing Date or the Additional Closing Date, as the case may
be. Notwithstanding the foregoing, if the offering contemplated hereby should be
terminated, the Company agrees to pay the Underwriter only the out-of-pocket
expenses incurred by the Underwriter in connection with the Agreement and the
proposed offer, sale, and delivery of Securities.
-19-
7. Conditions of Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Firm Stock and the Underwriter to
purchase and pay for the Additional Stock, as provided herein, and the
obligation of the Underwriter to purchase and pay for the Underwriter's
Warrants, each as provided herein, shall be subject, in the discretion of the
Underwriter's, to the continuing accuracy of the representations and warranties
of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to the Underwriter, as of the
date hereof and as of the Closing Date (or any Additional Closing Date, as the
case may be), to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become effective under the
Securities Act not later than 6:00 P.M., New York City local time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Underwriter, on or prior to the Closing Date, or any Additional
Closing Date, as the case may be, no Stop Order shall have been issued and no
proceeding shall have been initiated or threatened with respect to a Stop Order,
and any request by the Commission for additional information shall have been
complied with by the Company to the reasonable satisfaction of counsel for the
Underwriter. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Securities Act.
(b) At the Closing Date and any Additional Closing Date, as the case
may be, the Underwriter shall have received the opinion of Squadron, Ellenoff,
Plesent & Sheinfeld, LLP, counsel for the Company, dated the date of delivery,
addressed to the Underwriter, and in the form and scope satisfactory to counsel
for the Underwriter, with reproduced copies or signed counterparts thereof for
the Underwriter, to the effect that:
(i) the Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority, to own, lease, license,
and use its properties and assets and to conduct its business in the manner
described in the Prospectus. To our knowledge, the Company is duly qualified to
do business as a foreign corporation and is in good standing as such in every
United States jurisdiction in which its ownership, leasing, licensing, or use of
property and assets or the conduct of its business makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect;
(ii) the authorized capital stock of the Company consists of
(1) 15,000,000 shares of Common Stock, of which 2,082,239 shares are outstanding
and (ii) 3,000,000 shares of Preferred Stock, par value $.01 per share, none of
which is outstanding. Except as disclosed in the Prospectus, each outstanding
share of Common Stock is validly authorized and issued, fully paid, and
nonassessable and, has not been issued and, to our knowledge, is not owned or
held in violation of any preemptive or similar rights of stockholders. To the
knowledge of such counsel, there is no
-20-
commitment, plan, or arrangement to issue, and no outstanding option, warrant,
or other right calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, capital stock of the Company except as
may be described in the Prospectus. Except as described in the Prospectus, to
our knowledge there is outstanding no security or other instrument which by its
terms is convertible into, or exercisable or exchangeable for, capital stock of
the Company. The certificates evidencing the Common Stock are in due and proper
form under Delaware law and the By-laws of the Company;
(iii) to the knowledge of such counsel, there is no
litigation, arbitration, governmental or other proceeding pending or threatened,
with respect to the Company or any of its operations, businesses, properties, or
assets, which is required to be described in the Prospectus except as may be
described in the Prospectus. To the knowledge of such counsel, the Company is
not in violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as may be described in the Prospectus or such
as individually or in the aggregate do not now have and will not in the future
have a Material Adverse Effect; nor is the Company required to take any action
in order to avoid any such violation or default;
(iv) the Company is not in violation or breach of, or in
default with respect to, any term of its Certificate of Incorporation or
By-Laws;
(v) the Company has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and the Underwriter's
Warrants. All necessary corporate proceedings of the Company have been taken to
authorize the execution, delivery, and performance by the Company of this
Agreement and the Underwriter's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid, and
binding obligation of the Company, and, subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally, is enforceable as to the Company in accordance with its terms (except
to the extent rights to indemnity hereunder or thereunder may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or equitable principles).
The Underwriter's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Company for the execution, delivery, or performance by the
Company of this Agreement or the Underwriter's Warrants, except filings under
the Securities Act which have been made prior to the Closing Date or Additional
Closing Date, as the case may be, and except as may be required under "blue sky"
or securities laws or by the NASD as to which we express no opinion. No consent
of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding known to such counsel to which the Company is a
-21-
party, or to which any of its properties or assets are subject, is required for
the execution, delivery, or performance of this Agreement and the Underwriter's
Warrants; and the execution, delivery, and performance of this Agreement and the
Underwriter's Warrants will not violate, result in a breach of, conflict with,
result in the creation or imposition of any lien, charge, or encumbrance upon
any properties or assets of the Company pursuant to the terms of, or, with or
result in a breach of, or conflict with any law, rule, regulation, or any order,
judgment, or decree known to us binding on the Company to which any of its
operations, business, properties, or assets are subject;
(vi) each share of Firm Stock to be delivered on the Closing
Date is validly authorized and, when issued and delivered in accordance with the
terms hereof, will be validly issued, fully paid, and nonassessable, and will
not be issued in violation of any preemptive or similar rights of stockholders.
Each share of Additional Stock to be delivered on the Closing Date or any
Additional Closing Date, as applicable, is validly authorized and, when issued
and delivered in accordance with the terms hereof, will be validly issued, fully
paid, and nonassessable, and will not be issued in violation of any preemptive
or similar rights of stockholders. The Underwriter will receive good title to
the shares of Firm Stock and Additional Stock purchased by them, respectively,
free and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts. The Additional Stock has been duly
and validly reserved for issuance. The Stock conforms in all material respects
to all statements relating thereto contained in the Registration Statement or
the Prospectus under the caption "Description of Capital Stock";
(vii) the Warrant Shares are validly authorized and have been
duly and validly reserved for issuance pursuant to the terms of the
Underwriter's Warrants. The Underwriter's Warrants have been duly and validly
issued and delivered. The Warrant Shares, when issued and delivered in
accordance with the Underwriter's Warrants, will be validly issued, fully paid,
and nonassessable, and will not have been issued in violation of any preemptive
rights of stockholders. The Underwriter, and any other holders of the
Underwriter's Warrants, will receive good title to the securities purchased by
them upon exercise of the Underwriter's Warrants, free and clear of all liens,
security interests, pledges, charges, encumbrance, stockholders' agreements, and
voting trusts. The Underwriter's Securities conform in all material respects to
all statements relating thereto contained in the Registration Statement or the
Prospectus;
(viii) to the knowledge of such counsel, each contract,
agreement, instrument, lease, or license required to be described in the
Registration Statement or the Prospectus has been accurately described therein
in all material respects, and each contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to the Registration Statement;
(ix) insofar as statements in the Prospectus purport to
summarize the provisions of contracts, agreements, instruments, leases, licenses
or United States
-22-
law, such statements have been prepared or reviewed by such counsel and
accurately reflect the provisions purported to be summarized in all material
respects;
(x) the Company is not an "investment company" as defined in
the Investment Company Act and the rules and regulations thereunder and, if the
Company conducts its business as set forth in the Prospectus, will not become an
"investment company", and will not be required to be registered under the
Investment Company Act;
(xi) to the knowledge of such counsel, no person or entity has
the right to require registration of shares of Common Stock or other securities
of the Company because of the filing or effectiveness of the Registration
Statement, except by persons or entities which have waived such rights as
described in the Registration Statement and the Prospectus or who have been
furnished with a notice stating that such registration is not required as a
result of the determination by the Underwriter that the registration of the
shares would be materially adversely affected by such registration and that
therefore such registration is not required; and
(xii) the Registration Statement has become effective under
the Securities Act, the Prospectus has been filed in accordance with Rule 424(b)
of the Regulations, including the applicable time periods set forth therein, or
such filing is not required. To the knowledge of such counsel, no Stop Order has
been issued and no proceeding for that purpose has been instituted or
threatened.
In addition, such counsel shall state that in the course of
the preparation of the Registration Statement and Prospectus, such counsel have
participated in conferences with representatives of the Underwriter, officers
and representatives of the Company 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 that although such counsel have not verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, and
accordingly are not passing thereon, such counsel have no reason to believe that
(A) the Registration Statement (except as to financial statements and other
financial data and schedules which are or should be contained therein, as to
which such counsel need express no opinion) on the Effective Date, contained any
untrue statement of a material fact required to be stated therein, or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, not misleading, or (B) the Prospectus (except as to the
financial statements and other financial data and schedules which are or should
be contained therein, as to which such counsel need express no opinion), as of
its date or the date hereof, contained or contains any untrue statement of a
material fact or omitted or omits to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading or (C) the Registration Statement and the Prospectus
do not comply as to form in all material respects with the requirements of the
Securities Act and the applicable Regulations. There is no
-23-
assurance that all material facts were disclosed to such counsel or that such
counsel's familiarity with the Company is such that such counsel necessarily
recognized the materiality of such facts as were disclosed to such counsel, and
such counsel have relied to a large extent upon the statements of
representatives of the Company as to the materiality of the facts disclosed to
such counsel.
In rendering such opinion, counsel for the Company may rely
(A) as to matters involving the application of laws other than the laws of the
United States and the laws of the State of New York, to the extent counsel for
the Company deems proper and to the extent specified in such opinion, upon an
opinion or opinions (in form and substance reasonably satisfactory to counsel
for the Underwriter) of other counsel, reasonably acceptable to counsel for the
Underwriter, familiar with the applicable laws, in which case the opinion of
counsel for the Company shall state that reliance upon the opinion of such other
counsel by counsel for the Company and the Underwriter is reasonable; (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company; and (C) to the extent they deem proper, upon written
statements of certificates of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company; provided that copies of any such opinions, certificates, or
statements shall be annexed as exhibits to the opinion of counsel for the
Company.
(c) On or prior to the Closing Date and any Additional Closing Date,
as the case may be, the Underwriter shall have been furnished such information,
documents, certificates, and opinions as they may reasonably require for the
purpose of enabling them to review the matters referred to in Section 7(b), and
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions herein
contained, or as the Underwriter may reasonably request.
(d) At the Closing Date or any Additional Closing Date, as the case
may be, (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be stated
therein in accordance with the Securities Act and the Regulations, and in all
material respects conform to the requirements thereof; and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) there shall have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, or condition
(financial or otherwise), results of operations, future prospects, capital
stock, long-term or short-term debt, or general affairs of the Company from that
set forth in the Registration Statement and the Prospectus, except changes which
the Registration Statement and Prospectus indicate might occur after the date on
which the Registration Statement becomes effective under the Securities Act, and
the Company shall not have incurred any material liabilities or entered into any
agreements not in
-24-
the ordinary course of business other than as referred to in the Registration
Statement and Prospectus, (iii) except as set forth in the Prospectus, no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation shall be pending, threatened, or in prospect (or any
basis therefor) with respect to the Company, or any of its respective
operations, businesses, properties, or assets which would be required to be set
forth in the Registration Statement, wherein an unfavorable decision, ruling, or
finding would have a Material Adverse Effect, and (iv) the Stock shall be quoted
upon the Nasdaq Smallcap Market.
(e) At the Closing Date and any Additional Closing Date, as the case
may be, the Underwriter shall have received a certificate of the President and
the Controller of the Company, dated the Closing Date or such Additional Closing
Date, as the case may be, to the effect, among other things, that (i) the
conditions set forth in Sections 7(a) and 7(d) have been satisfied, (ii) as of
the date of this Agreement and as of the Closing Date or such Additional Closing
Date, as the case may be, the representations and warranties of the Company
contained herein were and are accurate and correct, and (iii) as of the Closing
Date or such Additional Closing Date, as the case may be, the obligations to be
performed by the Company hereunder on or prior to such time have been fully
performed.
(f) At the time this Agreement is executed and at the Closing Date
and any Additional Closing Date, as the case may be, the Underwriter shall have
received a letter, addressed to the Underwriter, and in form and substance
satisfactory to the Underwriter, from Coopers & Lybrand L.L.P., independent
certified public accountants for the Company, dated the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the published Regulations;
(ii) stating that, in their opinion, the financial statements
and schedules of the Company included in the Registration Statement examined by
them comply in form in all material respects with the applicable accounting
requirements of the Securities Act and the related published rules and
regulations;
(iii) stating that they have performed, with respect to the
interim financial statements of the Company included in the Registration
Statement, the procedures set out in Statement on Auditing Standards No. 71
("SAS 71") for a review of interim financial information and providing the
report of Coopers & Lybrand L.L.P as described in SAS 71 on the interim
financial statements of the Company;
(iv) stating that, on the basis of procedures (but not an
examination made in accordance with the generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim
-25-
financial statements), a reading of the latest available minutes of the
stockholders and Boards of Directors of the Company and committees of such Board
of Directors, inquires to certain officers and other employees of the Company
responsible for financial and accounting matters, and other specified procedures
and inquiries, nothing has come to their attention that caused them to believe
that: (A) the unaudited financial statements and schedules of the Company
included in the Registration Statement and Prospectus do not comply in form in
all material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and related published rules and regulations
under the Securities Act or the Exchange Act or are not fairly presented in
conformity with generally accepted accounting principles (except to the extent
that certain footnote disclosures regarding any stub period may have been
omitted in accordance with the applicable rules of the Commission under the
Exchange Act) applied on a basis consistent with that of the audited financial
statements appearing therein; (B) there was any change in the capital stock or
long-term debt of the Company or any decrease in the total current assets or
stockholders' equity of the Company as of the date of the latest available
monthly financial statements of the Company as of a specified date not more than
five business days prior to the date of such letter, each, as compared with the
amounts shown in the June 30, 1997 balance sheets included in the Registration
Statement and Prospectus, other than as described in the Registration Statement
and Prospectus or any change or decrease (which shall be set forth therein)
which, in the sole discretion of the Underwriter, the Underwriter shall accept,
or (C) there was any decrease in the revenues, net income, or net income per
share of Common Stock during the period from June 30, 1997 to the date of the
latest available monthly financial statements of the Company or to a specified
date not more than five business days prior to the date of such letter, each as
compared with the corresponding prior period, other than as described in the
Registration Statement and Prospectus or any decrease (which shall be set forth
therein) which, in the sole discretion of the Underwriter, the Underwriter shall
accept; and
(v) stating that they have compared specific numerical data
and financial information pertaining to the Company set forth in the
Registration Statement, which have been specified by the Underwriter prior to
the date of this Agreement, to the extent that such data and information may be
derived from the general accounting records of the Company, and excluding any
questions requiring any interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries, and other
appropriate procedures (which procedures do not constitute an examination in
accordance with the generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.
(g) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be reasonably satisfactory in
form and substance to the Underwriter and to counsel for the Underwriter, and
the Underwriter shall have received from such counsel for the Underwriter
opinions, dated as of the Closing Date and the Additional Closing Date, as the
case may be, with respect to such of the
-26-
matters set forth under Section 7(b), and with respect to such other related
matters, as the Underwriter may reasonably request.
(h) The NASD, upon review of the terms of the public offering of the
Stock, shall not have objected to the Underwriter' participation in such
offering.
(i) On the Closing Date, the Company shall have sold the
Underwriter's Warrants to the Underwriter and its designees.
(j) Prior to or on the Closing Date, the Company shall have provided
to the Underwriter copies of the agreements referred to in Section 2(u). In
order to enforce this covenant, the Company shall impose stop-transfer
instructions with respect to the shares of capital stock owned by the officers,
directors and stockholders covered by such agreements until the end of such
period.
Any certificate or other document signed by any officer of the
Company and delivered to the Underwriter or to counsel for the Underwriter
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Company, as applicable, hereunder to the Underwriter as to the
statements made therein. If any condition to the Underwriter' obligations
hereunder to be fulfilled prior to or at the Closing Date or any Additional
Closing Date, as the case may be, is not so fulfilled, the Underwriter may
terminate this Agreement or, if the Underwriter so elects, in writing waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees,
to indemnify and hold harmless the Underwriter, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, against any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 8, but not be limited to, reasonable attorneys' fees and any and all
expense whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with, (i) any untrue statement or
alleged untrue statement of a material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto or (B) any
application or other document or communication (for purposes of this Section 8,
collectively referred to as an "application") executed by, or on behalf of, the
Company or based upon written information furnished by, or on behalf of, the
Company filed in any jurisdiction in order to qualify the Securities under the
"blue sky" or securities laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
-27-
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, written information furnished to the Company as
stated in Section 8(b) with respect to the Underwriter by, or on behalf of, the
Underwriter expressly for inclusion in the Registration Statement, any
Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant, or agreement of the Company contained in
this Agreement; provided, that the Company will not be liable to the Underwriter
or any person controlling the Underwriter with respect to any such untrue
statement or omission made in any Preliminary Prospectus that is corrected in
the Prospectus (or any amendment or supplement thereto) if the person asserting
any such loss, claim, damage or liability purchased Securities from such
Underwriter but was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Securities Act, unless such failure
to deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with its obligations under this Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Underwriter or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of the Underwriter (an "indemnified party") in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company in writing
of the institution of such action (but the failure so to notify shall not
relieve the Company from any liability they may have other than pursuant to this
Section 8(a)), and the Company shall promptly assume the defense of such action,
including, without limitation, the employment of counsel reasonably satisfactory
to such indemnified party or parties and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense of
such action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or counsel for such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from, or in
addition to, those available to the Company in any of which events such fees and
expenses shall be borne by the Company and neither the Company shall not have
the right to direct the defense of such action on behalf of any such indemnified
party or parties.
Anything in this section to the contrary notwithstanding, the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent. The Company shall not, without the prior
written consent of each indemnified party that is not released as described in
this sentence, settle or
-28-
compromise any action, or permit a default or consent to the entry of judgment
or otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against the Company or any
of its officers or directors in connection with the sale of the Securities, the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment or supplement thereto, or any application.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Underwriter in Section 8(a), but only with respect to
statements or omissions, if any, made in the Registration Statement, any
Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information furnished to the
Company as stated in this Section 8(b) with respect to any Underwriter by, or on
behalf of, the Underwriter expressly for inclusion in the Registration
Statement, any Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, or on any application, as the case may be (it being agreed
that the only such information is that set forth in the stabilization legend on
the inside front cover page of the Prospectus, the amounts of the selling
concession and reallowance and the name of the Underwriter, and the number of
shares of Firm Stock purchased by the Underwriter set forth in the Prospectus),
provided, however, that the obligation of the Underwriter to provide indemnity
under the provisions of this Section 8(b) shall be limited to the amount which
represents the product of (i) the number of shares of Stock underwritten by the
Underwriter hereunder and the (ii) the underwriting discount per share of Common
Stock set forth on the cover page of the Prospectus. If any action shall be
brought against the Company, or any other person so indemnified based on the
Registration Statement, any Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or in any application, and in respect of which
indemnity may be sought against the Underwriter pursuant to this Section 8(b),
the Underwriter shall have the rights and duties given to the Company, and the
Company, and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 8(a) or
8(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case or (ii) any indemnified or indemnifying party seeks
contribution under the Securities Act, the
-29-
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by, or on behalf of, any director of the Company, any officer
of the Company who signed the Registration Statement, and any controlling person
of the Company), as one entity, and the Underwriter (including for this purpose
any contribution by, or on behalf of, an indemnified party) as a second entity,
shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever to which any of them may be subject, based on relative benefits so
that the Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per share of Common Stock set forth
on the cover page of the Prospectus represents of the initial public offering
price per share of Common Stock set forth on the cover page of the Prospectus
and the Company is responsible for the Company's proceeds, provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Underwriter in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company or by the Underwriter, and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement, alleged statement, omission, or alleged omission. The
Company and the Underwriter agree that it would be unjust and inequitable if the
respective obligations of the Company and the Underwriter for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Underwriter and the
other indemnified parties were treated as one entity for such purpose) or by any
other method of allocation that does not reflect the equitable considerations
referred to in this Section 8(c). No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 8(c), each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee and agent of the Underwriter shall have the same rights to
contribution as the Underwriter, and each person, if any, who controls the
Company within the meaning of 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 the provisions of
this Section 8(c). Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 8(c) is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties,
-30-
covenants, and agreements of the Underwriter and the Company, including the
indemnity and contribution agreements contained in Section 8, shall remain
operative and in full force and effect regardless of any investigation made by,
or on behalf of, the Underwriter or any indemnified person, or by, or on behalf
of, the Company or any person or entity which is entitled to be indemnified
under Section 8(b), and shall survive termination of this Agreement or the
delivery of the Firm Stock and the Additional Stock, if any, to the Underwriter.
In addition, the provisions of Sections 6, 8, 9, 12, and 14 shall survive
termination of this Agreement, whether such termination occurs before or after
the Closing Date or any Additional Closing Date.
10. Default by an Underwriter. [intentionally omitted]
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 9:30 A.M., New York
City local time, on the first full business day following the day on which the
Registration Statement becomes effective under the Securities Act or at the time
of the initial public offering by the Underwriter of the Firm Stock, whichever
is earlier. The time of the initial public offering shall mean the time, after
the Registration Statement becomes effective under the Securities Act, of the
release by the Underwriter for publication of the first newspaper advertisement
which is subsequently published relating to the Firm Stock or the time, after
the Registration Statement becomes effective under the Securities Act, when the
shares of Firm Stock are first released by the Underwriter for offering by the
Underwriter or dealers by letter or telegram, whichever shall first occur. The
Underwriter or the Company may prevent this Agreement from becoming effective
without liability of any party to any other party, except as noted below in this
Section 11, by giving the notice indicated in Section 11(d) before the time this
Agreement becomes effective under the Securities Act.
(b) If the purchase price of the Firm Stock has not been determined
as provided for in Section 3 prior to 4:30 p.m., New York City local time, on
the third full business day after the date on which the Registration Statement
was declared effective under the Securities Act, this Agreement may be
terminated at any time thereafter either by the Underwriter or by the Company by
giving notice to the other unless before such termination the purchase price for
the Firm Stock has been so determined. If the purchase price of the Firm Stock
has not been so determined prior to 4:30 p.m., New York City local time, on the
tenth full business day after the date on which the Registration Statement was
declared effective under the Securities Act, this Agreement shall automatically
terminate forthwith.
(c) In addition to the right to terminate this Agreement pursuant to
Sections 7 hereof, the Underwriter shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Additional Closing Date,
as the case may be, by giving notice to the Company, and, if exercised, the
Over-allotment Option, at any time prior to any Additional Closing Date, by
giving notice to the Company, (i) if any domestic or international event, act,
or occurrence has materially and adversely
-31-
disrupted, or, in the opinion of the Underwriter will in the immediate future
materially and adversely disrupt, the securities markets; or (ii) if there shall
have been a general suspension of, or a general limitation on prices for,
trading in securities on the New York Stock Exchange, the American Stock
Exchange or in the over-the-counter market; or (iii) if there shall have been an
outbreak or increase in the level of major hostilities or other national or
international calamity; or (iv) if a banking moratorium has been declared by a
United States; or (v) if there shall have been a material interruption in the
mail service or other means of communication within the United States if such
interruption materially impairs the ability of the Underwriter to offer the
securities for sale or materially impairs the securities markets generally; or
(vi) if the Company shall have sustained a material loss 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 court or government action, order, or decree, which, in the opinion of the
Underwriter, such event materially impairs the ability of the Underwriter to
offer the securities for sale or materially impairs securities markets generally
and will make it inadvisable to proceed with the offering, sale, or delivery of
the Firm Stock or the Additional Stock, as the case may be; or (vii) if any
material governmental restrictions shall have been imposed on trading in
securities in general, which restrictions are not in effect on the date hereof;
or (ix) if there shall be passed by the Congress of the United States or by any
state legislature any act or measure, or adopted by any governmental body or
authoritative accounting institute or board, or any governmental executive, any
orders, rules, or regulations, which the Underwriter believes likely to have a
material adverse effect on the business, financial condition, or financial
statements of the Company or the securities market generally; or (x) if there
shall have been such material and adverse change in the market for securities in
general or in political, financial, or economic conditions as in the judgment of
the Underwriter makes it inadvisable due to the material impact on the
securities market generally to proceed with the offering, sale, and delivery of
the Firm Stock or the Additional Stock, as the case may be, on the terms
contemplated by the Prospectus.
(d) If the Underwriter elects to prevent this Agreement from
becoming effective, as provided in this Section 11 or to terminate this
Agreement pursuant to Section 7 of this Agreement, the Underwriter shall notify
the Company promptly by telephone, facsimile or telegram, confirmed by letter.
If, as so provided, the Company elects to prevent this Agreement from becoming
effective or to terminate this Agreement, the Company shall notify the
Underwriter promptly by telephone, telex, facsimile or telegram, confirmed by
letter.
(e) Anything in this Agreement to the contrary notwithstanding if
this Agreement shall not become effective by reason of an election pursuant to
this Section 11 or if this Agreement shall terminate or shall otherwise not be
carried out within the time specified herein by reason of any failure on the
part of the Company to perform any covenant or agreement or satisfy any
condition of this Agreement required by it to be performed or satisfied, the
sole liability of the Company to the Underwriter, in addition to the obligations
the Company assumed pursuant to Section 6 hereof, will be to reimburse the
Underwriter for such out-of-pocket expenses (including
-32-
the reasonable fees and disbursements of their counsel) as shall have been
incurred by it in connection with this Agreement or the proposed offer, sale,
and delivery of the Securities, and, upon demand, the Company agrees to pay
promptly the full amount thereof to the Underwriter.
12. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered, telexed, sent by facsimile or
telegraphed, confirmed by letter, to Hampshire Securities Corporation, 640 Fifth
Avenue, 4th Floor, New York, New York 10019, Attention: Mr. Leo T. Abbe Managing
Director, with a copy to Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New
York, New York 10103, Attention: Mara H. Rogers, Esq.; or if sent to the
Company, shall be mailed, delivered, sent by facsimile or telegraphed, confirmed
by letter, to the Company, 9051 Executive Park Drive, Suite 302, Knoxville,
Tennessee, Attention: Kenneth D. Van Meter, with a copy to Squadron, Ellenoff
Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176, Attention:
Kenneth R. Koch, Esq. All notices hereunder shall be effective upon receipt by
the party to which it is addressed.
13. Construction. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
conflict of laws.
14. Consent to Jurisdiction. The Company irrevocably consent to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that service thereof may be made in accordance with
Section 12 and upon itself at the address set forth in the Registration
Statement or such other address as such agent may designate by notice in
accordance with Section 12. Within 30 days after such service, or such other
time as may be mutually agreed upon in writing by the attorneys for the parties
to such action or proceeding, the Company shall appear or answer such summons,
complaint, or other process. Should the Company fail to appear or answer within
such 30-day period or such extended period, as the case may be, the Company
shall be deemed in default and judgment may be entered against the Company for
the amount as demanded in any summons, complaint, or other process so served.
-33-
If the foregoing correctly sets forth the understandings between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CELERITY SYSTEMS, INC.
By:
---------------------------------
Name:
Title:
Accepted as of the date first above
written in New York, New York
HAMPSHIRE SECURITIES CORPORATION
as Underwriter
By:
---------------------------------
Name:
Title: