Schedule III
2,100,000 Shares
Elcom Technologies Corporation
Common Stock
(No Par Value)
UNDERWRITING AGREEMENT
----------------------
October __, 1996
Pennsylvania Merchant Group Ltd,
as Representative of the Several Underwriters
Four Falls Xxxxxxxxx Xxxxxx
Xxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Gentlemen:
Elcom Technologies Corporation, a Pennsylvania corporation (the "Company"),
proposes to sell, and the Shareholders of the Company named in Schedule II
hereto (the "Selling Shareholders" and individually, a "Selling Shareholder")
propose to sell, an aggregate of 2,100,000 shares of its Common Stock, 2,000,000
shares and 100,000 shares respectively, no par value (the "Common Shares"), to
the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representative (the "Representative"). The
aforementioned 2,100,000 Common Shares to be issued and sold to the Underwriters
by the Company and the Selling Shareholders are hereinafter referred to as the
"Firm Shares." The Company and certain Selling Shareholders, including
executives of the Company, named on Schedule II hereto who own shares of Common
Stock in the Company also propose to sell at the Underwriters' option an
aggregate of up to 315,000 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below solely to cover over-allotments. The
amounts of the Firm Shares to be so purchased by the several Underwriters are
set forth opposite their names in Schedule I hereto. The respective amounts of
the Option Shares (subject to
adjustment as provided herein) to be sold by the Selling Shareholders are set
forth on Schedule II hereto. The balance of the Option Shares, if any, shall be
sold by the Company. The Company and the Selling Shareholders are sometimes
referred to herein collectively as the "Sellers." The shares of Common Stock of
the Company, no par value per share, are hereinafter referred to as the "Common
Stock."
As the Representative, you have advised the Company and the Selling
Shareholders that the several Underwriters are willing, acting severally and not
jointly, to purchase the number of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE SELLING
-------------------------------------------------- -------
SHAREHOLDERS, AND THE PRINCIPAL SHAREHOLDER.
-------------------------------------------
(a) The Company represents, warrants and agrees with each of the
Underwriters as set forth below.
(i) A registration statement on Form S-1 (File No. ________) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
Rule 430A of the Rules and Regulations) contained therein (singularly, a
"Preliminary Prospectus") and the exhibits, financial statements and schedules,
as finally amended and revised, have heretofore been delivered by the Company to
each of you. Such registration statement (in the form in which it became
effective, herein referred to as the "Registration Statement," which shall be
deemed to include all information omitted therefrom in reliance upon Rule 430A
and contained in the Prospectus referred to below), has been declared effective
by the Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement. The
form of prospectus first filed by the Company with the Commission pursuant to
Rule 424(b) and Rule 430A is herein referred to as the "Prospectus."
-2-
(ii) The exhibits that have been filed to the Registration Statement
include all agreements which are required to be filed as exhibits to the
Registration Statement.
(iii) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary Prospectus relating to
the proposed offering of the Shares nor instituted proceedings for that purpose
and each Preliminary Prospectus, at the time of filing thereof, did not and at
the date hereof does not, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. Each part of the Registration Statement contains, and the
Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and in all material
respects conform or will conform, as the case may be, to the requirements of,
the Act and the Rules and Regulations. Each part of the Registration Statement
and each amendment thereto does not contain and will not contain, as the case
may be, any untrue statement of a material fact and does not omit to state, as
the case may be, any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Prospectus and any amendments or supplements
thereto do not contain and will not contain, as the case may be, any untrue
statement of a material fact and do not omit nor will they omit to state, as the
case may be, any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative or any Selling
Shareholder, specifically for use in the preparation thereof.
(iv) The Company has been duly organized and is validly existing as a
corporation in corporate good standing under the laws of the Commonwealth of
Pennsylvania, with corporate power and authority to own its properties and
conduct its business as described in the Registration Statement and the
Prospectus; the Company's wholly-owned subsidiary, Elcom Cash Management
Corporation, ("Subsidiary") has been duly organized and is validly existing as a
corporation in corporate good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement and the Prospectus; each
of the Company and the Subsidiary is duly qualified to transact business in all
jurisdictions in which the conduct of its business or ownership of property
requires such
-3-
qualification; the outstanding shares of capital stock of the Subsidiary have
been duly authorized and validly issued, are fully paid and non-assessable and
are or at the Closing Date and the Option Closing Date (as such dates are
hereinafter defined) will be owned of record and beneficially either by the
Company or by a wholly-owned corporate subsidiary of the Company free and clear
of all liens, security interests, equities, options, claims, mortgages, pledges,
charges, restrictions or encumbrances whatsoever (each, a "Lien" and together
"Liens"); and no options, warrants or other rights to purchase, or agreements,
commitments or other obligations to issue, or other rights to convert any
obligations into, shares of capital stock or ownership interests in, or other
securities of, the Subsidiary are outstanding.
(v) The outstanding shares of Common Stock of the Company, including
all shares of the Company's Common Stock to be sold by the Selling Shareholders,
have been or will be at the time of their sale to the Underwriters hereunder,
duly authorized, validly issued and fully paid and non-assessable; and no
preemptive rights exist with respect to any of the Shares or the issue and sale
thereof.
(vi) The Shares conform to the statements concerning them in the
Registration Statement and the Prospectus and, except as described therein, (A)
there are no outstanding options, warrants or other rights calling for the
issuance of, and there are no obligations, commitments, plans or arrangements to
issue, any shares of capital stock or other securities of the Company or any
security convertible into or exchangeable or exercisable for capital stock or
other securities of the Company, and (B) there is no holder of any security of
the Company or its Subsidiary or any other person who has the right, contractual
or otherwise, to have any shares of capital stock of the Company or its
Subsidiary included in the Registration Statement or the right to require
registration under the Act of any shares of capital stock or other securities of
the Company or its Subsidiary under any circumstances. The certificates
representing the shares comply with the Pennsylvania Business Corporation Law of
1988 (the "BCL") and are genuine. The Company has no knowledge of any fact
which would impair the validity of the Shares.
(vii) The financial statements of the Company (the "Financial
Statements"), together with related notes and schedules as set forth in the
Registration Statement and the Prospectus present fairly the financial position
and the results of operations of the Company, at the indicated dates and for the
indicated periods, in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such periods have been made,
subject in the case of unaudited financial statements to normal year-end
-4-
audit adjustments, none of which will be, individually or in the aggregate,
material or inconsistent with the Company's audited Financial Statements. The
selected and summary financial and statistical data included in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with the financial statements presented
therein and the books and records of the Company and its Subsidiary. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or its Subsidiary
before any court or administrative agency which might result in any material
adverse change in the condition (financial or otherwise) or operations of the
Company and its Subsidiary taken as a whole or in the management or business
prospects of the Company and its Subsidiary taken as a whole (a "Material
Adverse Change"), except as set forth in the Registration Statement.
(ix) The Company and its Subsidiary have good and marketable title to
all of their respective properties (real and personal) and assets, including
without limitation all such reflected in the Financial Statements (or described
in the Registration Statement and the Prospectus), subject to no Lien, except as
reflected in such Financial Statements (or described in the Registration
Statement and the Prospectus). The Company and its Subsidiary occupy their
leased properties under valid and binding leases conforming in all material
respects to the descriptions thereof set forth in the Registration Statement and
the Prospectus.
(x) The Company and its Subsidiary have filed all federal, state,
local and foreign income tax returns and reports which have been required to be
filed, which returns and reports are complete and correct, and have paid all
taxes indicated by said returns and reports and all assessments received by them
to the extent that such taxes have become due. There are no federal, state or
local tax liabilities of the Company or its Subsidiary not reflected in the
Financial Statements except as incurred in the ordinary course of business since
date thereof.
-5-
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any Material Adverse Change or, to the knowledge of the Company, any
development involving a prospective Material Adverse Change, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into by the Company or its Subsidiary, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and its Subsidiary have no material contingent obligations that are
not disclosed in the Registration Statement.
(xii) Neither the Company nor its Subsidiary is, or with the giving
of notice or lapse of time will be, in default under or in violation of its
articles of incorporation or bylaws or under any agreement, lease, license
agreement, contract, indenture or other instrument or obligation to which it is
a party or by which it or any of its properties is bound and which default or
violation results in a Material Adverse Change. The consummation of the
transactions herein contemplated and the fulfillment of the terms hereof
including the use of proceeds as contemplated in Prospectus will not (A)
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, contract,
lease, license agreement or other agreement or instrument to which the Company
is a party, or of the articles of incorporation and bylaws or other constituent
documents of the Company or its Subsidiary; (B) violate any statute, law, order,
rule or regulation applicable to the Company or its Subsidiary of any court or
of any regulatory body or administrative agency or other governmental body
having jurisdiction; or (C) result in the creation or imposition of any Lien
upon any property or assets of the Company or its Subsidiary pursuant to the
terms of any agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of the property or assets of any of
them is subject.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated, including use of proceeds (except such additional steps as may be
required by the National Association of Securities Dealers, Inc. (the "NASD") or
may be necessary to qualify the Shares for public offering by the Underwriters
under state securities or "Blue Sky" laws), has been obtained or made and is in
full force and effect.
(xiv) The Company and its Subsidiary hold all licenses, certificates
and permits from governmental authorities
-6-
which are necessary to the conduct of its business, all of which are in full
force and effect, except where the failure to so hold such licenses,
certificates and permits could not result in a Material Adverse Change. The
Company and its Subsidiary own or possess all patents, trademarks, trademark
registrations, service marks, service xxxx registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by them or each of them or necessary for the conduct
of their respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company with
respect to the foregoing except as set forth in the Registration Statement; and
neither the Company nor its Subsidiary has infringed any patent, patent rights,
trade names, trademarks or copyrights or other proprietary right, or received
any notice of or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any patent, patent rights, trade
names, trademark, copyright or other proprietary rights, or otherwise received
any notice or is otherwise aware of any threatened early termination of any
license or any facts which would render any patent, patent rights, trade names,
trademark, copyright or proprietary right invalid or inadequate to protect the
interest of the Company or its Subsidiary therein except as set forth in the
Registration Statement.
(xv) The Company has obtained and delivered to the Representative the
agreements of the persons and entities named in Schedule III annexed hereto to
the effect that each such person or entity will not, for the periods specified
on such schedule, without the Representative's prior written consent, directly
or indirectly, offer to sell, sell, grant any option for the sale of, or
otherwise dispose of, any Common Stock or any securities convertible into or
exchangeable for Common Stock of the Company owned at the date hereof or
hereafter by each such person or entity or with respect to which each such
person or entity has power of disposition.
(xvi) From its inception until June 9, 1995, Xxxxx Xxxxxxx was the
only public accountant engaged by the Company, and the Company had not had any
"disagreement" (as used in Item 304 of Regulation S-K of the Rules and
Regulations) with Xxxxx Xxxxxxx, had not experienced any "reportable event" (as
used in such Item 304) since its inception and nothing was required to be filed
pursuant to Section 10A of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Commission thereunder.
(xvii) Price Waterhouse LLP ("Price Waterhouse"), who have certified
certain of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations. Since June 9, 1995, Price Waterhouse has
-7-
been the only public accountants engaged by the Company, and the Company has not
had any "disagreement" (as used in Item 304 of Regulation S-K of the Rules and
Regulations) with Price Waterhouse, and has not experienced any "reportable
event" (as used in such Item 304) since June 9, 1995.
(xviii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xix) None of the Company or the Selling Shareholders has distributed
nor, prior to the later to occur of (A) the Closing Date and (B) completion of
the distribution of the Shares, will distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Preliminary Prospectus, the Prospectus, or other materials, if
any, permitted by the Act. Neither the Company, nor to the Company's knowledge,
any of its Affiliates (as that term is defined in the Act), has taken, directly
or indirectly, any action designed to cause or result in, or which has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(xx) Except as described in the Registration Statement, the Company
maintains insurance of the types and in the amounts deemed by it to be 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.
(xxi) To the Company's knowledge, neither the Company nor its
Subsidiary nor any of their respective employees or agents has made any payment
of funds of the Company or its Subsidiary or received or retained any such funds
in violation of any law, rule or regulation which could result in a Material
Adverse Change.
(xxii) The ownership of the capital stock of any corporation (other
than the Company and its Subsidiary) described in the Prospectus under the
caption "Certain Transactions" by the Company's officers or directors or its 5%
or greater shareholders is accurately described therein. To the Company's
knowledge, after due investigation, none of the officers, directors or 5% or
greater shareholders of the Company have any affiliation with the NASD.
-8-
(xxiii) The Company is not, and after the sale of the Shares to be
sold by it hereunder and the application of the Net Proceeds thereof as
described in the Prospectus under the caption "Use of Proceeds" will not be, an
investment company within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
(xxiv) The Firm Shares and the Option Shares, if any, have been
approved for quotation on the NASD Automated Quotation National Market System
("NASDAQ"), subject to notice of official issuance.
(xxv) No labor dispute by the employees of the Company or its
Subsidiary exists or, to the best of the Company's knowledge, is imminent and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of their principal suppliers, subassemblers, value added
suppliers, subcontractors, original equipment manufacturers, authorized dealers,
representatives or distributors that could reasonably be expected to result in
any Material Adverse Change. No collective bargaining agreement nor organized
union exists with any of employees of the Company or Subsidiary and, to the
Company's knowledge, no such agreement or organization is imminent.
(xxvi) The Company and its Subsidiary are in compliance with all
Environmental Laws (as defined below), except to the extent that failure to
comply with such Environmental Laws could not result in a Material Adverse
Change. To the knowledge of the Company, except as disclosed in the Prospectus,
neither the Company nor its Subsidiary (A) is the subject to any pending or
threatened federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release of any Hazardous Materials (as defined
below) into the environment, resulting from the business or operations of the
Company or its Subsidiary or from the Company's ownership or possession of any
of its properties or assets or (B) is in contravention of any Environmental Law
that, in the case of (A) or (B), could reasonably be expected to result in a
Material Adverse Change. Neither the Company nor its Subsidiary has received
any notice or claim, nor are there pending or, to the knowledge of the Company,
threatened lawsuits or other proceedings or administrative or regulatory actions
against them, with respect to violations of any Environmental Law or in
connection with any release of any Hazardous Material into the environment that,
individually or in the aggregate, if the subject of any unfavorable decision,
ruling or finding, could result in a Material Adverse Change. As used herein,
"Environmental Laws" means any federal, state or local law or regulation
applicable to the Company's or its Subsidiary's business operations or ownership
or possession of any of their properties or assets relating, to environmental
matters, and "Hazardous Materials" means those substances that are regulated by
or form the basis of liability under any Environmental Laws.
-9-
(xxvii) The Company conducts no business in Cuba.
(xxviii) The Company has never conducted business through any
corporation, partnership, limited liability company, or any other entity other
than itself and the Subsidiary, and the Company does not hold any equity
interest in any entity other than the Subsidiary.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder has, and immediately prior to the
delivery to the Underwriters of the Shares to be sold by such Selling
Shareholder on the Closing Date or the Option Closing Date, as the case may be,
will have good and valid title to the Shares to be sold by such Selling
Shareholder, free of any Liens, and full right, power and authority to effect
the sale and delivery of such Shares to the Underwriters; and upon the delivery
of and payment for such Shares pursuant to this Agreement, good and valid title
thereto, free of any Liens, will be transferred to the several Underwriters.
(ii) The consummation by such Selling Shareholder of the transactions
herein contemplated and the fulfillment by such Selling Shareholder of the terms
hereof will not result in a breach of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which such Selling Shareholder is a party or which
affects the Shares, or of any statute, law, order, rule or regulation applicable
to such Selling Shareholder or which affects the Shares of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
(iii) All authorizations, approvals and consents necessary for the
execution and delivery by or on behalf of such Selling Shareholder of this
Agreement, and the sale and delivery of the Shares to be sold by the Selling
Shareholder hereunder (other than such authorizations, approvals or consents as
may be necessary under state securities or "Blue Sky" laws) have been obtained
and are in full force and effect.
(iv) Such Selling Shareholder has not taken and will not take,
directly or indirectly, individually or as a group, any action designed to, or
which has constituted, or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock of the
Company, and has not effected any sales of shares of Common Stock which, if
effected by the Issuer, would be required to be disclosed in response to Item
701 of Regulation S-K or any other of the Rules and Regulations or the Act,
except as disclosed.
-10-
(v) Without independent investigation or verification, such
Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in this Section 1 are not true and correct,
is familiar with the Registration Statement to the prospectus and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement to the Prospectus, or which has adversely affected or is
reasonably likely to adversely affect the business of the Company or its
Subsidiary; and the sale of the Shares by such Selling Shareholder pursuant
hereto is not prompted by any information concerning the Company or its
Subsidiary which is not set forth in the Registration Statement to the
Prospectus. The Registration Statement to the Prospectus, insofar as it relates
to such Selling Shareholder, 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.
(vi) This Agreement and the Custodian Agreement (as defined below)
have each been duly authorized, executed and delivered by or on behalf of such
Selling Shareholder and are the valid and binding agreements of such Selling
Shareholder, enforceable against him or her in accordance with their respective
terms.
(vii) Such Selling Shareholder has executed a "lock-up" letter as
provided in section 1(a)(xiv) and no offering, sale or other disposition of any
Common Stock of the Company will be made for a period of 180 days after the date
of this Agreement, directly or indirectly, by such Selling Shareholder otherwise
than hereunder or pursuant to such "lock-up" letter, without the prior written
consent of the Representative.
(c) Any certificate signed by an officer of the Company and delivered
to the Representative or to counsel for the Underwriters in connection with the
execution and delivery of this Agreement, the Closing and the Option Closing
hereunder shall be deemed a representation and warranty by the Company to each
Underwriter as to the matters covered thereby; any certificate signed by or in
behalf of any Selling Shareholder and delivered to the Representative or to
counsel for the Underwriters as aforesaid shall be deemed a representation and
warranty by such Selling Shareholder to each Underwriter as to the matters
covered thereby.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of the
-----------------------------------------
representations, warranties and covenants herein contained, and subject to the
conditions herein set forth, the Company agrees to sell to the Underwriters and
each Underwriter agrees, severally and not jointly, to purchase, at a price
between $8.00 and $10.00 per share, the number of Firm Shares set
-11-
forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof.
Payment for the Firm Shares and the Option Shares (if the option
provided for below shall have been exercised before the first business day prior
to the Closing Date) to be sold hereunder is to be made in New York Clearing
House funds by certified or bank cashier's checks drawn to the order of the
Company for the shares to be sold by it and to the order of "Elcom Technologies
Corporation as Custodian" for the shares to be sold by the Selling Shareholders,
in each case against delivery of certificates therefor to the Representative for
the several accounts of the Underwriters. Such payment and delivery are to be
made at the offices of Pennsylvania Merchant Group Ltd, at _____ a.m., _________
time, on October __, 1996 or at such other time and date not later than two
business days thereafter as the Representative may designate as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date" or the "Closing." (As used herein, "business day" means a day on
which the New York Stock Exchange is open for trading and on which banks in New
York are open for business and not permitted by law or executive order to be
closed.) The certificates for the Firm Shares and the Option Shares, if any,
will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the one full business day
prior to the Closing Date or Option Closing Date, as applicable, and will be
made available for inspection by the Representative by no later than 1:00 p.m.
on the last business day prior to the Closing Date or Option Closing Date, as
applicable.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Shareholders listed on Schedule II hereto hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section 2. The maximum aggregate number of
Option Shares to be sold by the Selling Shareholders is set forth opposite their
respective names in Schedule II hereto. The option granted hereby may be
exercised in whole or in part, but only once, and at any time upon written
notice given within 30 days after the date of this Agreement, by you, as
Representative of the several Underwriters, to the Company and the Custodian (as
defined below) setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. If the option granted hereby is exercised for
less than the maximum number of Option Shares being offered by the Selling
Shareholders, the respective number of Option Shares to be sold by each of the
Selling Shareholders listed on Schedule II hereto shall be
-12-
determined on a pro rata basis in accordance with the number of shares set forth
opposite their names on Schedule II hereto, adjusted by you in such manner as to
avoid fractional shares. The time and date at which certificates for Option
Shares are to be delivered shall be determined by the Representative but shall
not be earlier than one (if the option is exercised at least one full business
day prior to the Closing Date) or three (if the Option is exercised on or after
the last full business day prior to the Closing Date) nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is one or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to 2,100,000, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representative of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company. To the extent, if any, that the option is exercised, payment
for the Option Shares shall be made on the Option Closing Date in New York
Clearing House funds by certified or bank cashier's check drawn to the order of
"Elcom Technologies Corporation as Custodian" for the Option Shares to be sold
by the Selling Shareholders against delivery of certificates therefor at the
offices of Pennsylvania Merchant Group Ltd.
The Selling Shareholders have deposited irrevocable instructions to
exercise stock options for the Shares to be sold hereunder, together with checks
or cash in the amount of the option exercise price in custody with Elcom
Technologies Corporation as custodian (the "Custodian") pursuant to the
Custodian Agreement and Power of Attorney (the "Custodian Agreement") executed
by each Selling Shareholder for delivery of any Option Shares to be sold
hereunder by the Selling Shareholders. Each of the Selling Shareholders
specifically agrees that the stock option and the right to purchase the Option
Shares issuable upon exercise thereof are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling Shareholders
for such custody are to that extent irrevocable, and that the obligations of the
Selling Shareholders hereunder shall not be terminable by any act or deed of the
Selling Shareholders (or by any other person, firm or corporation including the
Company, the Custodian or the Underwriters) or by operation of law (including
the death of an individual Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement.
-13-
If any such event should occur prior to the delivery to the Underwriters of the
Option Shares hereunder, certificates for the Option Shares shall be delivered
by the Custodian in accordance with the terms and conditions of this Agreement
as if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Option Shares held by it
against delivery of such Shares.
The obligations of the Selling Shareholders and the Company hereunder
are several and not joint.
3. OFFERING BY THE UNDERWRITERS. It is understood that the several
----------------------------
Underwriters are to make a public offering of the Firm Shares as soon as the
Representative deems it advisable to do so. The Firm Shares are to be initially
offered to the public at the initial public offering price set forth in the
Prospectus. The Representative may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
-----------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters and
the Selling Shareholders that:
(i) The Company will (A) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement in accordance with Rules 430 and 424, a copy of which has
been furnished to the Representative and to which the Representative have not
objected in writing prior to filing and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representative shall not previously have been advised and furnished with a copy
or to which the Representative shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(ii) The Company will advise the Representative promptly (A) of
any request of the Commission for amendment of the Registration Statement or for
a supplement to the Prospectus or for any additional information; (B) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose, and the Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued;
and (C) within the period of time referred to in paragraph (v) below,
-14-
of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event that makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or that requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the Rules and Regulations
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with Act and the Rules and Regulations or any
other law.
(iii) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus,
Prospectus or any amendment or supplement thereto as the Representative may
reasonably request. The Company will deliver to, or upon the order of, the
Representative during the period when, in the opinion of counsel for the
Underwriters, delivery of a Prospectus is required under the Act, as many copies
of the Prospectus in final form, or as thereafter amended or supplemented, as
the Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and each amendment thereto, including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement, but without exhibits, and of all amendments thereto, as
the Representative may reasonably request.
(v) The Company will comply to the best of its ability with the Act
and the Rules and Regulations and the Exchange Act, so as to permit the
completion of the distribution of the shares as contemplated by this Agreement
and the Prospectus. If during the period in which a prospectus is
-15-
required by law to be delivered by an Underwriter or dealer any event shall
occur as a result of which, in the judgment of the Company or the
Representative, it becomes necessary to amend or supplement the Prospectus or
the Registration Statement in order to make the statements therein, in the light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus, reasonably acceptable to
the Representative, so that the Prospectus as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be misleading,
or so that the Prospectus will comply with all applicable laws, rules and
regulations.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement in reasonable detail, covering a period of at least 12 consecutive
months beginning after the effective date of the Registration Statement, which
earning statement shall satisfy the requirements of Section 11(a) of the Act and
Rule 158 of the Rules and Regulations and will advise you in writing when such
statement has been so made available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act,
as amended. The Company will deliver to the Representative similar reports with
respect to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial statements.
(viii) No offering, sale or other disposition of any Common Stock of
the Company will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by the Company otherwise than hereunder or
with the prior written consent of the Representative, except that the Company
may, without such consent, issue shares upon the exercise of options outstanding
on the date of this Agreement.
(ix) The Company will use its best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date or the Option Closing Date, as the case
may be, and
-16-
to satisfy all conditions precedent to the delivery of the Shares.
(x) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock.
(xi) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of its incorporation or required for NASDAQ designation,
a registrar for its Common Stock.
(xii) The Company shall apply the net proceeds of the sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xiii) The Company shall not invest or otherwise use the proceeds
received by the Company from the sale of the shares to the Underwriters in such
manner as would require the Company to register as an investment company under
the 1940 Act.
(xiv) The Company shall apply the net proceeds of the sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(xv) The Company shall not invest, or otherwise use the proceeds
received by the Company from the sale of the shares to the Underwriters in such
manner as would require the Company to register as an investment company under
the 0000 Xxx.
(xvi) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company to facilitate the sale or resale of the Shares.
(b) Each of the Selling Shareholders covenants and agrees with the several
Underwriters and the Company that:
(i) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury
-17-
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(ii) Such Selling Shareholder will cooperate to the extent reasonably
necessary to cause the Registration Statement or any post-effective amendment
thereto to become effective at the earliest possible time.
(iii) Such Selling Shareholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 4(a)(v) hereof, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations or of any change in information relating to such Selling Shareholder
or the Company or any new information relating to the Company or relating to any
matter stated in the Prospectus or any amendment or supplement thereto which
comes to the attention of such Selling Shareholder that suggests that any
statement made in the Registration Statement or the Prospectus (as then amended
or supplemented) is or may be untrue in any material respect or that the
Registration Statement or Prospectus (as then amended or supplemented) omits or
may omit to state a material fact or a fact necessary to be stated therein in
order to make the statements therein not misleading in any material respect, or
of the necessity to amend or supplement the Prospectus (as then amended or
supplemented) in order to comply with the Act or any other law.
(iv) Such Selling Shareholder will (A) do or perform all things
reasonably required to be done or performed by the Selling Shareholder prior to
the Closing Date or the Option Closing Date, as the case may be, to satisfy all
conditions precedent to the delivery of his, her or its Shares pursuant to this
Agreement; (B) not take, directly or indirectly, any action designed to or that
might reasonably be expected to cause or result in stabilization or manipulation
of the price of the Company's Common Stock to facilitate the sale or resale of
the Shares; and (C) pay all federal and other taxes, if any, on the transfer of
the sale of Shares being sold by it to the Underwriter.
5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees
------------------
incident to the performance of the obligations of the Company and the Selling
Shareholders, except in the case of Selling Shareholders, for transfer taxes, if
any, involved in the sale of the Shares by them to the several Underwriters
under this Agreement, including, without limiting the generality of the
foregoing, the following: (a) the printing and filing of the Registration
Statement as originally filed and each amendment thereto; (b) the preparation,
issuance and delivery of the Certificate(s) for the Shares to the Underwriters;
(c) the fees and disbursements of the Company's and the Selling Shareholders'
-18-
counsel and accountants; (d) the cost of printing and delivering to, or as
requested by, the Underwriters copies, as applicable, of the Registration
Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the
Agreement Among Underwriters, the Underwriters' Selling Memorandum, the
Underwriters' Questionnaire, the Invitation Letter, the Selected Dealer
Agreement, the Custodian Agreement, and the Blue Sky Survey and any supplements
or amendments thereto and all other agreements, memoranda, correspondence and
any and all other documents printed and delivered in connection with the
offering of the Shares; (e) the filing fees of the Commission and the filing
fees and expenses incident to securing any required review by the NASD of the
terms of the sale of the Shares; (f) the application fee of the NASDAQ; (g) a
non-accountable expense allowance in the amount of 1.0% of the gross proceeds
raised payable at Closing to the Representative; (h) the expenses, including the
fees and disbursements of counsel for the Underwriters incurred in connection
with the qualification of the Shares under state securities or Blue Sky laws;
(i) the Company's travel expenses in connection with meetings with the brokerage
community and institutional investors; (j) the costs and expenses associated
with settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by the Company; (k) the cost of printing and
engraving Certificate(s) for the Shares; (l) the costs of advertising the
offering, including a "tombstone" advertisement; (m) the fees, expenses and
other costs incurred by the Underwriters and their counsel for review of the
Company's patents and patent applications, if any, and related matters and
(n) any transfer or other taxes imposed on the sale of Shares by it to the
Underwriters. The Company shall not, however, be required to pay for any of the
Underwriters' expenses (other than those related to qualification under state
securities or Blue Sky laws or the non-accountable expense allowance equal to
1.0% of the gross proceeds raised), except that, if this Agreement shall not be
consummated because the conditions in Section 7 hereof are not satisfied, or
because this Agreement is terminated by the Representative pursuant to Section 6
hereof, or by reason of any failure, refusal or inability on the part of the
Company or the Selling Shareholders to perform in any material respect any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on their part to be performed, unless such failure to satisfy
said condition or to comply with said terms be due to the default or omission of
any Underwriter, then the Company shall reimburse the several Underwriters for
all out-of-pocket expenses, including fees and disbursements of counsel,
incurred in connection with investigating, marketing and proposing to market the
Shares or in contemplation of performing their obligations hereunder; but the
Company and the Selling Shareholders shall not in any event be liable to any of
the several Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations
---------------------------------------------
of the Underwriters to purchase the Firm Shares on the Closing Date and the
Option Shares, if any, on the Option Closing Date are subject to the accuracy,
as of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company and the Selling Shareholders
contained herein, and to the performance by the Company and the Selling
Shareholders of their covenants and obligations hereunder and to the following
additional conditions:
-19-
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective under the Act and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made in the manner required, and any written request of the Commission for
additional information (to be included in the Registration Statement or
otherwise) shall have been disclosed to the Representative and complied with to
their reasonable satisfaction.
(b) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Fox, Rothschild, O'Brien
& Xxxxxxx ("Xxx Xxxxxxxxxx") counsel for the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(i) The Company and Subsidiary have been duly organized and are
validly existing as corporations in corporate good standing under the laws of
the Commonwealth of Pennsylvania and the State of Delaware, respectively, with
corporate power and authority to own their properties and conduct their business
as described in the Prospectus; the Company and its Subsidiary are duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification, or in which the failure to qualify could
result in a Material Adverse Change.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of its Common Stock have been duly authorized; the outstanding shares of
its Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the certificates for the Shares comply with the
requirements of the BCL and are in due and proper form; the shares of Common
Stock, including the Option Shares, if any, to be sold by the Company and the
Selling Shareholders pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement.
(iii) No preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof under the BCL or, to the
knowledge of such counsel, otherwise.
-20-
(iv) Except as described in the Prospectus to the best knowledge of
such counsel, (A) there are no outstanding options, warrants or other rights of
any character calling for the issuance of, and such counsel does not know of any
agreements, commitments or obligations to issue, any shares of capital stock of
the Company or Subsidiary or any security convertible into or exchangeable or
exercisable for capital stock of the Company or Subsidiary, and (B) no holder of
any security of the Company has the right to require the registration of Common
Stock or other securities of the Company.
(v) The Registration Statement has become effective under the Act
and, to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(vi) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto comply as to form with the
requirements of the Act and the Rules and Regulations (except that such counsel
need express no opinion as to the financial statements, schedules and other
financial information included therein).
(vii) The statements under the captions "Risk Factors - Future Sales
of Common Stock," "Legal Proceedings - Prior Litigation," and "Description of
Securities, (through and including the subheading "Transfer Agent") in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are in all material respects 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 and certificates of the
Company and its transfer agent with respect to the factual matters contained in
such statements.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(ix) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or its Subsidiary, except
as disclosed in the Prospectus.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do
-21-
not and will not (A) conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the articles of incorporation or
bylaws of the Company, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound; or (B)
violate any existing applicable federal or Pennsylvania law, regulation, ruling
(assuming compliance with all applicable state and federal securities and Blue
Sky laws) known to counsel or any judgment, order or decree, applicable to the
Company or its Subsidiary or any of their respective properties.
(xi) The Company has the power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Firm Shares
that it is required to deliver and sell under this Agreement. This Agreement
has been duly authorized, executed and delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the National Association of Securities
Dealers, Inc. or as required by state securities and "Blue Sky" laws as to which
such counsel need express no opinions), except such as have been obtained or
made, specifying the same.
(xiii) The Company is not, and will not become as a result of the
transactions contemplated by this Agreement, required to register under the 1940
Act.
(xiv) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xv) To such counsel's knowledge, each Selling Shareholder has full
legal right, power and authority, and any approval required by law (other than
as required by state securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Shareholder.
(xvi) The Custodian Agreement has been duly authorized, executed and
delivered by each Selling Shareholder and is a valid, irrevocable instrument
legally sufficient for the purposes intended and constitutes the legal, valid
and binding obligation of the Selling Shareholders, enforceable against each of
them in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, arrangement or similar laws
affecting creditors' rights generally or by general principles of equity
(including
-22-
standards of materiality, good faith, fair dealing and reasonableness) whether
applied by a court of law or equity, and except as rights to indemnify and
contribution hereunder may be limited by applicable law, statutory duties or
public policy.
(xvii) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by the Company and each Selling
Shareholder on the Closing Date or Option Closing Date, as applicable, free and
clear of all Liens.
In rendering such opinion Fox Rothschild may rely as to matters
governed by the laws of states other than Pennsylvania or federal laws on local
counsel in such jurisdictions and as to the matters set forth in subparagraphs
(xiv), (xv), (xvi) and (xvii), on opinions of other counsel representing the
respective Selling Shareholders, provided that in each case Fox Rothschild shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. Furthermore, in rendering an opinion as to the matters
set forth in such subparagraphs, Fox Rothschild may rely, as to matters of fact
with respect to each Selling Shareholder, upon the representations of such
Selling Shareholders contained in this Agreement and the Custodian Agreement of
such Selling Shareholder. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that nothing has come to
the attention of such counsel which leads them to believe that the Registration
Statement, as of the time it became effective under the Act, the Prospectus or
any amendment or supplement thereto, on the date it was filed pursuant to Rule
424(b), and the Registration Statement and the Prospectus, or any amendment or
supplement thereto, as of the Closing Date or the Option Closing Date, as the
case may be, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading (except that such counsel need express no view as to
financial statements, schedules and other financial information included
therein). With respect to such statement, Fox Rothschild may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representative shall have received from the Company a copy of
an opinion given to the Company from Xxxxxx & Xxxxxxx, patent counsel for the
Company, to the effect that the litigation brought by Phonex Corporation
challenging the Company's patents is without merit.
(d) The Representative shall have received from Drinker Xxxxxx &
Xxxxx, counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case
-23-
may be, to the effect that the opinions delivered pursuant to Paragraphs 6(b)
and 6(c) above appear on their face to be appropriately responsive to the
requirements of this Agreement except, specifying the same, to the extent waived
by you, and with respect to the Shares, this Agreement, and the Prospectus, the
legal existence of the Company, and such other related matters as you may
require. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers or other appropriate representatives of the Company and
its Subsidiary and certificates of public officials. In rendering such opinion
Drinker Xxxxxx & Xxxxx may rely as to all matters governed other than by the
laws of the Commonwealth of Pennsylvania or federal laws on the opinions of
counsel referred to in Paragraphs (b) and (c) of this Section 6. In addition to
the matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that the Registration Statement, as of the time it became effective
under the Act, and the Prospectus or any amendment or supplement thereto on the
date it was filed pursuant to Rule 424(b), and the Registration Statement and
the Prospectus or any amendment or supplement thereto, as of the Closing Date or
the Option Closing Date, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial or statistical information included therein). With respect to such
statement, Drinker Xxxxxx & Xxxxx may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(e) The Representative shall have received at or prior to the Closing
Date from Drinker Xxxxxx & Xxxxx a memorandum or summary, in form and substance
satisfactory to the Representative, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the state securities
or Blue Sky laws of such jurisdictions as the Representative may reasonably have
designated to the Company.
(f) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, a signed letter from Price Waterhouse,
dated the Closing Date or the Option Closing Date, as the case may be,
confirming that they are independent public accountants within the meaning of
the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the related
published Rules and Regulations, and otherwise in accordance with
-24-
the procedures set forth in the letter signed by such firm and dated and
delivered to the Representative on the date hereof that nothing has come to
their attention during the period from the date five days prior to the date
hereof, to a date not more than five days prior to the Closing Date or 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 on
the Closing Date or the Option Closing Date, as the case may be. All such
letters shall be in form and substance satisfactory to the Representative.
(g) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for such
purpose shall have been taken or, to the knowledge of the Company or any
Underwriter shall be contemplated or threatened by the Commission at or prior to
the Closing Date; (ii) there shall not have been any change in the capital stock
of the Company or any material increase in the short-term or long-term debt of
the Company (other than in the ordinary course of business) from that set forth
or contemplated in the Registration Statement and the Prospectus (or any
amendment or supplement thereto); (iii) there shall not have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus (or any amendment or supplement thereto), except as may
otherwise be stated in the Registration Statement and Prospectus or any
amendment or supplement thereto, any Material Adverse Change; (iv) the Company
and its Subsidiary shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company and its Subsidiary, taken as a whole, other than those
reflected in the Registration Statement and the Prospectus (or any amendment or
supplement thereto); and (v) all the representations and warranties of the
Company, and the Selling Shareholders contained in this Agreement shall be true
and correct on and as of the date hereof and on and as of the Closing Date and
Option Closing Date as if made on and as of the Closing Date or Option Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company (or such other officers as are acceptable to
you), to the effect set forth in this Section 6(g) and in Section 6(j) as it
relates to the Company;
(h) The Company and the Selling Shareholders shall have furnished to
the Representative such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representative may reasonably have requested.
(i) The approval of the Firm Shares and Option Shares, if any, as
applicable, for quotation and listing (upon official
-25-
notice of issuance) on the NASDAQ shall not have been rescinded or conditioned.
(j) The Company and the Selling Shareholders shall not have failed to
perform, or comply with, in any material respect any of the agreements contained
herein and required to be performed or complied with by the Company and the
Selling Shareholders at or prior to the Closing Date or Option Closing Date, as
the case may be.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representative and to Drinker
Xxxxxx & Xxxxx, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other except to the
extent provided in Sections 5 and 8 hereof.
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The several obligations
--------------------------------------------
of the Company and the Selling Shareholders to sell and deliver the portion of
the Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company and the Selling Shareholders, severally and not
jointly, agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter (within the meaning of the Act) against all
losses, claims, damages or liabilities to which such Underwriter or such
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (A) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (B) the omission or alleged omission to
-26-
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that the Company and the Selling Shareholders
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof; provided further, that the
indemnity agreement contained in this Section with respect to any Preliminary
Prospectus will not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any loss, claim, damage, liability,
action or proceeding, arising out of or based upon an untrue statement or
alleged untrue statement of a material fact, or omission or alleged omission of
a material fact, made therein, with respect to the sale of the Shares by such
Underwriter to any person if a copy of a Preliminary Prospectus or Prospectus or
any amendment or supplement thereto (if any amendment or supplement thereto
shall have been furnished to such Underwriter) correcting such untrue statement
or alleged untrue statement or omission or alleged omission shall not have been
given or sent to such person by or on behalf of such Underwriter with or prior
to the written confirmation of the sale involved. This indemnity agreement will
be in addition to any liability which the Company or the Selling Shareholders
may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement, the Selling Shareholders, and each person, if any, who
controls the Company or the Selling Shareholders within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company or any
such director, officer, Selling Shareholder or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under
-27-
which they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representative specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) Any person entitled to indemnification hereunder (the "indemnified
party") shall give prompt written notice to the person against whom such
indemnity may be sought (the "indemnifying party") after the receipt by such
person of any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such person may
claim indemnification or contribution pursuant to this Agreement and, unless in
the reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and the indemnifying party with respect to
such claim, permit the indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to such indemnified party. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim, unless in the reasonable judgment of counsel
for such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel or counsels. The
indemnifying party will not be subject to any liability for any settlement made
without its consent.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a)(i) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
-28-
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 8(c) hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation, and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the proceeds received by
such Selling Shareholder from the Underwriters in the offering. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint. If
indemnification is available under this Section 8, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in Section
8(a) and (b) hereof without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 8(d).
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any
-29-
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
(f) The liability of each Selling Shareholder under such Selling
Shareholder's representations and warranties made hereunder and under the
indemnity and contribution agreements hereof shall be limited to an amount equal
to the initial public offering price of the Shares sold by such Selling
Shareholders to the Underwriters net of underwriting discounts paid with respect
to such Shares. The Company and the Selling Shareholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
9. DEFAULT BY UNDERWRITERS OR SELLING SHAREHOLDERS. If on the Closing
-----------------------------------------------
Date or the Option Closing Date, as the case may be, any Underwriter shall fail
to purchase and pay for the portion of the Shares which such Underwriter has
agreed to purchase and pay for on such date (otherwise than by reason of any
default on the part of the Company or a Selling Shareholder), you, as
Representative of the Underwriters, shall use your best efforts to procure
within 24 hours thereafter one or more of the other Underwriters, or any others,
to purchase from the Company and the Selling Shareholders such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Shares or Option
Shares, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 24 hours you, as such Representative, shall
not have procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company and the Selling Shareholders or you as the Representative of
the Underwriters will have the right, by written notice given within the next
24-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or of the Selling Shareholders except to the extent
-30-
provided in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representative, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. NOTICES. All communications hereunder shall be in writing and, except
-------
as otherwise provided herein, will be mailed, delivered by overnight courier
service or electronic facsimile transmission or telegraphed and confirmed as
follows: if to the Underwriters, to Pennsylvania Merchant Group Ltd, as
Representative of the Several Underwriters, Four Falls Xxxxxxxxx Xxxxxx, Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, Attention: Xxxx X. Xxxxx; if to the
Company or the Selling Shareholders, to Elcom Technologies Corporation, 00 Xxxxx
Xxxxxx Xxxxxxx, Xxxxxxx, XX 00000.
11. TERMINATION. This Agreement may be terminated by you by notice to the
-----------
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus or any amendment or supplement
thereto, in your opinion, any Material Adverse Change, whether or not arising in
the ordinary course of business, (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities on either such Exchange or the
NASDAQ, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
-31-
state authorities, or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the securities markets in the
United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Selling
Shareholders, as to any obligation of the Underwriters to purchase the Option
Shares, upon the occurrence at any time prior to the Option Closing Date of any
of the events described in subparagraph (b) above or as provided in Sections 6
and 9 of this Agreement.
12. SUCCESSORS. This Agreement has been and is made solely for the
----------
benefit of the Underwriters, the Company and the Selling Shareholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.
13. MISCELLANEOUS. The reimbursement, indemnification and contribution
-------------
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers, and (c) delivery of and payment for
the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania.
Any person executing this Agreement as Attorney-in-Fact for a Selling
Shareholder represents by so doing that he has been duly appointed as Attorney-
in-Fact by such Selling Shareholder pursuant to a validly existing and binding
Power of Attorney which authorize such Attorney-in-Fact to take such action.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding
-32-
agreement among the Selling Shareholders, the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
ELCOM TECHNOLOGIES CORPORATION
By
-------------------------------
Xxxxxx X. Xxxx, President
Selling Shareholders listed on
Schedule II
By
-------------------------------
Xxxxx X. Xxxxxxxxx
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
PENNSYLVANIA MERCHANT GROUP LTD
As Representative of the several
Underwriters listed on Schedule I
By
--------------------------------
-33-
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Pennsylvania Merchant Group Ltd
---------------------
Total
-----------
-34-
SCHEDULE II
Schedule of Selling Shareholders
Selling Shareholder Number of Option Shares
------------------- to be Sold
----------
-35-
SCHEDULE III
Schedule Of Persons Subject to Lock-Up Agreements
-------------------------------------------------
-36-
