2,500,000 Shares*
QUANTUM EPITAXIAL DESIGNS, INC.
Common Stock
UNDERWRITING AGREEMENT
November _____, 1997
XXXXXXX & COMPANY, INC.
XXXXXX XXXXXXXXXX XXXXX INC.
As Representatives of the several Underwriters
c/o Needham & Company, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Quantum Epitaxial Designs, Inc., a Pennsylvania corporation (the
"Company"), proposes to issue and sell ________ shares (the "Company Firm
Shares") of the Company's Common Stock, $0.001 par value per share (the "Common
Stock"), and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose to sell an aggregate of _______ shares (the
"Selling Stockholder Firm Shares") of Common Stock, in each case to you and to
the several other Underwriters named in Schedule I hereto (collectively, the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"). The Company and the Selling Stockholders also agreed to
grant to you and the other Underwriters an option (the "Option") to purchase up
to an additional ______ shares (the "Company Option Shares") and ______ shares
of Common Stock (the "Selling Stockholder Option Shares"), respectively, on the
terms and for the purposes set forth in Section 1(b). The Company Firm Shares
and Company Option Shares are collectively referred to herein as the "Company
Shares," and the Selling Stockholder Option Shares are collectively referred to
herein as the "Selling Stockholder Shares." The Company Firm Shares and the
Selling Stockholder Firm Shares are referred to collectively herein as the "Firm
Shares," and the Company Option Shares and Selling Stockholder Option Shares are
collectively referred to herein as the "Option Shares." The Firm Shares and the
Option Shares are referred to collectively herein as the "Shares."
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*Plus an option to purchase up to an additional 375,000 shares to cover
over-allotments.
The Company and each of the Selling Stockholders, intending to be
legally bound, hereby confirm their respective agreements with the
Representatives and the several other Underwriters as follows:
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements of
the Company and the Selling Stockholders herein contained and subject to all the
terms and conditions of this Agreement, (i) the Company agrees to issue and sell
the Company Firm Shares to the several Underwriters, (ii) each Selling
Stockholder, severally and not jointly, agrees to sell to the several
Underwriters the respective number of Selling Stockholder Firm Shares set forth
opposite that Selling Stockholder's name on Schedule II hereto and (iii) each of
the Underwriters, severally and not jointly, agrees to purchase from the Company
and the Selling Stockholders the respective number of Firm Shares set forth
opposite that Underwriter's name in Schedule I hereto, at the purchase price of
$______ for each Firm Share. The number of Firm Shares to be purchased by each
Underwriter from the Company and each Selling Stockholder shall be as nearly as
practicable in the same proportion to the total number of Firm Shares being sold
by the Company and each Selling Stockholder as the number of Firm Shares being
purchased by each Underwriter bears to the total number of Firm Shares to be
sold hereunder.
(b) Subject to all the terms and conditions of this Agreement, the
Company and the Selling Stockholders grant the Option to the several
Underwriters to purchase, severally and not jointly, up to the maximum number of
Option Shares set forth in Schedule II hereto at the same price per share as the
Underwriters shall pay for the Firm Shares. The Option may be exercised only to
cover over-allotments in the sale of the Firm Shares by the Underwriters and may
be exercised in whole or in part at any time on or before the 30th day after the
date of this Agreement upon written or telegraphic notice (the "Option Shares
Notice") by the Representatives to the Company and the Selling Stockholders no
later than 12:00 noon, New York City time, at least two and no more than five
business days before the date specified for closing in the Option Shares Notice
(the "Option Closing Date"), setting forth the aggregate number of Option Shares
to be purchased and the time and date for such purchase. On the Option Closing
Date, the Company and the Selling Stockholders will sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice, and each
Underwriter will purchase such percentage of the Option Shares as is equal to
the percentage of Firm Shares that such Underwriter is purchasing, as adjusted
by the Representatives in such manner as they deem advisable to avoid fractional
shares.
(c) Subject to the terms and conditions of this Agreement, on the
Closing Date (as hereinafter defined) the Company shall issue to the
Representatives warrants in the form attached hereto as Exhibit A (the
"Representatives' Warrants") to purchase an aggregate of _______ shares of
Common Stock at an exercise price equal to ____% of the Price to Public set
forth on the cover page of the Prospectus (as hereinafter defined). The number
of shares of Common Stock subject to each Representatives' Warrant shall be
specified by the Representatives no less than one business day prior to the
Closing Date.
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2. Delivery and Payment. Delivery of the Firm Shares shall be made to the
Representatives for the accounts of the Underwriters against payment of the
purchase price by certified or official bank checks or by wire transfers payable
in same-day funds to the order of the Company for the Company Firm Shares to be
sold by it and to __________, as custodian for the Selling Stockholders (the
"Custodian") for the Firm Shares to be sold by the Selling Stockholders (with
all costs and expenses incurred by the Underwriters in connection with such
settlement in same-day funds, including but not limited to, interest or cost of
funds and expenses, to be borne by the Company) at the office of Xxxxxxx &
Company, Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New
York City time, on the third (or, if the purchase price set forth in Section
1(b) hereof is determined after 4:30 p.m., Washington D.C. time, the fourth)
business day following the commencement of the offering contemplated by this
Agreement, or at such time on such other date, not later than seven business
days after the date of this Agreement, as may be agreed upon by the Company and
the Representatives (such date is hereinafter referred to as the "Closing
Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and shall
be registered in such names and in such denominations as the Representatives
shall request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Firm Shares and Option Shares by the Company to the
respective Underwriters shall be borne by the Company. The Company will pay and
save each Underwriter and any subsequent holder of the Shares harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Shares.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
(a) A registration statement (Registration No. 333-___) on Form S-1
relating to the Shares, including a preliminary prospectus and such amendments
to such registration statement as may have been required to the date of this
Agreement, has been prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a preliminary
prospectus as contemplated by Rule 430 or Rule 430A of the Rules and Regulations
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included at any time as part of the registration statement. Copies of such
registration statement and amendments and of each related preliminary prospectus
have been delivered to the Representatives. If such registration statement has
not become effective, a further amendment to such registration statement,
including a form of final prospectus, necessary to permit such registration
statement to become effective will be filed promptly by the Company with the
Commission. If such registration statement has become effective, a final
prospectus containing information permitted to be omitted at the time of
effectiveness by Rule 430A of the Rules and Regulations will be filed promptly
by the Company with the Commission in accordance with Rule 424(b) of the Rules
and Regulations. The term "Registration Statement" means the registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including financial statements and all exhibits and any information
deemed to be included by Rule 430A and includes any registration statement
relating to the offering contemplated by this Agreement and filed pursuant to
Rule 462(b) of the Rules and Regulations. The term "Prospectus" means the
prospectus as first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, if no such filing is required, the form of final
prospectus included in the Registration Statement at the Effective Date. Any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement, any preliminary prospectus or the Prospectus
shall be deemed to refer to and include the filing of any document under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") after the
Effective Date, the date of any preliminary prospectus or the date of the
Prospectus, as the case may be, and deemed to be incorporated therein by
reference.
(b) No order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission. On the Effective Date, the date
the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if
required), at all times subsequent to and including the Closing Date and, if
later, the Option Closing Date and when any post-effective amendment to the
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included in the Prospectus, did and will comply with all applicable
provisions of the Act and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations. On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no part of the
Registration Statement, the Prospectus or any such amendment or supplement did
or will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and, if later, the Option Closing Date, the
Prospectus did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties in this Section 3(b) do not apply to
any statements or omissions made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives specifically for inclusion in the Registration Statement or
4
Prospectus or any amendment or supplement thereto. The Company acknowledges that
the statements set forth under the heading "Underwriting" in the Prospectus
constitute the only information relating to any Underwriter furnished in writing
to the Company by the Representatives specifically for inclusion in the
Registration Statement.
(c) The Company does not own, and at the Closing Date and, if later,
the Option Closing Date, will not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any corporation, firm, partnership, joint venture,
association or other entity. The Company is, and at the Closing Date and, if
later, the Option Closing Date, will be, a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has, and at the Closing Date and, if later, the
Option Closing Date, will have, full power and authority to conduct all the
activities conducted by it, to own or lease all the assets owned or leased by it
and to conduct its business as described in the Registration Statement and the
Prospectus. The Company is, and at the Closing Date and, if later, the Option
Closing Date, will be, duly licensed or qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such license or qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not materially and
adversely affect the Company or its business, properties, business prospects,
condition (financial or otherwise) or results of operations. The Company is not,
and at the Closing Date and, if later, the Option Closing Date, will not be,
engaged in any discussions or a party to any agreement or understanding, written
or oral, regarding the acquisition of an interest in any corporation, firm,
partnership, joint venture, association or other entity where such discussions,
agreements or understandings would require amendment to the Registration
Statement pursuant to applicable securities laws. Complete and correct copies of
the certificate of incorporation and of the by-laws of the Company and all
amendments thereto have been delivered to the Representatives, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date
or, if later, the Option Closing Date.
(d) All of the outstanding shares of capital stock of the Company have
been duly authorized, validly issued and are fully paid and nonassessable and
were issued in compliance with all applicable state and federal securities laws;
the Company Firm Shares and the Option Shares have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and nonassessable; the shares of Common Stock issuable upon exercise of the
Representatives' Warrants will be duly authorized and, when issued pursuant to
the terms of the Representatives' Warrants will be validly issued, fully paid
and nonassessable; no preemptive or similar rights exist with respect to any of
the Shares or the issue and sale thereof or with respect to the issuance of the
Representatives' Warrants or the issue and sale of the shares issuable upon the
exercise thereof. The description of the capital stock of the Company in the
Registration Statement and the Prospectus is, and at the Closing Date and, if
later, the Option Closing Date, will be, complete and accurate in all respects.
Except as set forth in the Prospectus, the Company does not have outstanding,
and at the Closing Date and, if later, the Option Closing Date, will not have
outstanding, any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or any contracts or
5
commitments to issue or sell, any shares of capital stock, or any such warrants,
convertible securities or obligations. No further approval or authority of
stockholders or the Board of Directors of the Company will be required for the
transfer and sale of the Selling Stockholder Firm Shares or the issuance and
sale of the Company Firm Shares and the Option Shares as contemplated herein.
(e) The financial statements and schedules included in the
Registration Statement or the Prospectus present fairly the financial condition
of the Company as of the respective dates thereof and the results of operations
and cash flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Prospectus. No other financial statements or schedules of the Company are
required by the Act, the Exchange Act, the Exchange Act Rules and Regulations or
the Rules and Regulations to be included in the Registration Statement or the
Prospectus. Xxxxxx Xxxxxxxx LLP (the "Accountants"), who have reported on such
financial statements and schedules, are independent accountants with respect to
the Company as required by the Act and the Rules and Regulations. The summary
consolidated financial and statistical data included in the Registration
Statement present fairly the information shown therein and have been compiled on
a basis consistent with the financial statements presented therein.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date and, if later, the Option Closing Date, except as set forth in or
contemplated by the Registration Statement and the Prospectus, (i) there has not
been and will not have been any change in the capitalization of the Company
(other than in connection with the exercise of options to purchase the Company's
Common Stock granted pursuant to the Company's stock option plans from the
shares reserved therefor as described in the Registration Statement), or any
material adverse change in the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company,
arising for any reason whatsoever, (ii) the Company has not incurred nor will it
incur, except in the ordinary course of business as described in the Prospectus,
any material liabilities or obligations, direct or contingent, nor has the
Company entered into nor will it enter into, except in the ordinary course of
business as described in the Prospectus, any material transactions other than
pursuant to this Agreement and the transactions referred to herein and (iii) the
Company has not and will not have paid or declared any dividends or other
distributions of any kind on any class of its capital stock.
(g) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its business in
a manner that would cause it to become, an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(h) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its officers in their capacity as such, nor any basis therefor, before or by any
Federal or state court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, wherein an unfavorable ruling,
6
decision or finding might materially and adversely affect the Company or the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company.
(i) The Company has, and at the Closing Date and, if later, the Option
Closing Date, will have, performed all the obligations required to be performed
by it, and is not, and at the Closing Date, and, if later, the Option Closing
Date, will not be, in default, under any contract or other instrument to which
it is a party or by which its property is bound or affected, which default might
reasonably be expected to materially and adversely affect the Company or the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company. To the best knowledge of the Company, no
other party under any contract or other instrument to which it is a party is in
default in any respect thereunder, which default might reasonably be expected to
materially and adversely affect the Company or the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company. The Company is, and at the Closing Date and, if later, the
Option Closing Date, will not be, in violation of any provision of its
certificate or articles of organization or by-laws or other organizational
documents.
(j) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated herein,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-laws
and rules of the National Association of Securities Dealers, Inc. (the "NASD")
in connection with the purchase and distribution by the Underwriters of the
Shares.
(k) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with the terms hereof. The
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the certificate or articles of incorporation or by-laws of the
Company, any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement or other evidence of indebtedness,
lease, contract or other agreement or instrument to which the is a party or by
which the Company, or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or regulation
of any court or other governmental agency or body applicable to the business or
properties of the Company.
(l) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The Company has
7
valid, subsisting and enforceable leases for the properties described in the
Prospectus as leased by it/them. The Company owns or leases all such properties
as are necessary to its operations as now conducted or as proposed to be
conducted, except where the failure to so own or lease would not materially and
adversely affect the Company or the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company.
(m) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company and are enforceable against and by the Company in
accordance with the terms thereof.
(n) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
Section 6 of this Agreement to be delivered to the Representatives was or will
be, when made, inaccurate, untrue or incorrect.
(o) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action designed, or
which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
(p) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement, which rights have not been waived by the holder thereof
as of the date hereof.
(q) The Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act to register the Common Stock, has filed an application
to list the Shares to be sold hereunder on the Nasdaq National Market ("NNM"),
and has received notification that the listing has been approved, subject to
notice of issuance of such Shares.
(r) Except as disclosed in the Prospectus (i) the Company has
sufficient trademarks, trade names, patent rights, mask works, copyrights,
licenses, approvals and governmental authorizations to conduct its business as
now conducted, (ii) the Company has no knowledge of any infringement by it of
trademarks, trade name rights, patent rights, mask work rights, copyrights,
licenses, trade secrets or other similar rights of others, where such
infringement could have a material and adverse effect on the Company or the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company, and (iii) there is no claim being made
against the Company, or to the best of the Company's knowledge, any employee of
the Company regarding trademark, trade name, patent, mask work, copyright,
license, trade secret or other infringement which could have a material and
adverse effect on the Company or the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company.
8
(s) The Company has filed all federal, state, local and foreign income
tax returns which have been required to be filed and has paid all taxes and
assessments received by it to the extent that such taxes or assessments have
become due. The Company has no tax deficiency which has been or, to the best
knowledge of the Company, might be asserted or threatened against it which could
have a material and adverse effect on the Company or the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company.
(t) The Company owns or possesses all authorizations, approvals,
orders, licenses, registrations, other certificates and permits of and from all
governmental regulatory officials and bodies, necessary to conduct its business
as contemplated in the Prospectus, except where the failure to own or possess
all such authorizations, approvals, orders, licenses, registrations, other
certificates and permits would not materially and adversely affect the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company. There is no proceeding
pending or threatened (or any basis therefor known to the Company) which may
cause any such authorization, approval, order, license, registration,
certificate or permit to be revoked, withdrawn, cancelled, suspended or not
renewed; and the Company is conducting its business in compliance with all laws,
rules and regulations applicable thereto (including, without limitation, all
applicable federal, state and local environmental laws and regulations) except
where such noncompliance would not materially and adversely affect the Company
or the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company.
(u) The Company maintains insurance of the types and in the amounts
generally deemed adequate for its business, including, but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(v) The Company has not, nor, to the best of the Company's knowledge,
has any of its respective employees or agents at any time during the last five
years (i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(w) The executive offices and the manufacturing and storage facilities
of the Company (the "Premises"), and all operations presently or formerly
conducted thereon by the Company or any predecessor thereof, are now and, since
the Company began to use such Premises, always have been and, to the knowledge
of the Company, prior to when the Company began to use such Premises, always had
been, in compliance with all federal, state and local statutes, ordinances,
regulations, rules, standards and requirements of common law concerning or
relating to industrial hygiene and the protection of health and the environment
(collectively, the "Environmental Laws"), except to the extent that any failure
to be in such compliance would not materially adversely affect the general
affairs, properties, condition (financial or otherwise), results of operations,
9
stockholders' equity, business or prospects of the Company. There are no
conditions on, about, beneath or arising from the Premises or at any other
location that might give rise to liability, the imposition of a statutory lien
or require a "Response," "Removal" or "Remedial Action," as defined herein,
under any of the Environmental Laws, and that would materially adversely affect
the general affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company. Except
as expressly disclosed in the Prospectus, which disclosed items will not
materially adversely affect the general affairs, properties, condition
(financial or otherwise), results of operations, stockholders' equity, business
or prospects of the Company, (i) the Company has received no notice and has no
knowledge of any claim, demand, investigation, regulatory action, suit or other
action instituted or threatened against the Company or any portion of the
Premises relating to any of the Environmental Laws, and (ii) the Company has
received no notice of material violation, citation, complaint, order, directive,
request for information or response thereto, notice letter, demand letter or
compliance schedule to or from any governmental or regulatory agency arising out
of or in connection with "hazardous substances" (as defined by applicable
Environmental Laws) on, about, beneath, arising from or generated at the
Premises or at any other location. As used in this subsection, the terms
"Response," "Removal" and "Remedial Action" shall have the respective meanings
assigned to such terms under Sections 101(23)-101(25) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. 9601(23)-9601(25);
(x) The Company 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 authorization; (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) No unregistered securities of the Company have been sold by the
Company or on behalf of the Company by any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as expressly disclosed in the Registration
Statement.
(z) Except for the Company's disability, health, life insurance and
other welfare benefit plans, and those plans that are disclosed in the
Prospectus, the Company has not had and do not now have any employee benefit
plan, profit sharing plan, employee pension benefit plan or employee welfare
benefit plan or deferred compensation arrangements ("Plans") that are subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder ("ERISA"). All Plans that are
10
subject to ERISA are in compliance with ERISA, in all material respects, and, to
the extent required by the Internal Revenue Code of 1986, as amended (the
"Code"), in compliance with the Code in all material respects. The Company has
no employee pension benefit plan that is subject to Part 3 of Subtitle B of
Title I of ERISA or any defined benefit plan or multi-employer plan. The Company
has not maintained retired life and retired health insurance plans that are
employee welfare benefit plans providing for continuing benefit or coverage for
any employee or any beneficiary of any employee after such employee's
termination of employment, except as required by Section 4980B of the Code. No
fiduciary or other party in interest with respect to any of the Plans has caused
any of such Plans to engage in a prohibited transaction as defined in Section
406 of ERISA. As used in this subsection, the terms "defined benefit plan,"
"employee benefit plan," "employee pension benefit plan," "employee welfare
benefit plan," "fiduciary" and "multi-employer plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
(aa) No labor dispute exists with the Company's employees, and to the
knowledge of the Company no such labor dispute is threatened. The Company has no
knowledge of any existing or threatened labor disturbance by the employees of
any of its principal suppliers, contractors or customers that would reasonably
be expected to result in a material adverse effect to the general affairs,
properties, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company.
(bb) The Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions contemplated herein.
Any certificate signed by any officer of the Company in such capacity
and delivered to the Representatives or to counsel for the Underwriters pursuant
to this Agreement shall be deemed a representation and warranty by the Company
to the several Underwriters as to the matters covered thereby.
4. Representations, Warranties and Covenants of the Selling
Stockholders. Each Selling Stockholder, severally and not jointly, represents,
warrants and covenants to each Underwriter that:
(a) 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 Custody Agreement (hereinafter referred to as
"Stockholders' Agreement") hereinafter referred to, and for the sale and
delivery of the Selling Stockholder Shares to be sold by such Selling
Stockholder hereunder, have been obtained; and such Selling Stockholder has full
right, power and authority to enter into this Agreement and the Stockholders'
Agreement, to make the representations, warranties and agreements hereunder and
thereunder, and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholder hereunder.
(b) Certificates in negotiable form representing all of the Selling
Stockholder Shares to be sold by such Selling Stockholder have been placed in
custody under the Stockholders' Agreement, in the form heretofore furnished to
you, duly executed and delivered by such Selling Stockholder to the Custodian,
and such Selling Stockholder has duly executed and delivered a
power-of-attorney, in the form heretofore furnished to you and included in the
Stockholders' Agreement (the "Power-of-Attorney"), appointing _________ and
11
___________, and each of them, as such Selling Stockholder's attorney-in-fact
(the "Attorneys-in-Fact") with authority to execute and deliver this Agreement
on behalf of such Selling Stockholder, to determine (subject to the provisions
of the Stockholders' Agreement) 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 Selling Stockholder 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 Stockholders' Agreement.
(c) Such Selling Stockholder specifically agrees that the Selling
Stockholder Shares represented by the certificates held in custody for such
Selling Stockholder under the Stockholders' Agreement are for the benefit of and
coupled with and subject to the interests of the Underwriters, the Custodian,
the Attorneys-in-Fact, each other Selling Stockholder and the Company, that 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, and that the obligations of
such Selling Stockholder hereunder shall not be terminated by operation of law,
whether by the death, disability, incapacity, liquidation or dissolution of any
Selling Stockholder or by the occurrence of any other event. If any individual
Selling Stockholder or any executor or trustee for a Selling Stockholder should
die or become incapacitated, or if any Selling Stockholder that is an estate or
trust should be terminated, or if any Selling Stockholder that is a partnership
or corporation should be dissolved, or if any other such event should occur,
before the delivery of the Selling Stockholder Shares hereunder, certificates
representing the Selling Stockholder Shares shall be delivered by or on behalf
of the Selling Stockholders in accordance with the terms and conditions of this
Agreement and of the Stockholders' Agreement, and actions taken by the
Attorneys-in-Fact pursuant to the Powers-of-Attorney shall be as valid as if
such death, incapacity, termination, dissolution 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, termination,
dissolution or other event.
(d) This Agreement and the Stockholders' Agreement have each been duly
authorized, executed and delivered by such Selling Stockholder and each such
document constitutes a valid and binding obligation of such Selling Stockholder,
enforceable in accordance with its terms.
(e) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the sale of the Selling Stockholder Shares by such Selling
Stockholder or the consummation by such Selling Stockholder of the transactions
on its part contemplated by this Agreement and the Stockholders' Agreement,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-laws
and rules of the NASD in connection with the purchase and distribution by the
Underwriters of the Shares to be sold by such Selling Stockholder.
(f) The sale of the Selling Stockholder Shares to be sold by such
Selling Stockholder hereunder and the performance by such Selling Stockholder of
this Agreement and the Stockholders' Agreement and the consummation of the
12
transactions contemplated hereby and thereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of such
Selling Stockholder pursuant to the terms or provisions of, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or give any party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease, contract or
other agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any of its properties is bound or affected, or
violate or conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to such
Selling Stockholder or, if such Selling Stockholder is a corporation,
partnership or other entity, the organizational documents of such Selling
Stockholder.
(g) Such Selling Stockholder has, and at the Closing Date and, if
later, the Option Closing Date, will have, good and marketable title to the
Selling Stockholder Shares to be sold by such Selling Stockholder hereunder,
free and clear of all liens, encumbrances, equities or claims whatsoever; and,
upon delivery of such Selling Stockholder Shares and payment therefor pursuant
hereto, good and marketable title to such Selling Stockholder Shares, free and
clear of all liens, encumbrances, equities or claims whatsoever, will be
delivered to the Underwriters.
(h) On the Closing Date or, if later, the Option Closing Date, all
stock transfer or other taxes (other than income taxes) that are required to be
paid in connection with the sale and transfer of the Shares to be sold by such
Selling Stockholder to the several Underwriters hereunder will be have been
fully paid or provided for by such Selling Stockholder and all laws imposing
such taxes will have been fully complied with.
(i) Other than as permitted by the Act and the Rules and Regulations,
such Selling Stockholder has not distributed and will not distribute any
preliminary prospectus, the Prospectus or any other offering material in
connection with the offering and sale of the Shares. Such Selling Stockholder
has not taken and will not at any time take, directly or indirectly, any action
designed, or which might reasonably be expected, to cause or result in, or which
will constitute, stabilization of the price of shares of Common Stock to
facilitate the sale or resale of any of the Shares.
(j) All information with respect to such Selling Stockholder contained
in the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto complied or will comply in all material respects
with all applicable requirements of the Act and the Rules and Regulations and
does not 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.
(k) Such Selling Stockholder has no knowledge of any material fact or
condition not set forth in the Registration Statement or the Prospectus that has
adversely affected, or may adversely affect, the business, properties, business
13
prospects, condition (financial or otherwise) or results of operations of the
Company, and the sale of the Shares proposed to be sold by such Selling
Stockholder is not prompted by any such knowledge.
(l) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 3 hereof are
not true and correct.
(m) 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 agrees to deliver to you prior to or at the Closing Date 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).
5. Agreements of the Company and the Selling Stockholders. Each of the
Company and the Selling Stockholders respectively covenants and agrees with the
several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives promptly, and
will confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose or the threat thereof, (iv) of the happening of any event
during the period mentioned in the second sentence of Section 5(e) that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in the light of the circumstances in which they are made, not
misleading and (v) of receipt by the Company or any representative or attorney
of the Company of any other communication from the Commission relating to the
Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A of the Rules and Regulations, the
Company will comply with the provisions of and make all requisite filings with
the Commission pursuant to said Rule 430A and notify the Representatives
promptly of all such filings.
14
(c) The Company will furnish to each Representative, without charge,
one signed copy of each of the Registration Statement and of any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits thereto and will furnish to the Representatives, without charge, for
transmittal to each of the other Underwriters, a copy of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the several Underwriters and by all dealers
to whom the Shares may be sold, both in connection with the offering or sale of
the Shares and for any period of time thereafter during which the Prospectus is
required by law to be delivered in connection therewith. If during such period
of time any event shall occur which in the judgment of the Company or counsel to
the Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies of such
supplement or amendment to the Prospectus as the Representatives may reasonably
request.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and counsel to the Underwriters in connection
with the registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Representatives may
request; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) The Company will, so long as required under the Rules and
Regulations, 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 flow of the Company, if any, 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),
consolidated summary financial information of the Company, if any, for such
quarter in reasonable detail.
(h) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to the
15
holders of any class of its capital stock, and will furnish to the
Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
(i) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after the
Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company and, unless otherwise
paid by the Company, the Selling Stockholders will pay or reimburse if paid by
the Representatives, in such proportions as they may agree upon themselves, all
costs and expenses incident to the performance of the obligations of the Company
and the Selling Stockholders under this Agreement and in connection with the
transactions contemplated hereby, including but not limited to costs and
expenses of or relating to (i) the preparation, printing and filing of the
Registration Statement and exhibits to it, each preliminary prospectus,
Prospectus and any amendment or supplement to the Registration Statement or
Prospectus, (ii) the preparation and delivery of certificates representing the
Shares, (iii) the printing of this Agreement, the Agreement Among Underwriters,
any Selected Dealer Agreements, any Underwriters' Questionnaires, the
Stockholders' Agreements, any Underwriters' Powers of Attorney, and any
invitation letters to prospective Underwriters, (iv) furnishing (including costs
of shipping and mailing) such copies of the Registration Statement, the
Prospectus and any preliminary prospectus, and all amendments and supplements
thereto, as may be 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
listing of the Shares on the NNM, (vi) any filings required to be made by the
Underwriters with the NASD, and the fees, disbursements and other charges of
counsel for the Underwriters in connection therewith, (vii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 5(f), including the
fees, disbursements and other charges of counsel to the Underwriters in
connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (viii) fees, disbursements and other
charges of counsel to the Company (but not those of counsel for the
Underwriters, except as otherwise provided herein) and (ix) the transfer agent
for the Shares. The Underwriters may deem the Company to be the primary obligor
with respect to all costs, fees and expenses to be paid by the Company and by
the Selling Stockholders. The Selling Stockholders will pay (directly or by
reimbursement) all fees and expenses incident to the performance of their
obligations under this Agreement that are not otherwise specifically provided
for herein, including but not limited to any fees and expenses of counsel for
such Selling Stockholders, any fees and expenses of the Attorneys-in-Fact and
the Custodian, and all expenses and taxes incident to the sale and delivery of
the Shares to be sold by such Selling Stockholders to the Underwriters
hereunder.
(k) The Company will not at any time, directly or indirectly, take any
action designed or which might reasonably be expected to cause or result in, or
16
which will constitute, stabilization of the price of the shares of Common Stock
to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(m) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, without the
prior written consent of Xxxxxxx & Company, Inc., the Company will not offer,
sell, contract to sell, grant options to purchase or otherwise dispose of any of
the Company's equity securities of the Company or any other securities
convertible into or exchangeable with its Common Stock or other equity security
(other than pursuant to employee stock option plans or the conversion of
convertible securities or the exercise of warrants outstanding on the date of
this Agreement).
(n) During the period of 180 days after the date of the Prospectus,
the Company will not, without the prior written consent of Xxxxxxx & Company,
Inc., grant options to purchase shares of Common Stock at a price less than the
initial public offering price. During the period of 180 days after the date of
the Prospectus, the Company will not file with the Commission or cause to become
effective any registration statement (other than on Form S-8) relating to any
securities of the Company without the prior written consent of Xxxxxxx &
Company, Inc.
(o) The Selling Stockholders will, and the Company will cause each of
its officers, directors and certain stockholders designated by the
Representatives to, enter into lock-up agreements with the Representatives to
the effect that they will not, without the prior written consent of Xxxxxxx &
Company, Inc., sell, contract to sell or otherwise dispose of any shares of
Common Stock or rights to acquire such shares according to the terms set forth
in Schedule III hereto.
(p) The Company will not file with the Commission any registration
statement on Form S-8 relating to shares of its Common Stock prior to 90 days
after the effective date of the Registration Statement.
6. Conditions of the Obligations of the Underwriters. The obligations of
each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Representatives and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
17
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of the
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities and (iv)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Representatives and the Representatives do not object thereto
in good faith, and the Representatives shall have received certificates, dated
the Closing Date and, if later, the Option Closing Date and signed by the Chief
Executive Officer and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief), to
the effect of clauses (i), (ii) and (iii) of this paragraph.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as described in or
contemplated by the Registration Statement and the Prospectus, and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not described in the
Registration Statement and the Prospectus, if in the judgment of the
Representatives any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the Underwriters at the
initial public offering price.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any Federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would, in the judgment of the Representatives,
materially and adversely affect the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company.
(e) Each of the representations and warranties of the Company and the
Selling Stockholders contained herein shall be true and correct in all material
respects at the Closing Date and, with respect to the Option Shares, at the
Option Closing Date, and all covenants and agreements contained herein to be
performed on the part of the Company or the Selling Stockholders and all
conditions contained herein to be fulfilled or complied with by the Company or
the Selling Stockholders at or prior to the Closing Date and, with respect to
the Option Shares, at or prior to the Option Closing Date, shall have been duly
performed, fulfilled or complied with.
(f) The Representatives shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
18
satisfactory in form and substance to the Representatives and counsel for the
Underwriters from Pepper, Xxxxxxxx & Xxxxxxx LLP, counsel to the Company and the
Selling Stockholders, with respect to the following matters (except that the
matters set forth in subparagraphs (xx)-(xxii) need not be addressed in the
opinion delivered at the Option Closing Date, if later than the Closing Date):
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; has full
corporate power and authority to conduct all the activities conducted by it, to
own or lease all the assets owed or leased by it and to conduct its business as
described in the Registration Statement and Prospectus; and is duly licensed or
qualified to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such license or
qualification necessary and where the failure to be licensed or qualified would
have a material and adverse effect on the business or financial condition of the
Company.
(ii) All of the outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares) have been duly authorized, validly
issued and are fully paid and nonassessable, to such counsel's knowledge, were
issued pursuant to exemptions from the registration and qualification
requirements of federal and applicable state securities laws, and were not
issued in violation of or subject to any preemptive or, to such counsel's
knowledge, similar rights.
(iii) The specimen certificate evidencing the Common Stock filed as an
exhibit to the Registration Statement is in due and proper form under
Pennsylvania law, the Shares to be sold by the Company hereunder have been duly
authorized and, when issued and paid for as contemplated by this Agreement, will
be validly issued, fully paid and nonassessable; and no preemptive or similar
rights exist with respect to any of the Shares or the issue and sale thereof.
(iv) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any
corporation, firm, partnership, joint venture, association or other entity.
(v) The authorized and outstanding capital stock of the Company is as
set forth in the Registration Statement and the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement or pursuant to reservations,
agreements, employee benefit plans or the exercise of convertible securities,
options or warrants referred to in the Prospectus). To such counsel's knowledge,
except as disclosed in or specifically contemplated by the Prospectus, there are
no outstanding options, warrants of other rights calling for the issuance of,
and no commitments, plans or arrangements to issue, any shares of capital stock
of the Company or any security convertible into or exchangeable or exercisable
for capital stock of the Company. The description of the capital stock of the
Company in the Registration Statement and the Prospectus conforms in all
material respects to the terms thereof.
19
(vi) The Representatives' Warrants have been duly authorized, executed
and delivered by the Company and the Company has all requisite corporate power
and authority to execute the Representatives' Warrants; the Representatives'
Warrants are enforceable against the Company in accordance with their terms; and
the shares of Common Stock issuable upon the exercise of the Representatives'
Warrants have been duly authorized and reserved for such issuance and, when
issued in accordance with the terms of the Representatives' Warrants, will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights.
(vii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company is a party or to which
any of its respective properties is subject that are required to be described in
the Registration Statement or the Prospectus but are not so described.
(viii) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required for
the consummation by the Company of the transactions on its part contemplated
under this Agreement or the Representatives' Warrants, except such as have been
obtained or made under the Act or the Rules and Regulations and such as may be
required under state securities or Blue Sky laws or the by-laws and rules of the
NASD in connection with the purchase and distribution by the Underwriters of the
Shares.
(ix) The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company.
(x) The execution and delivery of this Agreement and or the
Representatives' Warrants, the compliance by the Company with all of the terms
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby does not contravene any provision of applicable law or the
Certificate of Incorporation or By-Laws of the Company, and to the best of such
counsel's knowledge will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms and provisions of, result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
properties is bound or affected, or violate or conflict with (i) any judgment,
ruling, decree or order known to such counsel or (ii) any statute, rule or
regulation of any court or other governmental agency or body, applicable to the
business or properties of the Company.
(xi) To such counsel's knowledge, there is no document or contract of
a character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed or incorporated by reference as required, and each
20
description of such contracts and documents that is contained in the
Registration Statement and Prospectus fairly presents in all material respects
the information required under the Act and the Rules and Regulations.
(xii) The statements under the captions "Risk Factors - Effect of
Certain Provisions of the Company's Articles of Incorporation and Pennsylvania
Law," "Risk Factors - Effect of Shares Eligible for Future Sale on Market
Price," "Management - Stock Option Plans," "Management - Classified Board of
Directors", "Management - Simplified Employee Pension/401 Plan," "Management -
Employment Arrangements," "Certain Transactions," "Description of Capital
Stock," and "Shares Eligible for Future Sale" in the Prospectus, insofar as the
statements constitute a summary of documents referred to therein or matters of
law, are accurate summaries and fairly and correctly present, in all material
respects, the information called for with respect to such documents and matters
(provided, however, that such counsel may rely on representations of the Company
with respect to the factual matters contained in such statements, and provided
further that such counsel shall state that nothing has come to the attention of
such counsel which leads them to believe that such representations are not true
and correct in all material respects).
(xiii) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(xiv) The Selling Stockholder Shares are duly listed on the NNM and
the Company Shares and the shares of Common Stock issuable upon exercise of the
Representatives' Warrants have been duly authorized for listing on the NNM,
subject to notice of issuance.
(xv) To such counsel's knowledge, no holder of securities of the
Company has rights, which have not been waived or satisfied, to require the
register with the Commission shares of Common Stock or other securities, as part
of the offering contemplated hereby.
(xvi) The Registration Statement has become effective under the 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 proceeding
for that purpose has been instituted or is pending, threatened or contemplated.
(xvii) The Registration Statement and the Prospectus comply as to form
in all material respects with the requirement of the Act and the Rules and
Regulations (other than the financial statements, schedules and other financial
data contained in the Registration Statement or the Prospectus, as to which such
counsel need express no opinion).
(xviii) Such counsel has participated in the preparation of the
Registration Statement and Prospectus and has no reason to believe that, as of
the Effective Date the Registration Statement, or any amendment or supplement
thereto, (other than the financial statements, schedules and other financial
data contained or incorporated by reference therein, as to which such counsel
21
need express no opinion) 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, or any
amendment or supplement thereto, as of its date and the Closing Date and, if
later, the Option Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (other than the financial statements, schedules and other
financial data contained or incorporated by reference therein, as to which such
counsel need express no opinion).
(xix) This Agreement and the Stockholders' Agreement have each been
duly executed and delivered by or on behalf of each Selling Stockholder; the
Stockholders' Agreement constitutes a valid and binding agreement of such
Selling Stockholder in accordance with its terms, except as enforceability may
be limited by the application of bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity; the
Attorneys-in-Fact and the Custodian have been duly authorized by such Selling
Stockholder to deliver the Shares on behalf of such Selling Stockholder in
accordance with the terms of this Agreement; and the sale of the Shares to be
sold by such Selling Stockholder hereunder, the performance by such Selling
Stockholder of this Agreement and the Stockholders' Agreement and the
consummation of the transactions contemplated hereby and thereby will not result
in a breach or violation of any of the terms or provisions of, or constitute a
default under, or give any party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease, contract or
other agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any of its properties is bound or affected, or
violate or conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to such
Selling Stockholder or, if such Selling Stockholder is a corporation,
partnership or other entity, the organizational documents of such Selling
Stockholder.
(xx) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Selling Stockholders of the transactions on their part
contemplated by this Agreement, except such as have been obtained or made under
the Act or the Rules and Regulations and such as may be required under state
securities or Blue Sky laws or the by-laws and rules of the NASD in connection
with the purchase and distribution by the Underwriters of the Shares.
(xxi) Each Selling Stockholder has full legal right, power and
authority to enter into this Agreement and the Stockholders' Agreement and to
sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder and, upon payment for such Shares and assuming that the
Underwriters are purchasing such Shares in good faith and without notice of any
other adverse claim within the meaning of the Uniform Commercial Code, the
Underwriters will have acquired all rights of such Selling Stockholder in such
Shares free of any adverse claim, any lien in favor of the Company and any
restrictions on transfer imposed by the Company.
22
In rendering the opinions in subparagraphs (xx) - (xxii), such counsel
may rely upon opinions of other counsel retained by the Selling Stockholders
reasonably acceptable to the Representatives and as to matters of fact on
certificates of the Selling Stockholders, officers of the Company and
governmental officials and the representations and warranties of the Company and
the Selling Stockholders contained in this Agreement and the Stockholders'
Agreement, provided that the opinion of counsel to the Company and Selling
Stockholders shall state that they are doing so, that they have no reason to
believe that they and the Underwriters are not entitled to rely on such opinions
or certificates and that copies of such opinions or certificates are to be
attached to the opinion.
In rendering such opinion, such counsel may rely upon as to matters of
local law on opinions of counsel satisfactory in form and substance to the
Representatives and counsel for the Underwriters, provided that the opinion of
counsel to the Company and the Selling Stockholders shall state that they are
doing so, that they have no reason to believe that they and the Underwriters are
not entitled to rely on such opinions and that copies of such opinions are to be
attached to the opinion.
(g) The representatives shall have received an opinion, dated the
Closing Date and the Option Closing Date, from Saul, Ewing, Xxxxxx & Xxxx LLP
counsel to the Underwriters, with respect to the Registration Statement, the
Prospectus, or the Representatives' Warrants and this Agreement, which opinion
shall be satisfactory in all respects to the Representatives.
(h) Concurrently with the execution and delivery of this Agreement,
the Accountants shall have furnished to the Representatives a letter, dated the
date of its delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to certain financial and other statistical and
numerical information contained or incorporated by reference in the Registration
Statement. At the Closing Date and, as to the Option Shares, the Option Closing
Date, the Accountants shall have furnished to the Representatives a letter,
dated the date of its delivery, which shall confirm, on the basis of a review in
accordance with the procedures set forth in the letter from the Accountants,
that nothing has come to their attention during the period from the date of the
letter referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date and the Option Closing Date, as
the case may be, which would require any change in their letter dated the date
hereof if it were required to be dated and delivered at the Closing Date and the
Option Closing Date.
(i) Concurrently with the execution and delivery of this Agreement and
at the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives a certificate, dated the date of its
delivery, signed by each of the Chief Executive Officer and the Chief Financial
Officer of the Company, in form and substance satisfactory to the
Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of such
23
certificate, such documents are true and correct in all material respects and do
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not untrue or misleading and (B) in the
case of the certificate delivered at the Closing Date and the Option Closing
Date, since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein not untrue or misleading.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the time
such certificate is delivered, true and correct.
(iii) Each of the covenants required to be performed by the
Company herein on or prior to the date of such certificate has been duly, timely
and fully performed and each condition herein required to be satisfied or
fulfilled on or prior to the date of such certificate has been duly, timely and
fully satisfied or fulfilled.
(j) Concurrently with the execution and delivery of this Agreement and
at the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives a certificate, dated the date of its
delivery, signed by the Selling Stockholders (or the Attorneys-in-Fact on their
behalf), in form and substance satisfactory to the Representatives, to the
effect that the representations and warranties of the Selling Stockholders
contained herein are true and correct in all material respects on and as of the
date of such certificate as if made on and as of the date of such certificate,
and each of the covenants and conditions required herein to be performed or
complied with by the Selling Stockholders on or prior to the date of such
certificate has been duly, timely and fully performed or complied with.
(k) The Representatives shall have received from the Company the duly
executed Representatives' Warrants.
(l) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 5(o).
(m) The Shares shall be qualified for sale in such jurisdictions as
the Representatives may reasonably request and each such qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date or the Option Closing Date.
(n) Prior to the Closing Date, the Shares and the shares of Common
Stock issuable upon exercise of the Representatives' Warrants shall have been
duly authorized for listing on the NNM upon official notice of issuance.
(o) The Company and the Selling Stockholders shall have furnished to
the Representatives such certificates, in addition to those specifically
mentioned herein, as the Representatives may have reasonably requested as to the
accuracy and completeness at the Closing Date and the Option Closing Date of any
24
statement in the Registration Statement or the Prospectus, as to the accuracy at
the Closing Date and the Option Closing Date of the representations and
warranties of the Company and the Selling Stockholders herein, as to the
performance by the Company and the Selling Stockholders of its and their
respective obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Representatives.
7. Indemnification.
(a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person, if any, who
controls each Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably 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 Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on 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 or supplement to the Registration
Statement or the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading in the light of the circumstances in which
they were made, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company or the Selling
Stockholders contained herein or any failure of the Company or the Selling
Stockholders to perform its or their obligations hereunder or under law in
connection with the transactions contemplated hereby; provided, however, that
(i) the Company and the Selling Stockholders will not be liable to the extent
that such loss, claim, liability, expense or damage arises from the sale of the
Shares in the public offering to any person by an Underwriter and is based on an
untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives, on behalf of any
Underwriter, expressly for inclusion in the Registration Statement, the
preliminary prospectus or the Prospectus; (ii) the Company and the Selling
Stockholders will not be liable to any Underwriter, the directors, officers,
employees or agents of such Underwriter or any person controlling such
Underwriter with respect to any loss, claim, liability, expense, or damage
arising out of or based on any untrue statement or omission or alleged untrue
statement or omission or alleged omission to state a material fact in the
preliminary prospectus which is corrected in the Prospectus if the person
asserting any such loss, claim, liability, charge or damage purchased Shares
from such Underwriter but was not sent or given a copy of the Prospectus at or
prior to the written confirmation of the sale of such Shares to such person; and
(iii) the liability of each Selling Stockholder under this Section 7(a) shall
not exceed the product of the purchase price for each Share set forth in Section
1(a) hereof multiplied by the number of Shares sold by such Selling Stockholder
hereunder. The Company and the Selling Stockholders acknowledge that the
statements set forth under the heading "Underwriting" in the preliminary
prospectus and the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of the Underwriters expressly for inclusion in the Registration Statement, the
25
preliminary prospectus or the Prospectus. This indemnity agreement will be in
addition to any liability that the Company and the Selling Stockholders might
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each
Selling Stockholder to the same extent as the foregoing indemnity from the
Company and each Selling Stockholder to each Underwriter, as set forth in
Section 7(a), but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives, on behalf of such Underwriter, expressly for use in the
Registration Statement, the preliminary prospectus or the Prospectus. The
Company and the Selling Stockholders acknowledge that the statements set forth
under the heading "Underwriting" in the preliminary prospectus and the
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company by the Representatives on behalf of the Underwriters
expressly for inclusion in the Registration Statement, the preliminary
prospectus or the Prospectus. This indemnity will be in addition to any
liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 shall, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party in writing of the commencement of such action, enclosing with
such notice a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions of this Section 7 unless,
and only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as
provided below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
26
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (iv) the indemnifying
party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any one time for all
such indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. Any indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) If the indemnification provided for in this Section 7 is
applicable in accordance with its terms but for any reason is held to be
unavailable to or insufficient to hold harmless an indemnified party under
paragraphs (a), (b) and (c) of this Section 7 in respect of any losses, claims,
liabilities, expenses and damages referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company or the Selling Stockholders
from persons other than the Underwriters, such as persons who control the
Company within the meaning of the Act, officers of the Company who signed the
Registration Statement and directors of the Company, who also may be liable for
contribution) by such indemnified party as a result of such losses, claims,
liabilities, expenses and damages in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders, on the one hand, and the Underwriters, on the other hand. The
relative benefits received by the Company and the Selling Stockholders, on the
one hand, and the Underwriters, on the other hand, 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 Stockholders 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. If, but only
if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company and the Selling
Stockholders, on the one hand, and the Underwriters, on the other hand, with
respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, the Selling Stockholders or
the Representatives on behalf of the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholders and
27
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be 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 into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 7(d) shall be deemed to
include, for purposes of this Section 7(d), 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
Section 7(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts received by it and no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 7(d) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7(d), any
person who controls a party to this Agreement within the meaning of the Act will
have the same rights to contribution as that party, and each officer of the
Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action against any such party in respect of which a claim for
contribution may be made under this Section 7(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company and the Selling
Stockholders contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any investigation made by or on behalf of the
Underwriters, (ii) acceptance of any of the Shares and payment therefor or (iii)
any termination of this Agreement.
8. Reimbursement of Certain Expenses. In addition to its other obligations
under Section 7(a) of this Agreement, the Company hereby agrees to reimburse on
a quarterly basis the Underwriters for all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon, in
whole or in part, any statement or omission or alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company or the
Selling Stockholder contained herein or failure of the Company or the Selling
Stockholders to perform its or their respective obligations hereunder or under
law, all as described in Section 7(a), notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the obligations under
this Section 8 and the possibility that such payment might later be held to be
improper; provided, however, that, to the extent any such payment is ultimately
held to be improper, the persons receiving such payments shall promptly refund
them.
28
9. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company and the Selling Stockholders from the Representatives,
without liability on the part of any Underwriter to the Company if, prior to
delivery and payment for the Firm Shares or Option Shares, as the case may be,
in the sole judgment of the Representatives, (i) trading in any of the equity
securities of the Company shall have been suspended by the Commission or by The
Nasdaq Stock Market, (ii) trading in securities generally on the New York Stock
Exchange or The Nasdaq Stock Market shall have been suspended or limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange, by order of the Commission, any court or other
governmental authority or The Nasdaq Stock Market, (iii) a general banking
moratorium shall have been declared by either Federal or New York State
authorities, or (iv) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
the United States or any outbreak or material escalation of hostilities or
other calamity or crisis shall have occurred, the effect of which is such as to
make it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with completion of the public offering or the delivery of
and payment for the Shares.
If this Agreement is terminated pursuant to this Section 9, neither the
Company nor any Selling Stockholder shall be under any liability to any
Underwriter except as provided in Sections 5(j), 7 and 8 hereof; but, if for any
other reason the purchase of the Shares by the Underwriters is not consummated
or if for any reason the Company shall be unable to perform its obligations
hereunder, the Company and the Selling Stockholders will reimburse the several
Underwriters for all out-of-pocket expenses (including the fees, disbursements
and other charges of counsel to the Underwriters) incurred by them in connection
with the offering of the Shares.
10. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 10 by more than one-ninth of such number of Firm Shares
without the prior written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm Shares and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase exceeds one-tenth of the aggregate number of
the Firm Shares and arrangements satisfactory to the Representatives and the
Company for the purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
29
non-defaulting Underwriter, the Company or the Selling Stockholders for the
purchase or sale of any Shares under this Agreement. In any such case either the
Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Any action taken pursuant to
this Section 10 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
11. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company or the Selling Stockholders, at the office of
the Company, 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxx, with a copy to Xxxxxxx X. Xxxxxx, Esq., 3000 Two Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, or (b) if to the Underwriters, to the
Representatives at the offices of Xxxxxxx & Company, Inc., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Corporate Finance Department, with a copy to
Xxxxxxx X. Xxxx, Esq., 0000 Xxxxxx Xxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000. Any such notice shall be effective only upon receipt. Any notice under
such Section 9 or 10 may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.
12. This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, the Selling Stockholders and the controlling
persons, directors and officers referred to in Section 7, 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" as used
in this Agreement shall not include a purchaser, as such purchaser, of Shares
from any of the several Underwriters.
13. Any action required or permitted to be made by the Representatives
under this Agreement may be taken by them jointly or by Xxxxxxx & Company, Inc.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
15. This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
16. In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
17. The Company and the Underwriters each hereby waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
30
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
QUANTUM EPITAXIAL DESIGNS, INC.
By:______________________________
Title:
SELLING STOCKHOLDERS
(named in Schedule II hereto)
By:______________________________
Attorney-in-Fact
Confirmed as of the date first
above mentioned:
XXXXXXX & COMPANY, INC.
XXXXXX XXXXXXXXXX XXXXX INC.
Acting on behalf of themselves
and as the Representatives of
the other several Underwriters
named in Schedule I hereto.
By: XXXXXXX & COMPANY, INC.
By:________________________________
Title:
31
SCHEDULE I
UNDERWRITERS
Number of
Firm
Shares
Underwriters to be Purchased
------------ ---------------
Xxxxxxx & Company, Inc...............................
Xxxxxx Xxxxxxxxxx Xxxxx Inc..........................
---------
Total..................................... 2,500,000
=========
32
SCHEDULE II
Total Number Total Number of
of Firm Shares Option Shares
to be Sold to be Sold
-------------- -------------
Quantum Epitaxial Designs, Inc..................
Xxxxx X.X. Xxxxx................................
NEPA Venture Fund, L.P.......................... _____ _____
TOTALS................................... 2,500,000 375,000
========= =======
33
SCHEDULE III
FORM OF LOCK-UP AGREEMENT
The undersigned is a holder of securities of Quantum Epitaxial Designs,
Inc., a Pennsylvania corporation (the "Company"), and wishes to facilitate the
public offering of shares of the Common Stock (the "Common Stock") of the
Company (the "Offering"). The undersigned recognizes that such Offering will be
of benefit to the undersigned.
In consideration of the foregoing and in order to induce you to act as
underwriters in connection with the Offering, the undersigned hereby agrees that
he, she or it will not, without the prior written approval of Xxxxxxx & Company,
Inc., acting on its own behalf and/or on behalf of other representatives of the
underwriters, directly or indirectly, sell, contract to sell, make any short
sale, or otherwise dispose of, or enter into any hedging transaction that is
likely to result in a transfer of, any shares of Common Stock, options to
acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock of the Company which he, she or it may own, for a
period commencing as of the date hereof and ending on the date which is one
hundred eighty (180) days after the date of the final Prospectus relating to the
Offering; provided, however, that the foregoing shall not prohibit (i) any
transfer by a partnership to its partners, by a corporation to an affiliated
entity or by an individual to a trust for the benefit of his or her spouse,
descendants or heirs, or (ii) any pledge of any shares of Common Stock so long
as, in any such instance, such partners, affiliated entity, trustee or pledgee,
as the case may be, agrees to be bound by the terms of this Agreement. The
undersigned confirms that he, she or it understands that the underwriters and
the Company will rely upon the covenants set forth in this Agreement in
proceeding with the Offering. The undersigned further confirms that the
agreements of the undersigned are irrevocable and shall be binding upon the
undersigned's heirs, legal representatives, successors and assigns. The
undersigned agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of securities held by the
undersigned except in compliance with this Agreement.
This Agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
Name:_____________________________________
34
EXHIBIT A
FORM OF REPRESENTATIVES' WARRANTS
WARRANT
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON ________, 2002, OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
WARRANT TO PURCHASE
--------
SHARES OF COMMON STOCK
OF
QUANTUM EPITAXIAL DESIGNS, INC.
No. _
This certifies that, for and in consideration of services rendered and
in connection with the initial public offering of Common Stock of the Company
named below (the "Offering") and other good and valuable consideration, Xxxxxxx
& Company, Inc., and its registered, permitted assigns (collectively, the
"Warrantholder"), is entitled to purchase from Quantum Epitaxial Designs, Inc.,
a corporation incorporated under the laws of the Commonwealth of Pennsylvania
(the "Company"), subject to the terms and conditions hereof, at any time on or
after 9:00 a.m., New York time, on __________________, 1998, and before 5:00
p.m., New York on __________________, 2002 (or, if such day is not a Business
Day, at or before 5:00 p.m., New York time, on the next following Business Day),
the number of fully paid and non-assessable shares of Common Stock of the
Company at the Exercise Price (as defined herein). The Exercise Price and the
number of shares purchasable hereunder are subject to adjustment from time to
time as provided in Article 3 hereof.
ARTICLE 1
1.1 Definition of Terms. As used in this Warrant, the following
capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or
other day on which banks in the State of New York are authorized by law to
remain closed.
(b) Common Stock: Common stock, $.001 par value, of the
Company.
(c) Common Stock Equivalents: Securities that are
convertible into or exercisable for shares of Common Stock.
35
(d) Demand Registration: See Section 6.2.
(e) Exchange Act: The Securities Exchange Act of 1934, as
amended.
(f) Exercise Price: $____ per Warrant Share, as such
price may be adjusted from time to time pursuant to Article 3 hereof.
(g) Expiration Date: 5:00 p.m., New York time, on
_________________, 2002 or if such day is not a Business Day, the next
succeeding day which is a Business Day.
(h) 25% Holders: At any time as to which a Demand
Registration is requested, the Holder and/or the holders of any other Warrants
and/or the holders of Warrant Shares who have the right to acquire or hold, as
the case may be, not less than 25% of the combined total of Warrant Shares
issuable and Warrant Shares outstanding at the time such Demand Registration is
requested.
(i) Holder: A Holder of Registrable Securities.
(j) NASD: National Association of Securities Dealers,
Inc.
(k) Net Issuance Exercise Date: See Section 2.2.
(l) Net Issuance Right: See Section 2.3.
(m) Net Issuance Warrant Shares: See Section 2.3.
(n) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(o) Piggyback Registration: See Section 6.1.
(p) Prospectus: Any prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to the Prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
(q) Public Offering: A public offering of any of the
Company's equity or debt securities pursuant to a Registration Statement under
the Securities Act.
(r) Registration Expenses: Any and all expenses incurred
in connection with any registration or action incident to performance of or
compliance by the Company with Article 6, including, without limitation, (i) all
SEC, national securities exchange and NASD registration and filing fees; all
listing fees and all transfer agent fees; (ii) all fees and expenses of
complying with state securities or blue sky laws (including the fees and
disbursements of counsel of the underwriters in connection with blue sky
qualifications of the Registrable Securities); (iii) all printing, mailing,
messenger and delivery expenses, (iv) all fees and disbursements of counsel for
the Company and of its accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, and (v) any disbursements of underwriters customarily paid by
issuers or sellers of securities including the reasonable fees and expenses of
any special experts retained in connection with the requested registration, but
excluding underwriting discounts and commissions, brokerage fees and transfer
taxes, if any, and fees of counsel or accountants retained by the holders of
Registrable Securities to advise them in their capacity as Holders of
Registrable Securities.
(s) Registrable Securities: Any Warrant Shares issued to
Xxxxxxx & Company, Inc., and/or its designees or transferees and/or other
securities that may be or are issued by the Company upon exercise of this
36
Warrant, including those which may thereafter be issued by the Company in
respect of any such securities by means of any stock splits, stock dividends,
recapitalizations, reclassifications or the like, and as adjusted pursuant to
Article 3 hereof; provided, however, that as to any particular security
contained in Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement; or (ii) they shall have been sold to the public pursuant to Rule 144
(or any successor provision) under the Securities Act.
(t) Registration Statement: Any registration statement
of the Company filed or to be filed with the SEC which covers any of the
Registrable Securities pursuant to the provisions of this Agreement, including
all amendments (including post-effective amendments) and supplements thereto,
all exhibits thereto and all material incorporated therein by reference.
(u) SEC: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
(v) Securities Act: The Securities Act of 1933, as
amended.
(w) Warrants: This Warrant, all other warrants issued on
the date hereof and all other warrants that may be issued in its or their place
(together evidencing the right to purchase an aggregate of up to ______ shares
of Common Stock), originally issued as set forth in the definition of
Registrable Securities.
(x) Warrantholder: The person(s) or entity(ies) to whom
this Warrant is originally issued, or any successor in interest thereto, or any
assignee or transferee thereof, in whose name this Warrant is registered upon
the books to be maintained by the Company for that purpose.
(y) Warrant Shares: Common Stock, Common Stock
Equivalents and other securities purchased or purchasable upon exercise of the
Warrants.
ARTICLE 2
DURATION AND EXERCISE OF WARRANT
2.1 Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 a.m., New York time, on
______________, 1998 and before 5:00 p.m., New York time, on the Expiration
Date. If this Warrant is not exercised on the Expiration Date, it shall become
void, and all rights hereunder shall thereupon cease.
2.2 Method of Exercise.
(a) The Warrantholder may exercise this Warrant, in whole or
in part, by presentation and surrender of this Warrant to the Company at its
corporate office at ____________ or at the office of its stock transfer agent,
if any, with the Exercise Form annexed hereto duly executed and, in the event of
an exercise for cash pursuant to Section 2.3(a), accompanied by payment of the
full Exercise Price for each Warrant Share to be purchased.
(b) Upon receipt of this Warrant with the Exercise Form fully
executed and, in the event of an exercise for cash pursuant to Section 2.3(a),
accompanied by payment of the aggregate Exercise Price for the Warrant Shares
for which this Warrant is then being exercised, the Company shall cause to be
issued certificates for the total number of whole shares of Common Stock for
which this Warrant is being exercised (adjusted to reflect the effect of the
anti-dilution provisions contained in Article 3 hereof, if any, and as provided
in Section 2.4 hereof) in such denominations as are requested for delivery to
the Warrantholder, and the Company shall thereupon deliver such certificates to
the Warrantholder. A net issuance exercise pursuant to Section 2.3(b) shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Net Issuance Exercise Date"), and, at the election of the Holder hereof, may be
37
made contingent upon the closing of the sale of the Company's Common Stock in a
Public Offering. The Warrantholder shall be deemed to be the holder of record of
the shares of Common Stock issuable upon such exercise as of the time of receipt
of the Exercise Form and payment in accordance with the preceding sentence, in
the case of an exercise for cash pursuant to Section 2.3(a), or as of the Net
Issuance Exercise Date, in the case of a net issuance exercise pursuant to
Section 2.3(b), notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Warrantholder. If at the time
this Warrant is exercised, a Registration Statement is not in effect to register
under the Securities Act the Warrant Shares issuable upon exercise of this
Warrant, the Company may, in the case of an exercise for cash pursuant to
Section 2.3(a), require the Warrantholder to make such representations, and may
place such legends on certificates representing the Warrant Shares, as may be
reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased under this
Warrant, the Company shall execute as of the exercise date (or, if later, the
Net Issuance Exercise Date) a new warrant in the form of this Warrant for the
balance of such Warrant Shares and deliver such new warrant to the Warrantholder
within thirty (30) days following the exercise date (or, if later, the Net
Issuance Exercise Date).
(d) The Company shall pay any and all stock transfer and
similar taxes which may be payable in respect of the issuance of any Warrant
Shares.
2.3 Exercise of Warrant.
(a) Right to Exercise for Cash. This Warrant may be exercised
by the Holder by delivery of payment to the Company, for the account of the
Company, by cash or by certified or bank cashier's check, of the Exercise Price
for the number of Warrant Shares specified in the Exercise Form in lawful money
of the United States of America.
(b) Right to Exercise on a Net Issuance Basis. In lieu of
exercising this Warrant for cash pursuant to Section 2.3(a), the Holder shall
have the right to exercise this Warrant or any portion thereof (the "Net
Issuance Right") into shares of Common Stock as provided in this Section 2.3(b)
at any time or from time to time during the period specified in Section 2.1
hereof by the surrender of this Warrant to the Company, with a duly executed and
completed Exercise Form marked to reflect net issuance exercise. Upon exercise
of the Net Issuance Right with respect to a particular number of shares subject
to this Warrant and noted on the Exercise Form (the "Net Issuance Warrant
Shares"), the Company shall deliver to the Holder (without payment by the Holder
of any Exercise Price or any cash or other consideration) (X) that number of
shares of fully paid and nonassessable Common Stock equal to the quotient
obtained by dividing the value of this Warrant (or the specified portion hereof)
on the Net Issuance Exercise Date, which value shall be determined by
subtracting (A) the aggregate Exercise Price of the Net Issuance Warrant Shares
immediately prior to the exercise of the Net Issuance Right from (B) the
aggregate fair market value of the Net Issuance Warrant Shares issuable upon
exercise of this Warrant (or the specified portion hereof) on the Net Issuance
Exercise Date (as herein defined) by (Y) the fair market value of one share of
Common Stock on the Net Issuance Exercise Date (as herein defined).
38
Expressed as a formula, such net issuance exercise shall be computed as
follows:
X = B - A
------
Y
Where: X = the number of shares of Common Stock that
may be issued to the Holder
Y = the fair market value (FMV) of one share
of Common Stock as of the Net Issuance
Exercise Date
A = the aggregate Exercise Price (i.e., Net
Issuance Warrant Shares x Exercise Price)
B = the aggregate FMV (i.e., FMV x Net Issuance
Warrant Shares)
(c) Determination of Fair Market Value. For purposes of this
Section 2.3, "fair market value" of a share of Common Stock as of the Net
Issuance Exercise Date shall mean:
(i) If the Net Issuance Right is exercised in
connection with and contingent upon a Public Offering, and if the Company's
Registration Statement relating to such Public Offering has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
Prospectus with respect to such offering.
(ii) If the Net Issuance Right is not exercised in
connection with and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange,
the Nasdaq National Market, or The Nasdaq SmallCap Market, the fair market value
of the Common Stock shall be deemed to be the last reported sale price of the
Common Stock on such exchange or Market on the trading day immediately prior to
the Net Issuance Exercise Date;
(B) If traded over-the-counter other
than on the Nasdaq National Market or The Nasdaq SmallCap Market, the fair
market value of the Common Stock shall be deemed to be the average of the
closing bid and ask prices of the Common Stock on the trading day immediately
prior to the Net Issuance Exercise Date; and
(C) If there is no public market for the
Common Stock, then fair market value shall be determined by mutual agreement of
the Warrantholder and the Company, and if the Warrantholder and the Company are
unable to so agree, at the Company's sole expense, by an investment banker of
national reputation selected by the Company and reasonably acceptable to the
Warrantholder.
2.4 Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of shares of Common Stock or other shares of capital stock of the
Company from time to time issuable upon exercise of this Warrant. All such
shares shall be duly authorized, and when issued upon such exercise, shall be
validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale
(except as contemplated by Sections 2.2(b) and 5.2) and free and clear of all
preemptive rights.
2.5 Fractional Shares. The Company shall not be required to issue any
fraction of a share of its capital stock in connection with the exercise of this
Warrant, and in any case where the Warrantholder would, except for the
provisions of this Section 2.5, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant, the Company
shall, upon the exercise of this Warrant, pay to the Warrantholder an amount in
cash equal to the fair market value of such fractional share as of the exercise
date (or, if applicable and a later date, the Net Issuance Exercise Date).
2.6 Listing. Prior to the issuance of any shares of Common Stock upon
exercise of this Warrant, the Company shall secure the listing of such shares of
39
Common Stock upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
ARTICLE 3
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article 3.
3.1 Mechanical Adjustments.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares, or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the number of Warrant Shares issuable upon exercise of
the Warrant and/or the Exercise Price in effect at the time of the record date
of such dividend, distribution, subdivision, combination, reclassification or
recapitalization shall be adjusted so that the Warrantholder shall be entitled
to receive the aggregate number and kind of shares which, if this Warrant had
been exercised in full immediately prior to such event, the Warrantholder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this Section 3.1(a) shall be made
successively immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
(b) If at any time prior to the exercise of this Warrant in
full, the Company shall fix a record date for the issuance or making of a
distribution to all holders of the Common Stock (including any such distribution
to be made in connection with a consolidation or merger in which the Company is
to be the continuing corporation) of evidences of its indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
combination, reclassification or recapitalization referred to in Section 3.1(a),
regular cash dividends or cash distributions paid out of net profits legally
available therefor and in the ordinary course of business or subscription
rights, options or warrants for Common Stock or Common Stock Equivalents (any
such nonexcluded event being herein called a "Special Dividend")), the Exercise
Price shall be decreased immediately after the record date for such Special
Dividend to a price determined by multiplying the Exercise Price then in effect
by a fraction, the numerator of which shall be the then current market price of
the Common Stock (as defined in Section 3.1(e)) on such record date less the
fair market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock or
of such subscription rights or warrants applicable to one share of Common Stock
and the denominator of which shall be such then current market price per share
of Common Stock (as so determined). Any adjustment required by this Section
3.1(b) shall be made successively whenever such a record date is fixed and in
the event that such distribution is not so made, the Exercise Price shall again
be adjusted to be the Exercise Price that was in effect immediately prior to
such record date.
(c) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
40
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Exercise Price or the number of
Warrant Shares purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as provided
in this Article 3, and the Company shall reserve, for the life of the Warrant,
such securities of such subsidiary or other corporation; provided, however, that
no adjustment in respect of dividends or interest on such stock or other
securities shall be made during the term of this Warrant or upon its exercise.
(d) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to either or both of paragraphs (a) and (b) of this
Section 3.1, the Warrant Shares shall simultaneously be adjusted by multiplying
the number of Warrant Shares initially issuable upon exercise of each Warrant by
the Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted.
(e) For the purpose of any computation under this Section 3.1,
the current market price per share of Common Stock at any date shall be deemed
to be the average of the daily closing prices for 20 consecutive trading days
commencing 30 trading days before such date. The closing price for each day
shall be the last sale price regular way or, in case no such reported sales take
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed, or if not listed or admitted to
trading on such exchange, the representative closing bid price as reported by
Nasdaq, or other similar organization if Nasdaq is no longer reporting such
information, or if not so available, the fair market price as determined in good
faith by the Board of Directors of the Company.
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this paragraph (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3.1 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Notwithstanding anything in this
Section 3.1 to the contrary, the Exercise Price shall not be reduced to less
than the then existing par value of the Common Stock as a result of any
adjustment made hereunder.
(g) In the event that at any time, as a result of any
adjustment made pursuant to Section 3.1(a), the Warrantholder thereafter shall
become entitled to receive any shares of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3.1(a) or this Section 3.1(g).
3.2 Notices of Adjustment. Whenever the number of Warrant Shares or the
Exercise Period is adjusted as herein provided, the Company shall prepare and
deliver forthwith to the Warrantholder a certificate signed by its President,
and by any Vice President, Treasurer or Secretary, setting forth the adjusted
number of shares purchasable upon the exercise of this Warrant and the Exercise
Price of such shares after such adjustment, setting forth a brief statement of
the facts requiring such adjustment and setting forth the computation by which
adjustment was made.
3.3 No Adjustment for Dividends. Except as provided in Section 3.1 of
this Agreement, no adjustment in respect of any cash dividends shall be made
during the term of this Warrant or upon the exercise of this Warrant.
3.4 Preservation of Purchase Rights in Certain Transactions. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than merger with a subsidiary in which the Company is
the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the property and assets
41
of the Company as an entirety or substantially as an entirety, the Company may,
as a condition precedent to such transaction cause such successor or purchasing
corporation, as the case may be, to execute with the Warrantholder an agreement
granting the Warrantholder the right thereafter, upon payment of the Exercise
Price in effect immediately prior to such action, to receive upon exercise of
this Warrant the kind and amount of shares and other securities and property
which he would have owned or have been entitled to receive after the happening
of such reclassification, change, consolidation, merger, sale or conveyance had
this Warrant been exercised immediately prior to such action. In the event that
in connection with any such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for, or of, a security of Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Article 3. The provisions of this Section 3.4 shall similarly apply to
successive reclassifications, capital reorganizations, consolidations, mergers,
sales or conveyances.
3.5 Form of Warrant After Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Exercise Price or the number or
kind of the Warrant Shares, and Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in this Warrant, as initially issued.
3.6 Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE 4
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
4.1 No Rights as Shareholders; Notice to Warrantholders. Nothing
contained in this Warrant shall be construed as conferring upon the
Warrantholder or his or its transferees the right to vote or to receive
dividends or to consent or to receive notice as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as shareholders of the Company. The
Company shall give notice to the Warrantholder by registered mail if at any time
prior to the expiration or exercise in full of the Warrants, any of the
following events shall occur:
(a) the Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any distribution (other than a cash dividend subject to the parenthetical set
forth in Section 3.1(b)) to all holders of Common Stock;
(b) the Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or Common Stock
Equivalents or of rights, options or warrants to subscribe for or purchase
Common Stock or Common Stock Equivalents or of any other subscription rights,
options or warrants;
(c) a dissolution, liquidation or winding up of the Company
shall be proposed; or
(d) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety.
Such giving of notice shall be initiated at least 10 Business
Days prior to the date fixed as a record date or effective date or the date of
closing of the Company's stock transfer books for the determination of the
42
shareholders entitled to such dividend, distribution or subscription rights, or
for the determination of the shareholders entitled to vote on such proposed
merger, consolidation, sale, conveyance, dissolution, liquidation or winding up.
Such notice shall specify such record date or the date of closing the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
4.2 Lost, Stolen, Mutilated or Destroyed Warrants. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as, and in substitution for, this Warrant.
ARTICLE 5
SPLIT-UP, COMBINATION, EXCHANGE AND
TRANSFER OF WARRANTS AND WARRANT SHARES
5.1 Split-Up, Combination and Exchange of Warrants. This Warrant may be
split up, combined or exchanged for another Warrant or Warrants containing the
same terms to purchase a like aggregate number of Warrant Shares. If the
Warrantholder desires to split up, combine or exchange this Warrant, he or it
shall make such request in writing delivered to the Company and shall surrender
to the Company this Warrant and any other Warrants to be so split-up, combined
or exchanged. Upon any such surrender for a split-up, combination or exchange,
the Company shall execute and deliver to the person entitled thereto a Warrant
or Warrants, as the case may be, as so requested. The Company shall not be
required to effect any split-up, combination or exchange which will result in
the issuance of a Warrant entitling the Warrantholder to purchase upon exercise
a fraction of a share of Common Stock or a fractional Warrant. The Company may
require such Warrantholder to pay a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrants.
5.2 Restrictions on Transfer; Restrictive Legends. Except as otherwise
permitted by this Section 5.2, each stock certificate for Warrant Shares issued
upon the exercise of any Warrant and each stock certificate issued upon the
direct or indirect transfer of any such Warrant Shares shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if (i) the issuance of such Warrant Shares has been
registered under the Securities Act, (ii) such Warrant or such Warrant Shares,
as the case may be, have been registered for resale under the Securities Act or
sold pursuant to Rule 144 under the Securities Act (or a successor thereto) or
(iii) the Warrantholder has received an opinion of counsel (who may be house
counsel for such Warrantholder) reasonably satisfactory to the Company that such
registration is not required with respect to such Warrant or such Warrant
Shares, as the case may be.
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ARTICLE 6
REGISTRATION UNDER THE SECURITIES ACT OF 1933
6.1 Piggyback Registration.
(a) Right to include Registrable Securities. If at any time or
from time to time prior to the second anniversary of the Expiration Date, the
Company proposes to register any of its securities under the Securities Act on
any form for the registration of securities under such Act, whether or not for
its own account (other than by a registration statement on Form S-8 or other
form which does not include substantially the same information as would be
required in a form for the general registration of securities or would not be
available for the Registrable Securities) (a "Piggyback Registration"), it shall
as expeditiously as possible give written notice to all Holders of its intention
to do so and of such Holders' rights under this Section 6.1. Such rights are
referred to hereinafter as "Piggyback Registration Rights." Upon the written
request of any such Holder made within 20 days after receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder), the Company shall include in the Registration Statement the
Registrable Securities which the Company has been so requested to register by
the Holders thereof and the Company shall keep such registration statement in
effect and maintain compliance with each Federal and state law or regulation for
the period necessary for such Holder to effect the proposed sale or other
disposition (but in no event for a period greater than 120 days).
(b) Withdrawal of Piggyback Registration by Company. If, at
any time after giving written notice of its intention to register any securities
in a Piggyback Registration but prior to the effective date of the related
Registration Statement, the Company shall determine for any reason not to
register such securities, the Company shall give notice of such determination to
each Holder and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such Piggyback Registration. All best
efforts obligations of the Company pursuant to Section 6.4 shall cease if the
Company determines to terminate prior to such effective date any registration
where Registrable Securities are being registered pursuant to this Section 6.1.
(c) Piggyback Registration of Underwritten Public Offerings.
If a Piggyback Registration involves an offering by or through underwriters,
then (i) all Holders requesting to have their Registrable securities included in
the Company's Registration Statement must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and conditions as
apply to other selling shareholders and (ii) any Holder requesting to have his
or its Registrable Securities included in such Registration Statement may elect
in writing, not later than three Business Days prior to the effectiveness of the
Registration Statement filed in connection with such registration, not to have
his or its Registrable Securities so included in connection with such
registration.
(d) Payment of Registration Expenses for Piggyback
Registration. The Company shall pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to a Piggyback
Registration Right contained in this Section 6.1.
(e) Priority in Piggyback Registration. If a Piggyback
Registration involves an offering by or through underwriters, the Company,
except as otherwise provided herein, shall not be required to include
Registrable Shares therein if and to the extent the underwriter managing the
offering reasonably believes in good faith and advises each Holder requesting to
have Registrable Securities included in the company's Registration Statement
that such inclusion would materially adversely affect such offering; provided
that (i) if other selling shareholders who are employees, officers, directors or
other affiliates of the Company have requested registration of securities in the
proposed offering, the Company will reduce or eliminate such other selling
shareholders' securities before any reduction or elimination of Registrable
Securities; and (ii) any such reduction or elimination (after taking into
account the effect of clause (i)) shall be pro rata to all other holders of the
securities of the Company exercising "Piggyback Registration Rights" similar to
those set forth herein in proportion to the respective number of shares they
have requested to be registered. Notwithstanding the foregoing, in any event,
within 60 days of the effective date of the Registration Statement, the Company
shall file such supplements and post effective amendments or take such other
action necessary under Federal and state regulation as may be necessary to
permit such Holders to include all of the Registrable Securities requested to be
registered by the Holders in the offering for a period of 90 days following such
period of delay.
44
6.2 Demand Registration.
(a) Request for Registration. If, at any time prior to the
Expiration Date, any 25% Holders request that the Company file a registration
statement under the Securities Act, as soon as practicable thereafter the
Company shall use its best efforts to file a registration statement with respect
to all Warrant Shares that it has been so requested to include and obtain the
effectiveness thereof, and to take all other action necessary under any Federal
or state law or regulation to permit the Warrant Shares that are held and/or
that may be acquired upon the exercise of the Warrants specified in the notices
of the Holders or holders hereof to be sold or otherwise disposed of, and the
Company shall maintain such compliance with each such Federal and state law and
regulation for the period necessary for such Holders or holders to effect the
proposed sale or other disposition; provided, however, the Company shall be
entitled to defer such registration for a period of up to 60 days if and to the
extent that its Board of Directors shall determine that such registration would
interfere with a pending corporate transaction. The Company shall also promptly
give written notice to the Holders and the holders of any other Warrants and/or
the holders of any Warrant Shares who or that have not made a request to the
Company pursuant to the provisions of this Section 6.2(a) of its intention to
effect any required registration or qualification, and shall use its best
efforts to effect as expeditiously as possible such registration or
qualification of all such other Warrant Shares that are then held and/or that
may be acquired upon the exercise of the Warrants, the Holder or holders of
which have requested such registration or qualification, within 15 days after
such notice has been given by the Company, as provided in the preceding
sentence. The Company shall be required to effect a registration or
qualification pursuant to this Section 6.2(a) on one occasion only.
(b) Payment of Registration Expenses for Demand Registration.
The Company shall pay all Registration Expenses in connection with the Demand
Registration.
(c) Selection of Underwriters. If any Demand Registration is
requested to be in the form of an underwritten offering, the managing
underwriter shall be Xxxxxxx & Company, Inc. and the co-manager (if any) and the
independent pricer required under the rules of the NASD (if any) shall be
selected and obtained by the Holders of a majority of the Warrant Shares to be
registered. Such selection shall be subject to the company's consent, which
consent shall not be unreasonably withheld. All fees and expenses (other than
Registration Expenses otherwise required to be paid) of any managing
underwriter, any co-manager or any independent underwriter or other independent
pricer required under the rules of the NASD shall be paid for by such
underwriters or by the Holders or holders whose shares are being registered. If
Xxxxxxx & Company, Inc. should decline to serve as managing underwriter, the
Holders of a majority of the Warrant Shares to be registered may select and
obtain one or more managing underwriters. Such selection shall be subject to the
Company's consent, which shall not be unreasonably withheld.
(d) Procedure for Requesting Demand Registration. Any request
for a Demand Registration shall specify the aggregate number of the Registrable
Securities proposed to be sold and the intended method of disposition. Within
ten (10) days after receipt of such a request the Company will give written
notice of such registration request to all Holders, and, subject to the
limitations of Section 6.2(b), the Company will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 Business Days after the date on which
such notice is given. Each such request shall also specify the aggregate number
of Registrable Securities to be registered and the intended method of
disposition thereof.
6.3 Buy-outs of Registration Demand. In lieu of carrying out its
obligations to effect a Piggyback Registration or Demand Registration of any
Registrable Securities pursuant to this Article 6, the Company may carry out
such obligation by offering to purchase and purchasing such Registrable
Securities requested to be registered at an amount in cash equal to the
difference between (a) 95% of the last sale price of the Common Stock on the day
the request for registration is made and (b) the Exercise Price in effect on
such day; provided, however, that the Holder or Holders may withdraw such
request for registration rather than accept such offer by the Company.
6.4 Registration Procedures. If and whenever the Company is required to
use its best efforts to take action pursuant to any Federal or state law or
45
regulation to permit the sale or other disposition of any Registrable Securities
that are then held or that may be acquired upon exercise of the Warrants in
order to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in this Article 6, the Company shall, as
expeditiously as practicable:
(a) Prepare and file with the SEC, as soon as practicable
within ninety (90) days after the end of the period within which requests for
registration may be given to the Company (but subject to the provision for
deferral contained in Section 6.2(a) hereof) a Registration Statement or
Registration Statements relating to the registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof, subject to Section 6.1(e) hereof, and use its best efforts
to cause such Registration Statements to become effective; provided that before
filing a Registration Statement or Prospectus or any amendment or supplements
thereto, including documents incorporated by reference after the initial filing
of any Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents provided to be filed, which
documents will be subject to the review of such Holders and underwriters;
(b) prepare and file with the SEC such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for a reasonable period not to exceed
180 days; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such Prospectus;
(c) notify the selling Holders of Registrable Securities and
the managing underwriters, if any, promptly, and (if requested by any such
Person) confirm such advice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related Prospectus or for additional information;
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose; (iv) if at any time the representations and warranties of the Company
contemplated by paragraph (n) below ceases to be true and correct in all
material respects; (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (vi) of the happening of any event that makes
any statement of a material fact made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement or Prospectus
so that they 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;
(d) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(e) if reasonably requested by the managing underwriters,
immediately incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters believe (on advice of counsel)
should be included therein as required by applicable law relating to such sale
of Registrable Securities, including, without limitation, information with
respect to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or
"best-efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each selling Holder of Registrable Securities
and each managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
46
(g) deliver to each selling Holder of Registrable Securities
and the underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each preliminary Prospectus) any amendment or
supplement thereto as such Persons may reasonably request; the Company consents
to the use of such Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any Amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities,
cooperate with the selling Holders of Registrable Securities, the underwriters,
if any, and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder or underwriter reasonably requests in writing, keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable Registration Statement;
provided that the Company will not be required to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject the Company to general service of process in any jurisdiction where it
is not at the time so subject;
(i) cooperate with the selling Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters may request at least two Business Days prior to any sale
of Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities within the United
States as may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities;
(k) upon the occurrence of any event contemplated by Section
6.4(c)(vi) above, prepare a supplement or post-effective amendment to the
applicable Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) with respect to each issue or class of Registrable
Securities, use its best efforts to cause all Registrable Securities covered by
the Registration Statements to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed if requested by
the Holders of a majority of such issue or class of Registrable Securities;
(m) enter into such agreements (including an underwriting
agreement) and take all such other action reasonably required in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, if the registration is in connection with an
underwritten offering (i) make such representations and warranties to the
underwriters, in such form, substance and scope as are customarily made by
issuers to underwriters in underwritten offering and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions in form, scope and substance shall be
reasonably satisfactory to the underwriters) addressed to the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with underwritten offerings; (iv)
set forth in full in any underwriting agreement entered into the indemnification
provisions and procedures of Section 6.5 hereof with respect to all parties to
be indemnified pursuant to said Section; and (v) deliver such documents and
certificates as may be reasonably requested by the underwriters to evidence
compliance with clause (i) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company; the
47
above shall be done at each closing under such underwriting or similar agreement
or as and to the extent required hereunder;
(n) make available for inspection by one or more
representatives of the Holders of Registrable Securities being sold, any
underwriter participating in any disposition pursuant to such registration, and
any attorney or accountant retained by such Holders or underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representatives, in connection with
such; and
(o) otherwise use its best efforts to comply with all
applicable Federal and state regulations; and take such other action as may be
reasonably necessary to or advisable to enable each such Holder and each such
underwriter to consummate the sale or disposition in such jurisdiction or
jurisdiction in which any such Holder or underwriter shall have requested that
the Registrable Securities be sold.
Except as otherwise provided in this Agreement, the Company shall have
sole control in connection with the preparation, filing, withdrawal, amendment
or supplementing of each Registration Statement, the selection of underwriters,
and the distribution of any preliminary prospectus included in the Registration
Statement, and may include within the coverage thereof additional shares of
Common Stock or other securities for its own account or for the account of one
or more of its other security holders.
The Company may require each Seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such securities and such other
information as may otherwise be required by the Securities Act to be included in
such Registration Statement.
6.5 Indemnification.
(a) Indemnification by Company. In connection with each
Registration Statement relating to disposition of Registrable Securities, the
Company shall indemnify and hold harmless each Holder and each underwriter of
Registrable Securities and each Person, if any, who controls such Holder or
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 any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that such indemnity shall not inure to the benefit of any Holder or underwriter
(or any person controlling such Holder or underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) on account
of any losses, claims, damages or liabilities arising from the sale of the
Registrable Securities if such untrue statement or omission or alleged untrue
statement or omission was made in such Registration Statement, Prospectus or
preliminary prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by such Holder
or underwriter specifically for use therein. The Company shall also indemnify
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities, if
requested. This indemnity agreement shall be in addition to any liability which
the Company may otherwise have.
(b) Indemnification by Holder. In connection with each
Registration Statement, each Holder shall indemnify, to the same extent as the
indemnification provided by the Company in Section 6.5(a), the Company, its
directors and each officer who signs the Registration Statement and each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act) but only insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue statement or
48
omission or alleged untrue statement or omission which was made in the
Registration Statement, the Prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to the Company specifically for
use therein. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus, Registration Statement or preliminary prospectus or any amendment
thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party that
proposes to assert the right to be indemnified hereunder 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. 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 satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses, except
as provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the employment of counsel by such
indemnified party has been authorized in writing by the indemnifying parties,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified party
in the conduct of the defense of such action (in which case the indemnifying
parties shall not have the right to direct the defense of such action on behalf
of the indemnified party) or (iii) the indemnifying parties shall not have
employed counsel to assume the defense of such action within a reasonable time
after notice of the commencement thereof, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying parties. An
indemnified party shall not be liable for any settlement of any action, suit,
proceeding or claim effected without its written consent.
(d) Contribution. In connection with each Registration
Statement relating to the disposition of Registrable Securities, if the
indemnification provided for in subsection a. hereof is unavailable to an
indemnified party thereunder in respect to any losses, claims, damages or
liabilities referred to therein, then the indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraphs (a) or (b) of this
Section 6.5 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. 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 indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. 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 paragraph (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.
(e) Underwriting Agreement to Control. Notwithstanding the
foregoing provisions of this Section 6.5, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with the underwritten public offering of the Registrable
Securities are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall control.
49
(f) Specific Performance. The Company and the Holder
acknowledge that remedies at law for the enforcement of this Section 6.5 may be
inadequate and intend that this Section 6.5 shall be specifically enforceable.
(g) Survival of Obligations. The obligations of the Company
and the Holder under this Section 6.5 shall survive the completion of any
offering of Registrable Securities pursuant to a Registration Statement under
this Article 6, and otherwise.
6.6 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times [after 90 days after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public];
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144
[(at any time after 90 days after the effective date of the first registration
statement filed by the Company)], the Securities Act and the Exchange Act [(at
any time after it has become subject to such reporting requirements)], or that
it qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
ARTICLE 7
OTHER MATTERS
7.1 Binding Effects; Benefits. This Warrant shall inure to the benefit
of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and assigns. Nothing in this
Warrant, expressed or implied, is intended to or shall confer on any person
other than the Company and the Warrantholder, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
7.2 No Inconsistent Agreements. The Company will not on or after the
date of this Warrant enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this Warrant or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements.
7.3 Adjustments Affecting Registrable Securities. The Company will not
take any action outside the ordinary course of business, or permit any change
within its control to occur outside the ordinary course of business, with
respect to the Registrable Securities which is without a bona fide business
purpose, and which is intended to interfere with the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
7.4 Integration/Entire Agreement. This Warrant is intended by the
parties as a final expression of their agreement and intended to be a complete
50
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Warrants. This Warrant supersedes all prior agreements and
understandings between the parties with respect to such subject matter (other
than warrants previously issued by the Company to the Warrantholder).
7.5 Amendments and Waivers. The provisions of this Warrant, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waiver or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of holders of at least a
majority of the outstanding Registrable Securities. Holders shall be bound by
any consent authorized by this Section whether or not certificates representing
such Registrable Securities have been marked to indicate such consent.
7.6 Counterparts. This Warrant may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
7.7 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
7.8 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provisions in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
7.9 Attorneys' Fees. In any action or proceeding brought to enforce any
provisions of this Warrant, or where any provision hereof is validly asserted as
a defense, the successful party shall be entitled to recover reasonable
attorneys' fees and disbursements in addition to its costs and expenses and any
other available remedy.
7.10 Computations of Consent. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (other
than the Warrantholder or subsequent Holders if they are deemed to be such
affiliates solely by reason of their holdings of such Registrable Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
7.11 Notice. Any notices or certificates by the Company to the Holder
and by the Holder to the Company shall be deemed delivered if in writing and
delivered in person or by registered mail (return receipt requested) to the
Holder addressed to him in care of Xxxxxxx & Company, Inc., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 or, if the Holder has designated, by notice in writing to
the Company, any other address, to such other address, and if to the Company,
addressed to it at: 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx, XX 00000 or if the Company
has designated, by notice in writing to the Holder, any other address, to such
other address.
The Company may change its address by written notice to the Holder and the
Holder may change its address by written notice to the Company.
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IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the ____ day of ___________________, 1997.
QUANTUM EPITAXIAL DESIGNS, INC.
By:____________________________________
Title:_________________________________
Attest:________________________________
Secretary
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EXERCISE FORM
(To be executed upon exercise of Warrant)
Quantum Epitaxial Designs, Inc.:
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
___ herewith tenders payment for _______ of the Warrant Shares to
the order of Quantum Epitaxial Designs, Inc. in the amount of
$_________ in accordance with the terms of this Warrant; or
___ herewith tenders this Warrant for _______ Warrant Shares
pursuant to the net issuance exercise provisions of Section
2.3(b) of this Warrant.
Please issue a certificate or certificates for such Warrant Shares in
the name of, and pay any cash for any fractional share to:
Name _______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
(Please print Name, Address and Social Security No.)
Signature ______________________________________________
Note: The above signature should correspond exactly with
the name on the first page of this Warrant
Certificate or with the name of the assignee
appearing in the assignment form below.
If said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder.
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ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, ______________________________ hereby sells,
assigns and transfers unto the Assignee(s) named below the rights represented by
such Warrant to purchase number of Warrant Shares listed opposite the respective
name(s) of the Assignee(s) named below and all other rights of the Warrantholder
under the within Warrant (including, without limitation, the registration rights
provided in Section 6 of the within Warrant), and does hereby irrevocably
constitute and appoint _____________________________ attorney, to transfer said
Warrant on the books of the within-named Company with respect to the number of
Warrant Shares set forth below, with full power of substitution in the premises:
Name(s) of
Assignee(s) Address No. of Warrant Shares
----------- ------- ---------------------
And if said number of Warrant Shares shall not be all the Warrant Shares
represented by the Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the Warrant Shares registered by said
Warrant.
Dated: , 19__ Signature _________________________________________
Note: The above signature should
correspond exactly with
the name on the face of
this Warrant
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