EXHIBIT 1.1
Active Power, Inc.
Common Stock, par value $0.001 per share
-----------------
Underwriting Agreement
----------------------
___________, 2000
Xxxxxxx, Xxxxx & Co.,
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated,
Xxxxxx Xxxxxxx & Co. Incorporated, and
CIBC World Markets Corp.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Active Power, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
8,000,000 shares and, at the election of the Underwriters, up to 900,000
additional shares of Common Stock, par value $0.001 per share ("Stock"), of the
Company and the stockholder of the Company named in Schedule II hereto (the
"Selling Stockholder") proposes, subject to the terms and conditions stated
herein, to sell to the Underwriters, at the election of the Underwriters, up to
300,000 additional shares of Stock. The aggregate of 8,000,000 shares to be sold
by the Company is herein called the "Firm Shares" and the aggregate of 1,200,000
additional shares to be sold by the Company and the Selling Stockholder is
herein called the "Optional Shares". The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-____) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any post-
effective amendment thereto or the Rule 462(b) Registration Statement, if any,
has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the Act is hereinafter called
a "Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the
Act to be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial Registration
Statement became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are hereinafter
collectively called the "Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Xxxxxxx, Xxxxx & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Xxxxxxx, Sachs & Co. expressly for use
therein;
(iv) The Company has not sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock (other than the issuance of capital
stock upon the exercise of options described in the Registration Statement and
the Prospectus) or long-term debt of the Company or any material adverse change,
or any development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus;
2
(v) The Company has good and marketable title to all personal property
owned by it, free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company; and any real property and buildings
held under lease by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company; the Company does not own any real property;
(vi) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so qualified in
any such jurisdiction;
(vii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; the
Company does not own or control, directly or indirectly, any shares of capital
stock of any other corporation or any interest in any partnership, joint
venture, limited liability company or other business enterprise;
(viii) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable, free from all preemptive or
similar rights, and will conform to the description of the Stock contained in
the Prospectus;
(ix) The issue and sale of the Shares to be sold by the Company and the
compliance by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, (a) any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the property or assets of the
Company is subject; (b) the Certificate of Incorporation or By-laws of the
Company; or (c) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
properties, except in the case of clause (a), for such breaches or violations as
would not either individually or in the aggregate have a material adverse effect
on the condition, business, properties or results of operations of the Company
("Material Adverse Effect"); and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares, registration of the Common Stock under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters;
3
(x) The Company is not (a) in violation of its Certificate of
Incorporation or By-laws or (b) in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound,
except in the case of clause (b), for such defaults as would not, either
individually or in the aggregate, have a Material Adverse Effect;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock"; insofar as they purport to constitute a summary
of the terms of the Stock, and under the caption "Underwriting" (other than
paragraphs five, nine, ten, eleven and fourteen under such caption), insofar as
they purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(xii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely to the
Company, would individually or in the aggregate have a material adverse effect
on the current or future financial position, stockholders' equity or results of
operations of the Company; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(xiii) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act");
(xiv) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(xv) Ernst & Young LLP, who have certified certain financial statements
of the Company, are independent public accountants as required by the Act and
the rules and regulations of the Commission thereunder;
(xvi) The Company owns or possesses, or can acquire on reasonable terms,
all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names currently employed by it in connection with its business as
described in the Prospectus and proposed to be employed by it in connection with
its High Inertia Turbine product, other than those which if not so owned or
possessed would not have a material adverse effect on the condition, financial
or otherwise, or on the earnings, business or operations of the Company; and the
Company has not received any notice of infringement of or conflict with asserted
rights of others with respect to any patent, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed by it
in connection with its business as described in the Prospectus which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company;
(xvii) The Company maintains insurance against such losses and risks and
in such amounts as are customary in the business in which it is engaged; the
Company has not within the last five
4
years been refused any insurance coverage sought or applied for; and the Company
does not have any 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 materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company;
(xviii) The Company possesses all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business as described in the Prospectus, except for
certificates, authorizations and permits which, if not obtained, would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Company to conduct its business as described in the Prospectus; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company, except as
described in or contemplated by the Prospectus;
(xix) The Company (a) is in compliance with any and all applicable
federal, state and local laws and regulations relating to the protection of
human health and safety, or the use, disposal, release, generation, storage or
transportation of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances ("Environmental Laws"), (b) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
its business as described in the Prospectus and (c) is in compliance with all
terms and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company;
(xx) There are no costs or liabilities associated with Environmental
Laws (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) which would, singly
or in the aggregate, have a material adverse effect on the Company; and
(xxi) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (c) access to assets is permitted only in
accordance with management's general or specific authorization and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(b) The Selling Stockholder represents and warrants to, and agrees
with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and the Power of Attorney and the Custody Agreement hereinafter
referred to, and for the sale and delivery of the Shares to be sold by such
Selling
5
Stockholder hereunder, have been obtained; and such Selling Stockholder has
full right, power and authority to enter into this Agreement, the Power-of-
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of the
provisions of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound or to which any of the property or assets of
such Selling Stockholder is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over such
Selling Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to such Time
of Delivery, such Selling Stockholder will have, good and valid title to
the Shares to be sold by such Selling Stockholder hereunder, free and clear
of all liens, encumbrances, equities or claims; and, upon delivery of such
Shares and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the several Underwriters;
(iv) Such Selling Stockholder will execute and deliver an agreement
substantially to the effect that, during the period beginning from the date
hereof and continuing to and including the date 180 days after the date of
the Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided therein, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar securities
(other than pursuant to employee stock option plans existing on, or upon
the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent, and in form and substance satisfactory to you;
(v) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading;
6
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or at
the Time of Delivery (as hereinafter defined) of the Optional Shares to be
sold by the Selling Stockholder a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the Shares
to be sold by such Selling Stockholder hereunder have been placed in
custody under a Custody Agreement, in the form heretofore furnished to you
(the "Custody Agreement"), duly executed and delivered by such Selling
Stockholder to the Company, as custodian (the "Custodian"), and such
Selling Stockholder has duly executed and delivered a Power of Attorney, in
the form heretofore furnished to you (the "Power of Attorney"), appointing
the persons indicated in Schedule II hereto, and each of them, as such
Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of such Selling
Stockholder, to determine the purchase price to be paid by the Underwriters
to the Selling Stockholders as provided in Section 2 hereof, to authorize
the delivery of the Shares to be sold by such Selling Stockholder hereunder
and otherwise to act on behalf of such Selling Stockholder in connection
with the transactions contemplated by this Agreement and the Custody
Agreement; and
(ix) The Shares represented by the certificates held in custody for
such Selling Stockholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder; the arrangements made by such
Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that
extent irrevocable; the obligations of the Selling Stockholder hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of the Selling Stockholder or by the occurrence of any other
event; if the Selling Stockholder should die or become incapacitated, or if
any other such event should occur, before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by or on
behalf of the Selling Stockholder in accordance with the terms and
conditions of this Agreement and of the Custody Agreement; and actions
taken by the Attorneys-in-Fact pursuant to the Power of Attorney shall be
as valid as if such death, incapacity or other event had not occurred,
regardless of whether or not the Custodian, the Attorneys-in-Fact, or any
of them, shall have received notice of such death, incapacity or other
event.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $________, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company and the Selling Stockholder
agree, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company and the Selling Stockholder, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum
7
number of Optional Shares which such Underwriter is entitled to purchase as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
The Company and the Selling Stockholder hereby grant, severally and not
jointly, to the Underwriters the right to purchase at their election up to
1,200,000 Optional Shares, at the purchase price per share set forth in the
paragraph above, for the sole purpose of covering sales of shares in excess of
the number of Firm Shares. Any such election to purchase Optional Shares shall
be made in proportion to the maximum number of Optional Shares to be sold by the
Company and the Selling Stockholder as set forth in Schedule II hereto. Any
such election to purchase Optional Shares may be exercised only by written
notice from you to the Company and the Attorneys-in-Fact, given within a period
of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company and the Attorneys-in-Fact otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Xxxxxxx, Xxxxx & Co. may request upon at least forty-eight
hours' prior notice to the Company and the Selling Stockholder shall be
delivered by or on behalf of the Company and the Selling Stockholder to
Xxxxxxx, Sachs & Co., through the facilities of the Depository Trust
Company ("DTC"), for the account of such Underwriter, against payment by or
on behalf of such Underwriter of the purchase price therefor by wire
transfer of Federal (same-day) funds to the account specified by the
Company and the Selling Stockholder to Xxxxxxx, Xxxxx & Co. at least forty-
eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery (as defined below)
with respect thereto at the office of DTC or its designated custodian (the
"Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
_____, 2000 or such other time and date as Xxxxxxx, Sachs & Co. and the
Company may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Xxxxxxx, Xxxxx &
Co. in the written notice given by Xxxxxxx, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time
and date as Xxxxxxx, Xxxxx & Co., the Company and the Selling Stockholder
may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery", such time and date
for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date
for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof, will be delivered at the
offices of Xxxxxx & Xxxxxx L.L.P., 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000 (the "Closing Location"), and the Shares will be delivered at
the Designated
8
Office, all at such Time of Delivery. A meeting will be held at the Closing
Location at .......p.m., Austin, Texas time, on the New York Business Day
next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the 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 Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in
9
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time
of issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries,
if any, (which need not be audited) complying with Section 11(a) of the Act
and the rules and regulations thereunder (including, at the option of the
Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its stockholders consolidated summary financial information of
the Company and its subsidiaries, if any, for such quarter in reasonable
detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries, if
any, are consolidated in reports furnished to its stockholders generally or
to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotation's ("NASDAQ")
National Market System ("NMS");
(j) To file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Act; and
10
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company and the Selling Stockholder covenant and agree with the
several Underwriters that (a) the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel
(and of the Selling Stockholder's counsel, if such counsel is the same counsel
as the Company's counsel) and accountants in connection with the registration of
the Shares under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey; (iv) all fees and expenses in connection
with listing the Shares on the NASDAQ NMS; (v) the filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar; and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section; and (b) such Selling Stockholder will pay or cause to be paid all costs
and expenses incident to the performance of such Selling Stockholder's
obligations hereunder which are not otherwise specifically provided for in this
Section, including (i) any fees and expenses of counsel for such Selling
Stockholder (if other than the Company's counsel), (ii) the fees and expenses of
the Attorneys-in-Fact and the Custodian and (iii) all expenses and taxes
incident to the sale and delivery of the Shares to be sold by such Selling
Stockholder to the Underwriters hereunder. It is understood, however, that the
Company shall bear, and the Selling Stockholder shall not be required to pay or
to reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Shares pursuant to this Agreement and
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Stockholder shall have performed all of its and his obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under
11
the Act and in accordance with Section 5(a) hereof; if the Company has
elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement
shall have become effective by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) Xxxxxx & Xxxxxx L.L.P., counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery,
with respect to the matters covered in paragraphs (i), (ii), (vi), (x) and
(xii) of subsection (c) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
(c) Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company is duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and, to such
counsel's knowledge, are fully paid and non-assessable; the Shares
being delivered at such Time of Delivery have been duly authorized
and when issued and delivered to the Underwriters against payment
therefor in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable; and the Shares conform
to the description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction set forth in Schedule I to
such counsel's opinion;
(iv) To such counsel's knowledge, the Company does not own or
control, directly or indirectly, any shares of capital stock of any
other corporation or any interest in any partnership, joint venture,
limited liability company or other business enterprise;
(v) To such counsel's knowledge and other than as set forth in
the Prospectus, there are no legal or governmental proceedings
pending to which the Company is a party or of which any property of
the Company is the subject which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement
thereto) that are not so described; and, to such counsel's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
12
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach or violation of any of the material terms or provisions
of, or constitute a material default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known
to such counsel to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the
Company are subject that is filed as an exhibit to the Registration
Statement, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation (other than
applicable state securities or Blue Sky laws, as to which such
counsel need express no opinion) known to such counsel of any court
or governmental agency or body having jurisdiction over the Company
or any of its properties;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
is required for the issue and sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement,
except (A) as have been obtained under the Act and the Exchange Act
or (B) such as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Shares, as to
which such counsel need express no opinion;
(ix) To such counsel's knowledge, the Company is not in
violation of its Certificate of Incorporation;
(x) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete
and fair;
(xi) The Company is not an "investment company", as such term is
defined in the Investment Company Act; and
(xii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements,
including the notes and schedules thereto, and the other financial
data included in the Registration Statement and the Prospectus, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the applicable
rules and regulations thereunder; and they do not know of any
amendment to the Registration Statement required to be filed or of
any contracts or other documents of a character required to be filed
as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are
not filed or described as required.
13
In addition, such opinion shall also contain a statement of
such counsel to the effect that based upon such counsel's
participation in conferences with certain officers and other
representatives of the Company, its independent public accountants,
the Underwriters and the Underwriter's counsel at which the contents
of the Registration Statement, the Prospectus and related matters
were discussed, (i) such counsel has no reason to believe that the
Registration Statement or any further amendment thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, including the notes and schedules thereto, and the other
financial data included in the Registration Statement, as to which
such counsel need express no belief), at the time the Registration
Statement became effective or as of such Time of Delivery, contained
or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (ii)
such counsel confirms that it has no reason to believe that the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, including the notes and schedules thereto, and the other
financial data included in the Prospectus, as to which such counsel
need express no belief), as of its date or as of the Time of
Delivery, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) Xxxxxxx, Phleger & Xxxxxxxx LLP, acting as special counsel for the
Selling Stockholder, as indicated in Schedule II hereto, shall have
furnished to you its written opinion with respect to the Selling
Stockholder (a draft of such opinion is attached as Annex II(c) hereto),
dated such Time of Delivery, in form and substance satisfactory to you, to
the effect that:
(i) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid
and binding agreements of such Selling Stockholder in accordance with
their terms;
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder; and the sale of the Shares to be
sold by such Selling Stockholder hereunder and the compliance by such
Selling Stockholder with all of the provisions of this Agreement, the
Power-of-Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to
which such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the property or assets of such
Selling Stockholder is subject that would have a material adverse effect
on the ability of the Selling Stockholder to perform his obligations
under this Agreement, nor will such action result in any violation of
the provisions of any statute or any order, rule or regulation (other
than applicable state securities or Blue Sky laws, as to which such
counsel need express no opinion) known to such counsel of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
14
(iii) No consent, approval, authorization or, to such counsel's
knowledge, order of any court or governmental agency or body is required
for the consummation of the transactions contemplated by this Agreement
in connection with the Shares to be sold by such Selling Stockholder
hereunder, except (A) as have been obtained under the Act and the
Exchange Act or (B) such as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of such
Shares by the Underwriters, as to which such counsel need express no
opinion;
(iv) Immediately prior to such Time of Delivery, such Selling
Stockholder was the sole registered owner of the Shares to be sold by
the Selling Stockholder under this Agreement and, to the knowledge of
such counsel, there are no facts or circumstances that would lead such
counsel to believe that, as of such Time of Delivery, such Selling
Stockholder is in breach of the warranties described in Section 8.108 of
the Texas Business and Commerce Code; and
(v) The laws of the State of Texas govern the delivery of the
certificates evidencing the Shares to be sold by the Selling Stockholder
to the Underwriters and payment by the Underwriters of the purchase
price for such Shares, and upon such delivery and payment, the
Underwriters will acquire such Shares free of all adverse claims (as
such term is defined in Section 8.102 of the Texas Business and Commerce
Code), assuming that the Underwriters do not have notice of any adverse
claim (as such term is defined in Section 8.102 of the Texas Business
and Commerce Code).
In rendering the opinion in paragraph (iv), such counsel may rely
upon a certificate of such Selling Stockholder in respect of matters
of fact as to ownership of, and liens, encumbrances, equities or
claims on, the Shares sold by such Selling Stockholder, provided that
such counsel shall state that they believe that both you and they are
justified in relying upon such certificate, and that copies thereof
are furnished to you;
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Ernst &
Young LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(f) (i) The Company shall not have sustained since the date of the
latest audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock or long-term debt of the Company or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company, otherwise than as set forth or
contemplated in
15
the Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time
of Delivery on the terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities or preferred stock by
any "nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ NMS; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ NMS; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or Texas State authorities; or (iv)
the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war, if the
effect of any such event specified in this clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on NASDAQ NMS;
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each executive officer, director, stockholder
and option holder, substantially to the effect set forth in Subsection 5(e)
hereof and otherwise in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(l) The Company and the Selling Stockholder shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and of the Selling Stockholder, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholder, respectively, herein
at and as of such Time of Delivery, as to the performance by the Company
and the Selling Stockholder of all of their respective obligations
hereunder to be performed at or prior to such Time of Delivery, and as to
such other matters as you may reasonably request, and the Company shall
have furnished or caused to be furnished certificates as to the matters set
forth in subsections (a) and (f) of this Section.
8. (a) The Company and the Selling Stockholder, jointly and severally,
will indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus,
16
the Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company and the Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Xxxxxxx, Xxxxx &
Co. expressly for use therein; provided, further, that the liability of the
Selling Stockholder pursuant to this Section 8(a) shall not exceed the product
of the number of Optional Shares sold by such Selling Stockholder and the
initial public offering price of the Shares as set forth in the Prospectus; and
provided, further, that such Selling Stockholder shall not have any obligation
under this Section 8(a) unless the Underwriters have purchased any Optional
Shares from the Selling Stockholder pursuant to the rights granted to them by
the Selling Stockholder in Section 2 of this Agreement.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Xxxxxxx, Xxxxx & Co. expressly for use therein; and will
reimburse the Company and the Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or the Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, that no Underwriter shall have any obligation
to the Selling Stockholder under this Section 8(b) unless the Underwriters have
purchased any Optional Shares from the Selling Stockholder pursuant to the
rights granted to them by the Selling Stockholder in Section 2 of this
Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action 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
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to
17
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholder on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholder bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholder on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholder and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) 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 in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue
18
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholder under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or the Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company and the Selling Stockholder shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholder that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholder notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholder shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholder shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholder shall not exercise the right
described in subsection (b)
19
above to require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Company and the Selling Stockholder to sell the Optional Shares) shall thereupon
terminate, without liability on the part of any non-defaulting Underwriter or
the Company or the Selling Stockholder, except for the expenses to be borne by
the Company and the Selling Stockholder and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or the Selling Stockholder, or any officer or
director or controlling person of the Company, or any controlling person of the
Selling Stockholder, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason, any Shares are not delivered by or on behalf of the
Company and the Selling Stockholder as provided herein, the Company and the
Selling Stockholder, pro rata (based on the number of Shares to be sold by the
Company and such Selling Stockholder hereunder), will reimburse the Underwriters
through you for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company and the Selling Stockholder shall then be under no
further liability in respect of the Shares not so delivered to any Underwriter
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Xxxxxxx, Sachs & Co. on behalf of you as the
representatives; and in all dealings with the Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Xxxxxxx, Xxxxx &
Co., 00 Xxx Xxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will
20
be supplied to the Company or the Selling Stockholder by you upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholder and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company, the Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
21
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
the Selling Stockholder. It is understood that your acceptance of this letter
on behalf of each of the Underwriters is pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company and the Selling Stockholder for examination upon request, but
without warranty on your part as to the authority of the signers thereof. Any
person executing and delivering this Agreement as Attorney-in-Fact for a Selling
Stockholder represents by so doing that he has been duly appointed as Attorney-
in-Fact by such Selling Stockholder pursuant to a validly existing and binding
Power-of-Attorney which authorizes such Attorney-in-Fact to take such action.
Very truly yours,
Active Power, Inc.
By:
---------------------------------
Name:
Title:
The Selling Stockholder
---------------------------------
Xxxxxx X. Xxxxxxxxx, III
Accepted as of the date hereof:
Xxxxxxx, Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated,
Xxxxxx Xxxxxxx & Co. Incorporated, and
CIBC World Markets Corp.
By:
-------------------------------
(Xxxxxxx, Sachs & Co.)
22
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
Xxxxxxx, Xxxxx & Co.............................................
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated..............
Xxxxxx Xxxxxxx & Co. Incorporated...............................
CIBC World Markets Corp.........................................
[Names of other Underwriters]...................................
--------------- ------------------
Total................................................ 8,000,000 1,200,000
=============== ==================
23
SCHEDULE II
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
------------------- ------------------
The Company.................................................. 8,000,000 900,000
The Selling Stockholder:..................................
Xxxxxx X. Xxxxxxxxx, III (a)......................... -0- 300,000
------------------- ------------------
Total.................................................... 8,000,000 1,200,000
=================== ==================
(a) Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000 is acting as special counsel for the Selling Stockholder, and the
Selling Stockholder has appointed ____________ and ______________, and each of
them, as his Attorneys-in-Fact.
24
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(e) of the Underwriting Agreement, Ernst & Young LLP
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable published
rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited interim financial statements, selected financial data, pro
forma financial information, financial forecasts and/or financial
statements derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports thereon,
copies of which have been separately furnished to the representatives of
the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
statements of income, balance sheets and statements of cash flows included
in the Prospectus as indicated in their reports thereon copies of which
have been separately furnished to the Representatives and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding whether
the unaudited financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations, nothing came to their attention that cause them to believe
that the unaudited financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(iv) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(v) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company, inspection of the minute books of the
Company since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that
caused them to believe that:
F-1
(A) (i) the unaudited statements of income, balance sheets and
statements of cash flows included in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, or (ii) any material modifications should be made to the
unaudited statements of income, balance sheets and statements of cash
flows included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited financial statements included in
the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited financial
statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and
referred to in clause (B) were not determined on a basis
substantially consistent with the basis for the audited financial
statements included in the Prospectus;
(D) any unaudited pro forma financial statements included in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the capital stock
(other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and
upon conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included
in the Prospectus) or any increase in the long-term debt of the
Company, or any decreases in net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with amounts shown in the latest balance sheet included
in the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in clause (E) there were any decreases in net revenues or
operating profit or the total or per share amounts of net income or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
the comparable period of the preceding year and with any other period
of corresponding length specified by the Representatives, except in
each case for decreases or
F-2
increases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(vi) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (v)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified
by the Representatives, which are derived from the general accounting records
of the Company, which appear in the Prospectus, or in Part II of, or in
exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and have
found them to be in agreement.
F-3
