Exhibit 1.1
______________ Shares
PECO II, Inc.
Common Shares
UNDERWRITING AGREEMENT
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________________ , 2000
CIBC World Markets Corp.
FleetBoston Xxxxxxxxx Xxxxxxxx Inc.
Xxxxxx Xxxxxx Partners LLC
c/o CIBC World Markets Corp.
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
PECO II, Inc., an Ohio corporation (the "Company"), proposes, subject
to the terms and conditions contained herein, to sell to you and the other
underwriters named on Schedule I to this Agreement (the "Underwriters"), for
whom you are acting as Representatives (the "Representatives"), an aggregate of
_____________ shares (the "Firm Shares") of the Company's Common Shares, without
par value (the "Common Shares"). The respective amounts of the Firm Shares to be
purchased by each of the several Underwriters are set forth opposite their names
on Schedule I hereto. In addition, the Company proposes to grant to the
Underwriters an option to purchase up to an additional ___________ shares (the
"Option Shares") of Common Shares from it for the purpose of covering over-
allotments in connection with the sale of the Firm Shares. The Firm Shares and
the Option Shares are together called the "Shares."
As part of the offering contemplated by this Agreement, the
Representatives have agreed to reserve out of the Firm Shares purchased by them
up to ________ shares (the "Directed Shares") for sale to the Company's
directors, officers, employees and other parties associated with the Company
(each, individually a "Participant" and collectively, the "Participants") under
the terms of the friends and family directed sales program (the "Friends and
Family Program"). Shares to be sold pursuant to the Friends and Family Program
shall be
sold pursuant to this Agreement at the public offering price. Any Directed
Shares not confirmed for purchase by a Participant by 5:00 p.m. New York time on
the date of this Agreement will be offered to the public by the Representatives
as set forth in the Prospectus (as such term is hereinafter defined).
1. Sale and Purchase of the Shares.
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On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at a price of $_____ per share (the "Initial Price"), the
number of Firm Shares set forth opposite the name of such Underwriter
under the column "Number of Firm Shares to be Purchased from the Company"
on Schedule I to this Agreement, subject to adjustment in accordance with
Section 10 hereof.
(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares
at the Initial Price. The number of Option Shares to be purchased by
each Underwriter shall be the same percentage (adjusted by the
Representatives to eliminate fractions) of the total number of Option
Shares to be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the Underwriters
and may be exercised in whole or in part at any time on or before 12:00
noon, New York City time, on the business day before the Firm Shares
Closing Date (as defined below), and from time to time thereafter within
30 days after the date of this Agreement, in each case upon written,
facsimile or telegraphic notice, or verbal or telephonic notice confirmed
by written, facsimile or telegraphic notice, by the Representatives to
the Company no later than 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the
time and date (if other than the Firm Shares Closing Date) of such
purchase.
2. Delivery and Payment. Delivery by the Company of the Firm Shares
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to the Representatives for the respective accounts of the Underwriters, and
payment of the purchase price by wire transfer in immediately available funds to
an account designated by the Company, against delivery of the respective
certificates therefor to the Representatives, shall take place at the offices of
CIBC World Markets Corp., Xxx Xxxxx Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
at 10:00 a.m., New York City time, on the third business day following the date
of this Agreement, or at such time on such other date, not later than 10
business days after the date of this Agreement, as shall be agreed upon by the
Company and the Representatives (such time and date of delivery and payment are
called the "Firm Shares
Closing Date").
In the event the option with respect to the Option Shares is exercised
in whole or in part on one or more occasions, delivery by the Company of the
Option Shares to the Representatives for the respective accounts of the
Underwriters and payment of the purchase price thereof in immediately available
funds by wire transfer to the Company shall take place at the offices of CIBC
World Markets Corp. specified above at the time and on the date (which may be
the same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in Section 1(b) (such time and date of
delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called, individually,
a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The
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Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission"), a Registration Statement (as
hereinafter defined) on Form S-1 (No. 333-37566), including a preliminary
prospectus relating to the Shares, and such amendments thereof as may have been
required to the date of this Agreement. Copies of such Registration Statement
(including all amendments thereof) and of the related Preliminary Prospectus (as
hereinafter defined) have heretofore been delivered by the Company to you. The
term "Preliminary Prospectus" means any preliminary prospectus (as described in
Rule 430 of the Rules) included at any time as a part of the Registration
Statement or filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules. The term "Registration
Statement" as used in this Agreement means the initial registration statement
(including all exhibits, financial schedules and information deemed to be a part
of the Registration Statement through incorporation by reference or otherwise),
as amended at the time and on the date it becomes effective (the "Effective
Date") including the information (if any) deemed to be part thereof at the time
of effectiveness pursuant to Rule 430A of the Rules. If the Company has filed
an abbreviated registration statement to register additional Shares pursuant to
Rule 462(b) under the Rules (the "462(b) Registration Statement") then any
reference herein to the Registration Statement shall also be deemed to include
such 462(b) Registration Statement. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement at the time of effectiveness or, if Rule 430A of the Rules is relied
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on, the term Prospectus shall also include the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each Preliminary
Prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Underwriter as follows:
(a) On the Effective Date, the Registration Statement complied, and
on the date of the Prospectus, the date any post-effective amendment to
the Registration Statement becomes effective, the date any supplement or
amendment to the Prospectus is filed with the Commission and each Closing
Date, the Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) will comply, in all material respects,
with the applicable provisions of the Securities Act and the Rules and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder. The Registration
Statement did not, as of the Effective Date, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and on the Effective Date and the other dates referred to
above neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of
the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement thereto
was first filed with the Commission, such preliminary prospectus as
amended or supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading. Notwithstanding the foregoing,
none of the representations and warranties in this paragraph 4(a) shall
apply to statements in, or omissions from, the Registration Statement or
the Prospectus made in reliance upon, and in conformity with, information
herein or otherwise furnished in writing by the Representatives on behalf
of the several Underwriters for use in the Registration Statement or the
Prospectus. With respect to the preceding sentence, the Company
acknowledges that
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the only information furnished in writing by the Representatives on
behalf of the several Underwriters for use in the Registration Statement
or the Prospectus are the statements contained under the caption
"Underwriting" in the Prospectus.
(b) The Registration Statement is effective under the Securities Act
and no stop order preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are threatened under the
Securities Act. Any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) of the Rules has been or will be made in
the manner and within the time period required by such Rule 424(b).
(c) The financial statements of the Company (including all notes and
schedules thereto) included or incorporated by reference in the
Registration Statement and Prospectus present fairly the financial
position, the results of operations, the statements of cash flows and the
statements of stockholders' equity and the other information purported
to be shown therein of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements and
related schedules and notes have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout
the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made. The summary
and selected financial data included in the Prospectus present fairly the
information shown therein as at the respective dates and for the
respective periods specified and the summary and selected financial data
have been presented on a basis consistent with the consolidated financial
statements so set forth in the Prospectus and other financial
information.
(d) Xxxxxx Xxxxxxxx LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are and, during the periods
covered by their reports, were independent public accountants as required
by the Securities Act and the Rules.
(e) The Company and each of its Subsidiaries (as hereinafter
defined) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. The Company
and each such subsidiary or other entity controlled directly or
indirectly by the Company (collectively, "Subsidiaries") is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted by it
or location of the assets or properties owned, leased or licensed by it
requires such qualification, except for such jurisdictions where the
failure to so qualify would not have a material adverse effect on the
assets or properties, business, results of operations or
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financial condition of the Company and its subsidiaries, taken as a whole
(a "Material Adverse Effect"). The Company does not own, lease or license
any asset or property or conduct any business outside the United States
of America. The Company and each of its Subsidiaries has all requisite
corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and
from all governmental or regulatory bodies or any other person or entity
(collectively, the "Permits"), to own, lease and license its assets and
properties and conduct its business, all of which are valid and in full
force and effect, as described in the Registration Statement and the
Prospectus, except where the lack of such Permits, individually or in the
aggregate, would not have a Material Adverse Effect. The Company and each
of its Subsidiaries has fulfilled and performed in all material respects
all of its material obligations with respect to such Permits and, to the
knowledge of the Company, no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the Company
thereunder. Except as may be required under the Securities Act and state
and foreign Blue Sky laws, no other Permits are required to enter into,
deliver and perform this Agreement and to issue and sell the Shares.
(f) The Company and each of its Subsidiaries owns or possesses
adequate and enforceable rights to use all trademarks, trademark
applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how and other similar rights and proprietary
knowledge (collectively, "Intangibles") described in the Prospectus as
being owned by it necessary for the conduct of its business. except where
the lack of such enforceable rights would not have a Material Adverse
Effect. Except for a notice of opposition filed with the U.S. Patent and
Trademark Office by PECO Energy Corporation with respect to the Company's
trademark application for "PECO II", neither the Company nor any of its
Subsidiaries has not received any notice of, or is not aware of, any
infringement of or conflict with asserted rights of others with respect
to any Intangibles. No departed employee of the Company or its
Subsidiaries has a right of reverter, or any other interest, with respect
to any Intangible.
(g) Except as disclosed in the Registration Statement and
Prospectus, the Company and each of its Subsidiaries has good and
marketable title in fee simple to all items of real property and good and
marketable title to all personal property described in the Prospectuses
as being owned by it. Any real property and buildings described in the
Prospectuses as being held under lease by the Company and each of its
Subsidiaries is held by it under valid, existing and enforceable leases,
free and clear of all liens, encumbrances, claims, security interests and
defects, except such as are described in the Registration Statement and
the Prospectus or would not have a Material Adverse Effect.
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(h) There are no litigation or governmental proceedings to which the
Company or its Subsidiaries is subject or which is pending or, to the
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries, which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, affect the consummation of
this Agreement or which is required to be disclosed in the Registration
Statement and the Prospectus that is not so disclosed.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
described therein, (a) there has not been any material adverse change
with regard to the assets or properties, business, results of operations
or financial condition of the Company and its Subsidiaries, taken as a
whole; (b) neither the Company nor its Subsidiaries has sustained any
loss or interference with its assets, businesses or properties (whether
owned or leased) from fire, explosion, earthquake, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree
which would have a Material Adverse Effect; and (c) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus, except as reflected therein, neither the Company nor its
Subsidiaries has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, except such
liabilities or obligations incurred in the ordinary course of business,
(ii) entered into any transaction not in the ordinary course of business
or (iii) declared or paid any dividend or made any distribution on any
shares of its stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its stock.
(j) There is no document, contract or other agreement of a character
required to be filed as an exhibit to the Registration Statement which is
not filed as required by the Securities Act or Rules. Each description
of a contract, document or other agreement in the Registration Statement
and the Prospectus accurately reflects in all respects the terms of the
underlying document, contract or agreement. Each agreement described in
the Registration Statement and Prospectus or listed in the Exhibits to
the Registration Statement or incorporated by reference is in full force
and effect and is valid and enforceable by and against the Company or the
Subsidiary, as the case may be, in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights generally and to
general principles of equity. Neither the Company nor the Subsidiary, if
the Subsidiary is a party, nor to the Company's knowledge, any other
party is in default in the observance or performance of any term or
obligation to be performed by it under any such agreement, and no event
has occurred which with notice or lapse of time or both would constitute
such a default, in any such case which default or event, individually or
in the aggregate, would have a Material Adverse Effect. No default
exists, and no event has occurred which with notice or lapse of time or
both would constitute a
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default, in the due performance and observance of any term, covenant or
condition, by the Company or the Subsidiary, if the Subsidiary is a party
thereto, of any other agreement or instrument to which the Company or the
Subsidiary is a party or by which it or its the Company, the Subsidiary
or their properties or business may be bound or affected which default or
event, individually or in the aggregate, would have a Material Adverse
Effect.
(k) Neither the Company nor any of its Subsidiaries is in violation
of any term or provision of its charter or by-laws or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation,
where the consequences of such violation, individually or in the
aggregate, would have a Material Adverse Effect.
(l) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale
by the Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or
result in the breach of any term or provision of, or constitute a default
(or an event which with notice or lapse of time or both would constitute
a default) under, or require any consent or waiver under, or result in
the execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or its Subsidiaries pursuant to the
terms of, any material indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or its Subsidiaries is a
party or by which it either the Company or its Subsidiaries or any of
their properties or businesses is bound, or any material franchise,
license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or its Subsidiaries or violate any provision of
the charter or by-laws of the Company or its Subsidiaries, except for
such consents or waivers which have already been obtained and are in full
force and effect and except for such consents or waivers that the failure
to obtain would not have a Material Adverse Effect.
(m) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus. The
certificates evidencing the Shares are in due and proper legal form and
have been duly authorized for issuance by the Company. All of the issued
and outstanding Common Shares have been duly and validly issued and are
fully paid and nonassessable. There are no statutory preemptive or other
similar rights to subscribe for or to purchase or acquire any Common
Shares of the Company or shares of its Subsidiaries or any such rights
pursuant to its Certificate of Incorporation or by-laws or any agreement
or instrument to or by which the Company or any of its Subsidiaries is a
party or bound. The Shares, when issued and sold pursuant to this
Agreement, will be duly and validly issued, fully paid and nonassessable
and none of them will be issued in violation of any preemptive or other
similar right. Except as disclosed in the
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Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and there is
no commitment, plan or arrangement to issue, any share of stock of the
Company or its Subsidiaries or any security convertible into, or
exercisable or exchangeable for, such stock. The Common Shares and the
Shares conform in all material respects to all statements in relation
thereto contained in the Registration Statement and the Prospectus. All
outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, and are fully paid and nonassessable and
are owned directly by the Company, or by another wholly-owned subsidiary
of the Company, free and clear of any security interests, liens,
encumbrances, equities or claims, other than those described in the
Prospectus.
(n) No holder of any security of the Company has the right to have
any security owned by such holder included in the Registration Statement
or to demand registration of any security owned by such holder during the
period ending 180 days after the date of this Agreement. Each
stockholder who holds 100,000 or more shares of capital stock of the
Company, director and executive officer of the Company has delivered to
the Representatives such person's written lock-up agreement in the form
attached to this Agreement ("Lock-Up Agreement").
(o) All necessary corporate action has been duly and validly taken
by the Company to authorize the execution, delivery and performance of
this and the issuance and sale of the Shares by the Company. This
Agreement has been duly and validly authorized, executed and delivered by
the Company and constitutes and will constitute a legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
(p) Neither the Company nor any of its Subsidiaries is involved in
any labor dispute nor, to the knowledge of the Company, is any such
dispute threatened, which dispute would have a Material Adverse Effect.
The Company is not aware of any existing or imminent labor disturbance by
the employees of any of its principal suppliers or contractors which
would have a Material Adverse Effect. The Company is not aware of any
threatened or pending litigation between the Company or its Subsidiaries
and any of its executive officers which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect and has no
reason to believe that such officers will not remain in the employment of
the Company.
(q) No transaction has occurred between or among the Company and any
of its officers or directors or five percent shareholders or any
affiliate or affiliates of any such officer or director or five percent
shareholders that is required to be
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described in and is not described in the Registration Statement and the
Prospectus.
(r) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation of the price
of the Common Shares to facilitate the sale or resale of any of the
Shares.
(s) The Company and its Subsidiaries have filed all Federal, state,
local and foreign tax returns which are required to be filed through the
date hereof, or have received extensions thereof, and have paid all taxes
shown on such returns and all assessments received by them to the extent
that the same are material and have become due, other than those taxes
the payment of which is being contested in good faith. There are no tax
audits or investigations pending, which if adversely determined would
have a Material Adverse Effect; nor are there any material proposed
additional tax assessments against the Company and any of its
Subsidiaries.
(t) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market System, subject to official Notice of Issuance. A
registration statement has been filed on Form 8-A pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which registration statement complies in all material respects with the
Exchange Act.
(u) The books, records and accounts of the Company and its
Subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company and its Subsidiaries. The Company and each of
its Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(v) The Company and each of its Subsidiaries is insured by insurers
of recognized financial responsibility against such losses and risks and
in such amounts as are customary in the businesses in which they are
engaged or propose to engage after giving effect to the transactions
described in the Prospectus; all policies of insurance and fidelity or
surety bonds insuring the Company or any of its Subsidiaries or the
Company's or its Subsidiaries' respective businesses, assets,
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employees, officers and directors are in full force and effect; the
Company and each of its Subsidiaries are in compliance with the terms of
such policies and instruments in all material respects; and neither the
Company nor any Subsidiary of the Company has 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. Neither the Company nor to the Company's
knowledge, any Subsidiary has been denied any insurance coverage which it
has sought or for which it has applied.
(w) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated required to be obtained or performed by
the Company (except such additional steps as may be required by the
Securities Act and the National Association of Securities Dealers, Inc.
(the "NASD") or may be necessary to qualify the Shares for public
offering by the Underwriters under the state securities or Blue Sky laws)
has been obtained or made and is in full force and effect.
(x) There are no affiliations with the NASD among the Company's
officers, directors or holders of at least 100,000 Common Shares of the
Company, except as set forth in the Registration Statement or otherwise
disclosed in writing or in the NASD questionnaires delivered to the
Representatives.
(y) (i) Each of the Company and its Subsidiaries is in compliance in
all material respects with all rules, laws and regulations relating to
the use, treatment, storage and disposal of toxic substances and
protection of health or the environment ("Environmental Law") which are
applicable to its business and each of the Company and its Subsidiaries
has received all permits, licenses or other approvals required of it
under applicable Environmental Laws to conduct its business and is in
compliance with all terms and conditions of any such permit, license or
approval except where such lack of compliance, permits, licenses or other
approvals would not have a Material Adverse Effect; (ii) neither the
Company nor its Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under
Environmental Laws; (iii) to the Company's knowledge, no facts currently
exist that will require the Company or its Subsidiaries to make future
material capital expenditures to comply with Environmental Laws; and iv)
to the Company's knowledge, no property which is or has been owned,
leased or occupied by the Company or its Subsidiaries has been designated
as a Superfund site pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section
9601, et. seq.) ("CERCLA") or otherwise designated as a contaminated site
under applicable state or local law. Neither the Company nor any of its
Subsidiaries has been named as a "potentially responsible party" under
CERCLA.
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(z) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws on the business,
operations and properties of the Company and its Subsidiaries, in the
course of which the Company identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws, or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly or
in the aggregate, have a Material Adverse Effect.
(aa) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of proceeds thereof as described
in the Prospectus, will not be an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment
Company Act").
(bb) The Company, its Subsidiaries or any other person associated
with or acting on behalf of the Company or its Subsidiaries including,
without limitation, any director, officer, agent or employee of the
Company or its Subsidiaries has not, directly or indirectly, while acting
on behalf of the Company or its Subsidiaries (i) used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; (iii)
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any other unlawful payment.
(cc) The Company has no reason to believe that the Year 2000 Problem
has had or will have a Material Adverse Effect on the business or
operations of the Company. The Year 2000 Problem, as used herein, means
computer or other technological problems resulting from the transition
from December 31, 1999 to January 1, 2000.
(dd) Neither the Company nor any other person associated with or
acting on behalf of the Company including, without limitation, any
director, officer, agent or employee of the Company has offered or caused
the Underwriters to offer any of the Shares to any person pursuant to the
Friends and Family Program with the specific intent to unlawfully
influence (i) a customer or supplier of the Company to alter the
customer's or supplier's level or type of business with the Company or
(ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
5. Conditions of the Underwriters' Obligations. The obligations
-------------------------------------------
of the Underwriters under this Agreement are several and not joint. The
respective obligations of the Underwriters to purchase the Shares are subject to
each of the following terms and conditions:
-12-
(a) Notification that the Registration Statement has become
effective shall have been received by the Representatives and the
Prospectus shall have been timely filed with the Commission in accordance
with Section 6(a) of this Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no
order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before or
to the knowledge of the Company or the Representatives, threatened by the
Commission, and any requests for additional information on the part of
the Commission (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the
satisfaction of the Commission and the Representatives.
(c) The representations and warranties of the Company contained in
this Agreement and in the certificates delivered pursuant to Section 5(d)
shall be true and correct when made and on and as of each Closing Date as
if made on such date. The Company shall have performed all covenants and
agreements and satisfied all the conditions contained in this Agreement
required to be performed or satisfied by them at or before such Closing
Date.
(d) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives and dated such Closing
Date, of the chief executive or chief operating officer and the chief
financial officer or chief accounting officer of the Company to the
effect that (i) the signers of such certificate have carefully examined
the Registration Statement, the Prospectus and this Agreement and that
the representations and warranties of the Company in this Agreement are
true and correct on and as of such Closing Date with the same effect as
if made on such Closing Date and the Company has performed all covenants
and agreements and satisfied all conditions contained in this Agreement
required to be performed or satisfied by it at or prior to such Closing
Date, and (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and to the best of their
knowledge, no proceedings for that purpose have been instituted or are
pending under the Securities Act.
(e) The Representatives shall have received, at the time this
Agreement is executed and on each Closing Date, a signed letter from
Xxxxxx Xxxxxxxx LLP addressed to the Representatives and dated,
respectively, the date of this Agreement and each such Closing Date in
form and substance reasonably satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that: (i) in their opinion the audited financial
statements and financial statement schedules included or incorporated by
reference in the Registration
-13-
Statement and the Prospectus and reported on by them comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules;
(ii) on the basis of a reading of the amounts included in the
Registration Statement and the Prospectus under the headings
"Summary Consolidated Financial Data" and "Selected Consolidated
Financial Data," carrying out certain procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter,
a reading of the minutes of the meetings of the stockholders and
directors of the Company, and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters
of the Company as to transactions and events subsequent to the date
of the latest audited financial statements, except as disclosed in
the Registration Statement and the Prospectus, nothing came to their
attention which caused them to believe that:
(A) the amounts in "Summary Consolidated Financial
Data," and "Selected Consolidated Financial Data" included in
the Registration Statement and the Prospectus do not agree with
the corresponding amounts in the audited and unaudited
financial statements from which such amounts were derived; or
(B) with respect to the Company, there were, at a
specified date not more than three business days prior to the
date of the letter, any increases in the current liabilities
and long-term liabilities of the Company or any decreases in
net income or in working capital or the stockholders' equity in
the Company, as compared with the amounts shown on the
Company's audited balance sheet for the fiscal year ended
December 31, 1999 and the three months ended March 31, 2000
included in the Registration Statement;
(iii) they have performed certain other procedures as may be
permitted under Generally Acceptable Auditing Standards as a result
of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting,
financial or statistical information derived from the general
accounting records of the Company) set forth in the Registration
Statement and the Prospectus and reasonably specified by the
Representatives agrees with the accounting records of the Company;
and
(iv) based upon the procedures set forth in clauses (ii) and
(iii) above and a reading of the amounts included in the
Registration Statement under the headings "Summary Consolidated
Financial Data" and "Selected
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Consolidated Financial Data" included in the Registration Statement
and Prospectus and a reading of the financial statements from which
certain of such data were derived, nothing has come to their
attention that gives them reason to believe that the "Summary
Consolidated Financial Data" and "Selected Consolidated Financial
Data" included in the Registration Statement and Prospectus do not
comply as to the form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules or that
the information set forth therein is not fairly stated in relation
to the financial statements included in the Registration Statement
or Prospectus from which certain of such data were derived are not
in conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
financial statements included in the Registration Statement and
Prospectus.
References to the Registration Statement and the Prospectus in
this paragraph (f) are to such documents as amended and supplemented
at the date of the letter.
(f) The Representatives shall have received on each Closing Date
from Xxxxxx, Halter & Xxxxxxxx LLP, counsel for the Company, an opinion,
addressed to the Representatives and dated such Closing Date, and stating
in effect that:
(i) Each of the Company and its Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the state of its incorporation. Each of
the Company and its Subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the
character or location of its assets or properties (owned, leased or
licensed) or the nature of its businesses makes such qualification
necessary, except where the failure to be so qualified, individually
or in the aggregate, would not result in a Material Adverse Effect.
(ii) Each of the Company and its Subsidiaries has all
requisite corporate power and authority to own, lease and license
its assets and properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus and with respect to the Company to enter into, deliver
and perform this Agreement and to issue and sell the Shares other
than those required under the state and foreign Blue Sky laws.
(iii) The Company has authorized and issued capital stock as
set forth in the Registration Statement and the Prospectus under the
caption "Capitalization"; the certificates evidencing the Shares are
in due and proper legal form and have been duly authorized for
issuance by the Company; all of the outstanding Common Shares of the
Company have been duly authorized
-15-
and validly issued and are fully paid and nonassessable and none of
them was issued in violation of any statutory preemptive rights,
preemptive rights under the Company's Articles of Incorporation and
Code of Regulations, or, to the best of such counsel's knowledge,
similar written contractual rights of any securityholder of the
Company by which the Company is bound. The Shares when issued and
sold pursuant to this Agreement will be duly authorized and validly
issued, outstanding, fully paid and nonassessable and none of them
will have been issued in violation of any statutory preemptive
rights, preemptive rights under the Company's Articles of
Incorporation and Code of Regulations, or, to the best of such
counsel's knowledge, similar written contractual rights of any
securityholder of the Company by which the Company is bound. To the
best of such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus, there are no preemptive
or other rights to subscribe for or to purchase or any restriction
upon the voting or transfer of any securities of the Company
pursuant to the Company's Articles of Incorporation or Code of
Regulations or other governing documents or any agreements or other
instruments to which the Company is a party or by which it is bound.
To the best of such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, exercisable for, or
exchangeable for stock of the Company. The Common Shares and the
Shares conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. The
issued and outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and are owned by the Company or by another
wholly owned subsidiary of the Company, free and clear of any
perfected security interest or, to the knowledge of such counsel,
any other security interests, liens, encumbrances, equities or
claims, other than those contained in the Registration Statement and
the Prospectus.
(iv) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the
Shares. This Agreement has been duly and validly authorized,
executed and delivered by the Company and this Agreement constitutes
the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with their respective terms except
as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(v) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions
-16-
contemplated hereby (including, without limitation, the issuance and
sale by the Company of the Shares) will give rise to a right to
terminate or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision of,
or constitute a default (or any event which with notice or lapse of
time, or both, would constitute a default) under, or require consent
or waiver under, or result in the execution or imposition of any
lien, charge, claim, security interest or encumbrance upon any
properties or assets of the Company or its Subsidiaries pursuant to
the terms of any indenture, mortgage, deed trust, note or other
agreement or instrument of which such counsel is aware and to which
the Company or its Subsidiaries is a party or by which it either the
Company or the Subsidiary or any of its properties or businesses is
bound, or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation of which such counsel is aware or
violate any provision of the charter or by-laws of the Company or
its Subsidiaries.
(vi) To the best of such counsel's knowledge, no default
exists, and no event has occurred which with notice or lapse of
time, or both, would constitute a default, in the due performance
and observance of any term, covenant or condition by the Company of
any indenture, mortgage, deed of trust, note or any other agreement
or instrument to which the Company is a party or by which it or any
of its assets or properties or businesses may be bound or affected,
where the consequences of such default, individually or in the
aggregate, would have a Material Adverse Effect.
(vii) To the best of such counsel's knowledge, the Company
and its Subsidiaries are not in violation of any term or provision
of its charter or by-laws or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation, where the
consequences of such violation, individually or in the aggregate,
would have a Material Adverse Effect.
(viii) No consent, approval, authorization or order of any
court or governmental agency or regulatory body is required for the
execution, delivery or performance of this Agreement by the Company
or offering, issuance, sale or delivery of the Shares, except such
as have been obtained under the Securities Act and such as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the several
Underwriters.
(ix) To the best of such counsel's knowledge, there is no
litigation or governmental or other proceeding or investigation,
before any court or before or by any public body or board pending or
threatened against, or involving the assets, properties or
businesses of, the Company which would have a Material Adverse
Effect.
-17-
(x) The statements in the Prospectus under the captions
"Description of Capital Stock," "Risk Factors-Provisions in our
charter documents and Ohio law may have anti-takeover effects,
"Shares Eligible for Future Sale," "Management-Employment Contracts
and Change of Control Arrangements," "Management-Stock Option
Plans," and "Certain Transactions," insofar as such statements
constitute a summary of documents referred to therein, the Company's
Articles of Incorporation or Code of Regulations, or matters of law,
have been reviewed by us and are fair summaries in all material
respects and accurately present the information called for with
respect to such documents and matters. Accurate copies of all
contracts and other documents required to be filed as exhibits to,
or described in, the Registration Statement have been so filed with
the Commission or are fairly described in the Registration
Statement, as the case may be.
(xii) The Registration Statement, all preliminary prospectuses
and the Prospectus and each amendment or supplement thereto (except
for the financial statements and schedules and other financial and
statistical data included therein, as to which such counsel
expresses no opinion) comply as to form in all material respects
with the requirements of the Securities Act and the Rules.
(xiii) The Registration Statement is effective under the
Securities Act, and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are threatened, pending or contemplated. Any
required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) under the Securities Act has been made in
the manner and within the time period required by such Rule 424(b).
(xiv) The Shares have been approved for listing on the Nasdaq
National Market.
(xv) The Company is not an "investment company" or an entity
controlled by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
To the extent deemed advisable by such counsel, they may rely as to
matters of fact on certificates of responsible officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the State of Ohio and the Federal laws of the United States; provided that such
counsel shall state that in their opinion the Underwriters and they are
justified in relying on such other opinions. Copies of such certificates and
other opinions shall be furnished to the Representatives and counsel for the
Underwriters.
In addition, such counsel shall state that such counsel has
participated in
-18-
conferences with officers and other representatives of the Company,
representatives of the Representatives and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing, no facts have come to
the attention of such counsel which lead such counsel to believe that the
Registration Statement at the time it became effective (except with respect to
the financial statements and notes and schedules thereto and other financial
data, as to which such counsel need express no belief) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus as amended or supplemented (except with respect to the
financial statements, notes and schedules thereto and other financial data, as
to which such counsel need make no statement) on the date thereof contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) The Representatives shall have received on each Closing Date
from ___________________________, special counsel for the Company, an
opinion, addressed to the Representatives and dated such Closing Date, in
form and substance satisfactory to the Underwriters. Open issue depending
on whether the Underwriters would like an opinion from trademark counsel.
(h) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives, and their
counsel and the Underwriters shall have received from Xxxxxx Godward LLP
a favorable opinion, addressed to the Representatives and dated such
Closing Date, with respect to the Shares, the Registration Statement and
the Prospectus, and such other related matters, as the Representatives
may reasonably request, and the Company shall have furnished to Xxxxxx
Godward LLP such documents as they may reasonably request for the purpose
of enabling them to pass upon such matters.
(i) The Representatives shall have received copies of the Lock-up
Agreements executed by each entity or person described in Section 4(n).
(j) The Company shall have furnished or caused to be furnished to
the Representatives such further certificates or documents as the
Representatives shall have reasonably requested.
6. Covenants of the Company.
------------------------
(a) The Company covenants and agrees as follows:
(i) The Company will use its best efforts to cause the
Registration
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Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto, to become effective as
promptly as possible. The Company shall prepare the Prospectus in a
form approved by the Representatives and file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than the
Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the
Securities Act.
(ii) The Company shall promptly advise the Representatives in
writing (i) when any amendment to the Registration Statement shall
have become effective, (ii) of any request by the Commission for any
amendment of the Registration Statement or the Prospectus or for any
additional information, (iii) of the prevention or suspension of the
use of any preliminary prospectus or the Prospectus or of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company shall not file any amendment of the
Registration Statement or supplement to the Prospectus unless the
Company has furnished the Representatives a copy for its review
prior to filing and shall not file any such proposed amendment or
supplement to which the Representatives reasonably object. The
Company shall use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(iii) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules,
any event occurs as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which
they were made not misleading, or if it shall be necessary to amend
or supplement the Prospectus to comply with the Securities Act or
the Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (ii) of this
Section 6(a), an amendment or supplement which shall correct such
statement or omission or an amendment which shall effect such
compliance.
(iv) The Company shall make generally available to its
security holders and to the Representatives 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
-20-
earning statement (which need not be audited) of the Company,
covering such 12-month period, which shall satisfy the provisions of
Section 11(a) of the Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and
amendments thereof) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and all amendments
thereof and, so long as delivery of a prospectus by an Underwriter
or dealer may be required by the Securities Act or the Rules, as
many copies of any preliminary prospectus and the Prospectus and any
amendments thereof and supplements thereto as the Representatives
may reasonably request.
(vi) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and
sale in connection with the offering under the laws of such
jurisdictions as the Representatives may designate and shall
maintain such qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the Company
shall not be required in connection therewith, as a condition
thereof, to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself
to taxation as doing business in any jurisdiction.
(vii) Without the prior written consent of CIBC World Markets
Corp., for a period of 180 days after the date of this Agreement,
the Company and each of its individual directors, executive officers
and holders of at least 100,000 Common Shares of the Company shall
not issue, sell or register with the Commission (other than on Form
S-8 or on any successor form), or otherwise dispose of, directly or
indirectly, any equity securities of the Company (or any securities
convertible into, exercisable for or exchangeable for equity
securities of the Company), except for the issuance of the Shares
pursuant to the Registration Statement and the issuance of shares
pursuant to the Company's existing stock option plan or bonus plan
as described in the Registration Statement and the Prospectus. In
the event that during this period, (i) any shares are issued
pursuant to the Company's existing stock option plan or bonus plan
that are exercisable during such 180 day period or (ii) any
registration is effected on Form S-8 or on any successor form
relating to shares that are exercisable during such 180 period, the
Company shall obtain the written agreement of such grantee or
purchaser or holder of such registered securities that, for a period
of 180 days after the date of this Agreement, such person will not,
without the prior written consent of CIBC World Markets Corp., offer
for sale, sell, distribute, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or exercise any
registration rights with respect to, any shares of Common
-21-
Shares (or any securities convertible into, exercisable for, or
exchangeable for any shares of Common Shares) owned by such person.
(viii) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and
by the Nasdaq National Market (including any required registration
under the Exchange Act).
(ix) The Company will apply the net proceeds from the
offering of the Shares in the manner set forth under "Use of
Proceeds" in the Prospectus.
(x) Company will comply with all applicable securities laws
and other applicable laws, rules and regulations in each foreign
jurisdiction in which the Directed Shares are offered in connection
with the Friends and Family Program.
(xi) The Company will ensure that the Directed Shares will be
restricted, to the extent required by the NASD or the NASD rules,
from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of the effectiveness of
the Registration Statement. The Representatives will notify the
Company as to which Participants will need to be so restricted. The
Company shall direct the transfer agent to place stop transfer
restrictions upon such securities for such period of time.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses
incident to the public offering of the Shares and the performance of the
obligations of the Company under this Agreement including those relating
to: (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the
Registration Statement and the Prospectus, and the printing, filing and
distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters; (iii) the registration
or qualification of the Shares for offer and sale under the securities or
Blue Sky laws of the various jurisdictions referred to in Section
6(a)(vi), including the reasonable fees and disbursements of counsel for
the Underwriters in connection with such registration and qualification
and the preparation, printing, distribution and shipment of preliminary
and supplementary Blue Sky memoranda; (iv) the furnishing (including
costs of shipping and mailing) to the Representatives and to the
Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several
documents required by this Section to be so furnished, as may be
reasonably requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold;
(v) the filing fees
-22-
of the NASD in connection with its review of the
terms of the public offering and reasonable fees and disbursements of
counsel for the Underwriters in connection with such review; (vi)
inclusion of the Shares for quotation on the Nasdaq National Market; and
(vii) all transfer taxes, if any, with respect to the sale and delivery
of the Shares by the Company to the Underwriters (viii) payments to
counsel for costs incurred by the Underwriters in connection with the
Friends and Family Program and payment of any stamp duties, similar taxes
or duties or other taxes, if any, incurred by the Underwriters in
connection with the Friends and Family Program. Subject to the provisions
of Section 9, the Underwriters agree to pay, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement not payable by the
Company pursuant to the preceding sentence, including, without
limitation, the fees and disbursements of counsel for the Underwriters.
(c) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Shares
Closing Date, any rumor, publication or event relating to or affecting
the Company shall occur as a result of which in the Representatives'
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus and any
integrated prospectus), the Company will, after notice from the
Representatives advising the Company to the effect set forth above,
forthwith prepare, consult with the Representatives concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to the Representatives, responding to or
commenting on such rumor, publication or event.
7. Indemnification.
--------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Securities Act, the Exchange
Act or other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise
out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment thereof or
supplement thereto, or in any Blue Sky application or other information
or other documents executed by the Company filed in any state or other
jurisdiction to qualify any or all of the Shares under the securities
laws thereof (any such application, document or information being
hereinafter referred to as a "Blue Sky Application") or arise out of or
are based
-23-
upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) in whole or in part upon any
breach of the representations and warranties set forth in Section 4
hereof, (iii) in whole or in part upon any failure of the Company to
perform any of its obligations hereunder or under law or (iv) any untrue
statement or alleged untrue statement of any material fact contained in
any audio or visual materials prepared by the Company or based upon
written information furnished by or on behalf of the Company, including
(without limitation) slides, videos, films, tape recordings used in
connection with the marketing of the Shares, including (without
limitation) statements communicated to securities analysts employed by
the Underwriters; provided, however, that such indemnity shall not inure
to the benefit of any Underwriter (or any person controlling such
Underwriter) on account of any losses, claims, damages or liabilities
arising from the sale of the Shares to any person by such Underwriter if
such untrue statement or omission or alleged untrue statement or omission
was made in such preliminary prospectus, the Registration Statement or
the Prospectus, or such amendment or supplement thereto, or in any Blue
Sky Application in reliance upon and in conformity with information
furnished in writing to the Company by the Representatives on behalf of
any Underwriter specifically for use therein and provided, further, that
the Company will not be liable to any Underwriter with respect to any
Prospectus to the extent that the Company shall sustain the burden of
proving that any such loss, liability, claim, damage or expense resulted
from the fact that such Underwriter, in contravention of a requirement of
this Agreement or applicable law, sold Shares to a person to whom such
Underwriter failed to send or give, at or prior to the Closing Date, a
copy of the Prospectus, as then amended or supplemented if: (X) the
Company has previously furnished copies thereof (sufficiently in advance
of the Closing Time to allow for distribution by the Closing Time) to the
Underwriter and the loss, liability, claim, damage or expense of such
Underwriter resulted from an untrue statement or omission of a material
fact contained in or omitted from the preliminary prospectus which was
corrected in the Prospectus as, if applicable, amended or supplemented
prior to the Closing Time and such Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person
and (Y) such failure to give or send such Prospectus by the Closing Time
to the party or parties asserting such loss, liability, claim, damage or
expense would have constituted a valid defense to the claim asserted by
such person. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
The Company agrees to indemnify and hold harmless the Representatives
and each person, if any, who controls any Representative within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act against any and all losses, claims, damages, expenses and liabilities
(including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted) (i) arising out of or
based upon any untrue statement or alleged untrue statement of a
-24-
material fact contained in any material prepared by or with the consent
of the Company for distribution to Participants in connection with the
Friends and Family Program or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (ii) arising out of or based upon the failure of any
Participant to pay for and accept delivery of Directed Shares otherwise
reserved for such Participant pursuant to the Friends and Family Program,
and (iii) related to, arising out of, or in connection with the Friends
and Family Program, other than losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of the Representatives.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, each director of the Company, and each officer of
the Company who signs the Registration Statement, to the same extent as
the foregoing indemnity from the Company to each Underwriter, but only
insofar as such losses, claims, damages or liabilities arise out of or
are based upon any untrue statement or omission or alleged untrue
statement or omission which was made in any preliminary prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, contained in the (i) concession and reallowance
figures appearing under the caption "Underwriting" in the Prospectus and
(ii) the stabilization information contained under the caption
"Underwriting" in the Prospectus; provided, however, that the obligation
of each Underwriter to indemnify the Company (including any controlling
person, director or officer thereof) shall be limited to the net proceeds
received by the Company from such Underwriter.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which
a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 7(a) or 7(b) shall be available
to any party who shall fail to give notice as provided in this Section
7(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by
the failure to give such notice but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not
relieve it from any liability that it may have to any indemnified party
for contribution or otherwise than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and
-25-
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the
defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in
writing by the indemnifying parties, (ii) the indemnified party shall
have been advised by counsel in writing that there may be one or more
legal defenses available to it which are different from or in addition to
those available to the indemnifying party (in which case the indemnifying
parties shall not have the right to direct the defense of such action on
behalf of the indemnified party) or (iii) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of
which cases the fees and expenses of counsel shall be at the expense of
the indemnifying parties. In no event shall the indemnifying parties be
responsible for the fees and expenses of more than one counsel for all
indemnified parties in connection with any one or separate but similar or
related actions in the same jurisdiction arising out of the same
allegations or circumstances, unless such indemnified party has a
separate defense or counter-claim to such actions. An indemnifying party
shall not be liable for any settlement of any action, suit, proceeding or
claim effected without its written consent, which consent shall not be
unreasonably withheld or delayed.
8. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for
in Section 7(a) or 7(b) is due in accordance with its terms but for any
reason is held to be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b), then each indemnifying
party shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution received by any person entitled hereunder to
contribution from any person who may be liable for contribution) to which
the indemnified party may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other from the offering of the Shares or, if
such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received
notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to
be in the same proportion as (x) the total
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proceeds from the offering (net of underwriting discounts but before
deducting expenses) received by the Company, as set forth in the table on
the cover page of the Prospectus, bear to (y) the underwriting discounts
received by the Underwriters, as set forth in the table on the cover page
of the Prospectus. The relative fault of the Company or the Underwriters
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact related to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8, (i) in no case shall any Underwriter
(except as may be provided in the Agreement Among Underwriters) be liable
or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder; and
(ii) the Company shall be liable and responsible for any amount in excess
of such underwriting discount provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of the Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to
clauses (i) and (ii) in the immediately preceding sentence of this
Section 8. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be
made against another party or parties under this Section, notify such
party or parties from whom contribution may be sought, but the omission
so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or
otherwise than under this Section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim
settled without its written consent. The Underwriter's obligations to
contribute pursuant to this Section 8 are several in proportion to their
respective underwriting commitments and not joint.
9. Termination. This Agreement may be terminated with respect to the
-----------
Shares to be purchased on a Closing Date by the Representatives by notifying the
Company at any time:
(a) in the absolute discretion of the Representatives at or before
any
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Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Representatives will in the future materially disrupt,
the securities markets; (ii) if there has occurred any new outbreak or
material escalation of hostilities or other calamity or crisis the effect
of which on the financial markets of the United States is such as to make
it, in the judgment of the Representatives, inadvisable to proceed with
the offering; (iii) if there shall be such a material adverse change in
general financial, political or economic conditions or the effect of
international conditions on the financial markets in the United States is
such as to make it, in the judgment of the Representatives, inadvisable
or impracticable to market the Shares; (iv) if trading in the Shares has
been suspended by the Commission or trading generally on the New York
Stock Exchange, Inc., on the American Stock Exchange, Inc. or the Nasdaq
National Market has been suspended or limited, or minimum or maximum
ranges for prices for securities shall have been fixed, or maximum ranges
for prices for securities have been required, by said exchanges or by
order of the Commission, the National Association of Securities Dealers,
Inc., or any other governmental or regulatory authority; or (v) if a
banking moratorium has been declared by any state or Federal authority;
or (vi) if, in the judgment of the Representatives, there has occurred a
Material Adverse Effect, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as required
by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. Substitution of Underwriters. If one or more of the Underwriters
----------------------------
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 9) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such
-28-
arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date, then
each of the nondefaulting Underwriters shall be obligated to purchase
such Shares on the terms herein set forth in proportion to their
respective obligations hereunder; provided, that in no event shall the
maximum number of Shares that any Underwriter has agreed to purchase
pursuant to Section 1 be increased pursuant to this Section 10 by more
than one-ninth of such number of Shares without the written consent of
such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to one additional business day within which it
may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representatives to purchase such Shares
upon the terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 6(b),
7, 8 and 9. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.
11. Miscellaneous. The respective agreements, representations,
-------------
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(b), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
-29-
This Agreement has been and is made for the benefit of the
Underwriters, the Company and their respective successors and assigns, and, to
the extent expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph if subsequently confirmed in
writing, (a) if to the Representatives, c/o CIBC World Markets Corp., Xxx Xxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxx Xxxxxx, with a copy
to Xxxxxx Godward LLP, One Xxxxx Center, 0000 00xx Xxxxxx, Xxxxxx, Xxxxxxxx
00000 Attention: Xxxxxx Xxxxx, Esq., and (b) if to the Company, to its agent
for service as such agent's address appears on the cover page of the
Registration Statement with a copy to Xxxxxx, Halter & Xxxxxxxx LLP, 1400
XxXxxxxx Investment Center, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxxx Esq.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
PECO II, Inc.
By
------------------------------------
Title:
Confirmed:
CIBC WORLD MARKETS CORP.
FLEETBOSTON XXXXXXXXX XXXXXXXX INC.
XXXXXX XXXXXX PARTNERS LLC
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By CIBC WORLD MARKETS CORP.
By
------------------------------
Title:
-31-
SCHEDULE I
Number of
Firm Shares to
Name Be Purchased
---- ------------
CIBC World Markets Corp.
FleetBoston Xxxxxxxxx Xxxxxxxx Inc.
Xxxxxx Xxxxxx Partners LLC
------------
Total
============
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