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[7,000,000] Shares
PROTON ENERGY SYSTEMS, INC.
COMMON STOCK, PAR VALUE $0.01
UNDERWRITING AGREEMENT
., 2000
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., 2000
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Proton Energy Systems, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") [7,000,000] shares of its Common Stock, par value
$0.01, (the "Firm Shares"). The Company also proposes to issue and sell to the
several Underwriters not more than an additional [1,050,000] shares of its
Common Stock, par value $0.01, (the "Additional Shares") if and to the extent
that you, as Managers of the offering, shall have determined to exercise, on
behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares." The
shares of Common Stock, par value $0.01, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has agreed to
reserve a portion of the Shares to be purchased by it under this Agreement for
sale to the Company's directors, officers, employees and business associates and
other parties related to the Company (collectively, "Participants"), as set
forth in the Prospectus under the heading "Underwriters" (the "Directed Share
Program"). The Shares to be sold by Morgan Stanley and its affiliates pursuant
to the Directed Share Program are referred to herein as the "Directed Shares."
Any Directed Shares not orally confirmed for purchase by any Participants by the
end of the business
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day on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
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1. Representations and Warranties. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to the
Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not
contain any 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, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, 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, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company; the State of Connecticut is the only jurisdiction
(a) in which the Company owns or leases property or maintains an office and
(b) in which it would otherwise be required to be in good standing or
obtain qualification for the business it conducts
(d) The Company has no subsidiaries.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance
of the Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and
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non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or any agreement or other instrument
binding upon the Company that is material to the Company, or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement).
(k) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company is a party or
to which any of the properties of the Company is subject that are required
to be described in the Registration Statement or the Prospectus and are not
so described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied
when so filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be required to register as an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
(n) The Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) is in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with
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the terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for cleanup, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company.
(p) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the Company
has not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary
course of business; (2) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company, except in each case as described in the Prospectus.
(q) The Company owns no real property and has good and
marketable title to all personal property owned by it which is material to
the business of the Company, free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company; and any
real property and buildings held under lease by the Company are held by it
under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made
of such property and buildings by the, in each case except as described in
the Prospectus.
(r) The Company owns or possesses, or can acquire on reasonable
terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently employed
by it in connection with the business now operated by it, and the Company
has not received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the Company.
(s) No material labor dispute with the employees of the Company
exists, except as described in the Prospectus, or, to the knowledge of the
Company, is imminent; and the Company is not aware of any existing,
threatened or imminent labor disturbance by the employees of any of its
principal suppliers, manufacturers or contracts that could have a material
adverse effect on the Company.
(t) The Company is insured by the insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are prudent and
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customary in the businesses in which it is engaged; the Company has not
been refused any insurance coverage sought or applied for; and the Company
does not have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the
Company, except as described in the Prospectus.
(u) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business and the absence of which
would have a material adverse effect on the Company, and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the Company, except as
described in the Prospectus.
(v) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1) transactions
are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (3) access to
assets is permitted only in accordance with management's general or
specific authorization; and (4) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(w) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(x) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any amendments or supplements thereto
will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection with
the Directed Share Program.
(y) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(z) The Company has not offered, or caused Morgan Stanley or its
affiliates to offer, Shares to any person pursuant to the Directed Share
Program with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter
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the customer's or supplier's level or type of business with the Company, or
(ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
(aa) The financial statements of the Company included in the
Registration Statement and the Prospectus present fairly in all material
respects the financial position of the Company as of the dates indicated
and the results of operation and the changes in financial position of the
Company for the periods specified (subject, in the case of interim
financial information, to year-end adjustments); and such financial
statements have been prepared in conformity with generally accepted
accounting principles. The summary selected financial information and the
selected financial data included in the Registration Statement and the
Prospectus present fairly the information shown therein and have been
complied on a basis consistent with that of the audited financial
information included in the Registration Statement and the Prospectus.
(bb) PricewaterhouseCoopers LLP, who have reported upon the
audited financial statements of the Company included in the Registration
Statement and the Prospectus, are, and during the periods covered by this
report were, to the Company's knowledge, independent with respect to the
Company as required by the Securities Act.
(cc) The business of the Company, including processes used by,
products made or sold by, and research development conducted by the
Company, does not, to the Company's knowledge after due inquiry, conflict
with, infringe upon, misappropriate or otherwise violate the intellectual
property rights of any third party and the Company is not aware of any fact
or circumstances which would render any technology or intellectual property
license granted by the Company by a third party invalid, unenforceable or
liable to cancellation or termination, except where such conflict,
infringement, misappropriation, violation, invalidity, unenforceability,
cancellation or termination would not, singly or in the aggregate, have a
material adverse effect on the Company.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $[______] a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to [1,050,000]
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
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overallotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
ending 180 days after the date of the Prospectus, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to
be sold hereunder, (B) the issuance by the Company of shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof described in the Prospectus of which the
Underwriters have been advised in writing or (C) the grant of stock options
pursuant to the Company's existing employee benefit plans described in the
Prospectus provided that either these stock options do not become exercisable
during the 180 day "lockup" period or the grantees of such stock options have
each entered into a "lockup" agreement substantially in the form of Exhibit A
hereto, between you and such grantee, relating to the sales and certain other
dispositions of shares of Common Stock or certain other securities, delivered to
you on or before the date each such option is granted and which shall be in full
force and effect on the date of such grant.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$[_____________] a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of
$[______] a share under the Public Offering Price, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $[_____] a
share, to any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on [____________], 2000, or at
such other time on the same or such other date, not later than [_________],
2000, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the
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date specified in the notice described in Section 2 or at such other time on the
same or on such other date, in any event not later than [_______], 2000, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_____] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date there shall not have occurred any change, or
any development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations of the Company
from that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Hale and Dorr LLP, outside counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to
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conduct its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in the State of Connecticut;
(ii) the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the Prospectus;
(iii) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly issued,
fully paid and non-assessable;
(iv) the Shares have been duly authorized and, when issued
and delivered and paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights under
the Delaware General Corporation Law statute or the Company's certificate
of incorporation or bylaws or, to such counsel's knowledge, under any other
agreement to which the Company is a party;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or the agreements set forth in a
schedule to such counsel's opinion or any judgment, order or decree known
to such counsel of any governmental body, agency or court having
jurisdiction over the Company and specifically naming the Company, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of its obligations under this Agreement, except such as may be required by
the securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares;
(vii) the statements (A) in the Prospectus under the
captions "Description of Capital Stock" and "Shares Eligible For Future
Sale" and the first, second, fourth, seventh, eighth, tenth and eleventh
paragraphs under the caption "Underwriters" and (B) in the Registration
Statement in Items 14 and 15, in each case insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect
to such legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
(viii) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company is a
party or to which any of the properties of the Company is subject that are
required by the terms of Form S-1 of the Securities Act to be described in
the Registration Statement or the Prospectus and are not so described or of
any statutes, regulations, contracts or
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other documents that are required by the terms of Form S-1 of the
Securities Act to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required;
(ix) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended; and
(x) the Registration Statement and Prospectus (except for
the financial statements, including the notes thereto, financial
schedules or other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of th e Commission thereunder.
In addition, such counsel shall state that, in connection with
the preparation of the Registration Statement and the Prospectus, they have
participated in conferences with officers and representatives of the
Company, counsel for the Underwriters and the independent accountants of
the Company, at which conferences they made inquiries of such persons and
others and discussed the contents of the Registration Statement and the
Prospectus; that while the limitations inherent in the independent
verification of factual matters and the character of determinations
involved in the registration process are such that they are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus (except as specifically referred to in paragraph (vii) above),
based on such participation, inquiries and discussions, no facts have come
to their attention which have caused them to believe that (1) the
Registration Statement, as of the Effective Date (but after giving effect
to changes incorporated pursuant to Rule 430A under the Act), contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading (except that they need not express any such view
with respect to the financial statements, including the notes thereto,
financial schedules or any other financial or statistical information
included therein), (2) that the Prospectus, as of the date it was filed
with the Commission pursuant to Rule 424(b)(4) under the Act, contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that they
need not express any such view with respect to the financial statements,
including the notes thereto, financial schedules or any other financial or
statistical information included therein), (3) or that the Registration
Statement or the Prospectus, as of the date of such opinion, contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that they
need not express any such view with respect to the financial statements,
including the notes thereto, financial schedules or any other financial or
statistical information included therein).
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The opinion of Hale and Dorr LLP described in Section 5(c) above
shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(d) The Underwriters shall have received on the Closing Date an
opinion, dated the Closing Date, of Cantor Colburn LLP, patent counsel of
the Company, substantially in the form of Exhibit B hereto.
(e) The Underwriters shall have received on the Closing Date an
opinion of Shearman & Sterling, counsel for the Underwriters, dated the
Closing Date, in form and substance satisfactory to you.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from PricewaterhouseCoopers LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(g) The "lockup" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the Closing
Date.
(h) The Common Stock shall have been approved for quotation on
the Nasdaq National Market, subject only to official notice of issuance.
(i) You shall have received such other documents and
certificates as are reasonably requested by you or your counsel.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any
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supplements and amendments thereto or to the Registration Statement as you
may reasonably request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed amendment
or supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering the
twelve-month period ending [September 30], 2001 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause
to be paid all expenses incident to the performance of its obligations
under this Agreement, including: (i) the fees, disbursements and expenses
of the Company's counsel and the Company's accountants in connection with
the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of
the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky or
Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for
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<PAGE>
offer and sale under state securities laws as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky or Legal Investment memorandum, (iv) all
filing fees and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of
the offering of the Shares by the National Association of Securities
Dealers, Inc., (v) all fees and expenses in connection with the preparation
and filing of the registration statement on Form 8-A relating to the Common
Stock and all costs and expenses incident to listing the Shares on the
Nasdaq National Market, (vi) the cost of printing certificates representing
the Shares, (vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation,
expenses associated with the production of road show slides and graphics,
fees and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with
the road show, (ix) all fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program and (x) all
other costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriters will pay all of their costs
and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
(g) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction on
sale, transfer, assignment, pledge or hypothecation imposed by NASD
Regulation, Inc. under its Interpretative Material 2110-1 on free-riding
and withholding to the extent necessary to ensure compliance with the three
month restrictions.
(h) To comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.
7. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
14
<PAGE>
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or
caused by 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, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through
you expressly for use therein; provided, however, that the foregoing
-------- -------
indemnity agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such losses, claims, damages or
liabilities, unless such failure is the result of noncompliance by the
Company with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be
15
<PAGE>
reimbursed as they are incurred. Such firm shall be designated in writing
by Morgan Stanley, in the case of parties indemnified pursuant to Section
7(a), and by the Company, in the case of parties indemnified pursuant to
Section 7(b). The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and
third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section
7(a) or 7(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause 7(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to
16
<PAGE>
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 7 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 that does
not take account of the equitable considerations referred to in Section
7(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, 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, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Shares.
8. Directed Share Program Indemnification.
(a) The Company agrees to indemnify and hold harmless Morgan
Stanley and its affiliates and each person, if any, who controls Morgan
Stanley or its affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act ("Morgan Stanley
Entities"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with
the consent of the Company for distribution to Participants in connection
with the Directed Share Program, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed
Shares that the Participant has agreed to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program other than
losses, claims, damages or liabilities (or expenses relating
17
<PAGE>
thereto) that are finally judicially determined to have resulted from the
bad faith or gross negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Morgan Stanley Entity in
respect of which indemnity may be sought pursuant to Section 8(a), the
Morgan Stanley Entity seeking indemnity shall promptly notify the Company
in writing and the Company, upon request of the Morgan Stanley Entity,
shall retain counsel reasonably satisfactory to the Morgan Stanley Entity
to represent the Morgan Stanley Entity and any other indemnified party that
the party that the Company may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any Morgan Stanley Entity shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Morgan Stanley Entity unless (i) the Company shall
have agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
Company and the Morgan Stanley Entity and representation of both parties by
the same counsel would be inappropriate due to actual or potential
differing interests between them. The Company shall not, in respect of the
legal expenses of the Morgan Stanley Entities in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Morgan Stanley Entities. Any such firm for the
Morgan Stanley Entities shall be designated in writing by Morgan Stanley.
The Company shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the Company agrees to
indemnify the Morgan Stanley Entities from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time a Morgan Stanley Entity shall have
requested the Company to reimburse it for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
Company agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by the Company of the aforesaid request and
(ii) the Company shall not have reimbursed the Morgan Stanley Entity in
accordance with such request prior to the date of such settlement. The
Company shall not, without prior written consent of Morgan Stanley, effect
any settlement of any pending or threatened proceeding in respect of which
any Morgan Stanley Entity is or could have been a party and indemnity could
have been sought hereunder by such Morgan Stanley Entity, unless such
settlement includes an unconditional release of the Morgan Stanley Entities
from all liability on claims that are the subject matter of such
proceeding.
(c) To the extent the indemnification provided for in Section
8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then the
Company, in lieu of indemnifying the Morgan Stanley Entity thereunder,
shall contribute to the amount paid or payable by the Morgan Stanley Entity
as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Morgan Stanley Entities on the other
hand from the offering of the Directed Shares or (ii) if the allocation
provided by clause 8(c)(i) above is not permitted
18
<PAGE>
by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 8(c)(i) above but also the
relative fault of the Company on the one hand and of the Morgan Stanley
Entities on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and of the Morgan Stanley Entities on the
other hand in connection with the offering of the Directed Shares shall be
deemed to be in the same respective proportions as the net proceeds from
the offering of the Directed Shares (before deducting expenses) and the
total underwriting discounts and commissions received by the Morgan Stanley
Entities for the Directed Shares, bear to the aggregate Public Offering
Price of the Shares. If the loss, claim, damage or liability is caused by
an untrue or alleged untrue statement of a material fact, the relative
fault of the Company on the one hand and the Morgan Stanley Entities on the
other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement or the omission or alleged omission
relates to information supplied by the Company or by the Morgan Stanley
Entities and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it
would not be just or equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Morgan Stanley Entities
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 8(c). The amount paid or payable by the Morgan
Stanley Entities as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by the Morgan Stanley Entities in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8, no Morgan Stanley Entity shall be
required to contribute any amount in excess of the amount by which the
total price at which the Directed Shares distributed to the public were
offered to the public exceeds the amount of any damages that such Morgan
Stanley Entity has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. The remedies
provided for in this Section 8 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any Morgan Stanley
Entity at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 8 shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Morgan Stanley Entity or the Company, its officers or
directors or any person controlling the Company and (iii) acceptance of any
payment of any of the Directed Shares.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the
19
<PAGE>
Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
overthecounter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of 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 the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 10 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares to be purchased, and arrangements satisfactory
to you and the Company for the purchase of such Firm Shares are not made within
36 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter or the Company. In any such case
either you 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 in the Prospectus or in any other
documents or arrangements may be effected. If, on the Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or
20
<PAGE>
such Underwriters as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
21
<PAGE>
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
Proton Energy Systems, Inc.
By:____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:__________________________
Name:
Title:
22
<PAGE>
SCHEDULE I
Number of
Firm Shares
Underwriter To Be Purchased
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
[NAMES OF OTHER UNDERWRITERS]
_______________
Total ........
===============
23
<PAGE>
Exhibit A
[FORM OF LOCK-UP LETTER]
____________ , 2000
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Proton Energy Systems, Inc., a Delaware
corporation (the "Company") providing for the public offering (the "Public
Offering") by the several Underwriters, including Morgan Stanley (the
"Underwriters"), of shares (the "Shares") of the Common Stock, $0.01 par value,
of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (a) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement or (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent and registrar against the transfer of the undersigned's shares of Common
Stock except in compliance with the foregoing restrictions.
Notwithstanding the foregoing restrictions on transfer, the
undersigned shall be permitted to make the following transfers; (i) transfers
made by gift, will or intestacy; (ii)
A-1
<PAGE>
transfer to the transferor's affiliates, as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended; (iii) in the event the
undersigned is an individual, transfer to his or her immediate family or to a
trust the beneficiaries of which are exclusively the undersigned or a member of
his or her immediate family; and (iv) in the event the undersigned is a
partnership or a limited liability company, transfers to the partners of such
partnership or the members of such limited liability company, as the case may
be, provided, that in the case of such transfer (x) the donee or transferee
agrees in writing to be bound by the terms hereof in the same manner as it
applies to the undersigned and (y) if the donor or transferor is a reporting
person subject to Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), any gifts or transfers made in accordance with this paragraph
shall not require such person to, and such person shall not voluntarily, file a
report of such transaction on Form 4 under the Exchange Act.
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Public Offering. The undersigned further understands that this Lock-Up
Agreement is irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors and assigns.
This instrument shall terminate if the Underwriting Agreement (other
than the provisions thereof that survive termination) shall terminate or be
terminated prior to payment for the delivery of the shares thereunder or is such
Underwriting Agreement is not executed by each party thereto on or prior to
October 31, 2000
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
_______________________
(Name)
_______________________
(Address)
A-2
