EXHIBIT 1.1
3,000,000 Shares
SCHEIN PHARMACEUTICAL, INC.
Common Stock
UNDERWRITING AGREEMENT
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March __, 1998
XXXXX & COMPANY
BEAR, XXXXXXX & CO. INC.
XXXXX XXXXXX INC.
As Representatives of the several Underwriters
c/o Cowen & Company
Xxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
1. Introductory. Schein Pharmaceutical, Inc., a Delaware corporation (the
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"Company") proposes to sell, pursuant to the terms of this Agreement, to
the several underwriters named in Schedule A hereto (the "Underwriters,"
or, each, an "Underwriter"), an aggregate of 3,000,000 shares of common
stock, par value $.01 per share (the "Common Stock") of the Company. The
aggregate of 3,000,000 shares so proposed to be sold is hereinafter
referred to as the "Firm Stock". The Company also proposes to sell to the
Underwriters, upon the terms and conditions set forth in Section 3 hereof,
up to an additional 450,000 shares of Common Stock (the "Optional Stock").
The Firm Stock and the Optional Stock are hereinafter collectively referred
to as the "Stock". Xxxxx & Company ("Cowen"), Bear, Xxxxxxx & Co. Inc. and
Xxxxx Xxxxxx Inc. are acting as representatives of the several Underwriters
and in such capacity are hereinafter referred to as the "Representatives".
2. Representations and Warranties of the Company. The Company represents and
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warrants to, and agrees with, the several Underwriters that:
(i) A registration statement on Form S-1 (File No. 33-41413) in the
form in which it became or becomes effective and also in such form as
it may be when any post-effective amendment thereto shall become
effective with respect to the Stock, including any pre-effective
prospectuses included as part of the registration statement as
originally filed or as part of any amendment or supplement thereto, or
filed pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, copies of which have
heretofore been delivered to you, has been carefully prepared by the
Company in conformity with the requirements of the Securities Act and
has been filed with the Commission under the Securities Act. If it is
contemplated, at the time this Agreement is executed, that a post-
effective amendment to the registration statement will be filed and
must be declared effective before the offering of the Stock may
commence, the term "Registration Statement" as used in this Agreement
means the registration statement as amended by said post-effective
amendment. The term "Registration Statement" as used in this
Agreement shall also include any registration statement relating to
the Stock that is filed and declared effective pursuant to Rule 462(b)
under the Securities Act. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the
Registration Statement, or, (A) if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A
under the Securities Act and such information is included in a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, the term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in
the prospectus filed with the Commission pursuant to Rule 424(b) and
(B) if prospectuses that meet the requirements of Section 10(a) of the
Securities Act are delivered pursuant to Rule 434 under the Securities
Act, then (i) the term "Prospectus" as used in this Agreement means
the "prospectus effective upon completion" (as such term is defined in
Rule 434(g) under the Securities Act) as supplemented by (a) the
addition of Rule 430A information or other information contained in
the form of prospectus delivered pursuant to Rule 434(b)(2) under the
Securities Act or (b) the information contained in the term sheets
described in Rule 434(b)(3) under the Securities Act, and (ii) the
date of such prospectuses shall be deemed to be the date of the term
sheets. The term "Pre-effective Prospectus" as used in this Agreement
means the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus
shall have been amended from time to time prior to the date of the
Prospectus.
(ii) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Pre-effective Prospectus, and,
at its date of issue, each Pre-effective Prospectus conformed in all
material respects with the requirements of the Securities Act and did
not include 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, in light of the circumstances under which they
were made, not misleading; and, when the Registration Statement
becomes effective and at all times subsequent thereto up
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to and including each of the Closing Dates (as hereinafter defined),
the Registration Statement and the Prospectus and any amendment or
supplement thereto contained and will contain all material statements
and information required to be included therein by the Securities Act
and conformed and will conform in all material respects to the
requirements of the Securities Act and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include 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 under which they were made, not misleading; provided,
however, that the foregoing representations, warranties and agreements
shall not apply to information contained in or omitted from any Pre-
effective Prospectus or the Registration Statement or the Prospectus
or any such amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of any Underwriter, directly or through you, specifically for
use in the preparation thereof; there is no franchise, lease,
contract, agreement or document or legal or governmental proceeding
required to be described in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement which is
not described or filed therein as required; and all descriptions of
any such franchises, leases, contracts, agreements or documents, of
the Company's Certificate of Incorporation and By-laws, and of laws,
rules, regulations, orders, judgments and decrees contained in the
Registration Statement are accurate and complete descriptions of such
documents in all material respects and fairly present the information
required to be shown.
(iii) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as set
forth or contemplated in the Prospectus, neither the Company nor any
of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, nor entered into any material
transactions not in the ordinary course of business, and there has not
been any material adverse change, or any development involving a
prospective material adverse change, in or affecting the condition
(financial or otherwise), properties, business, management, prospects,
net worth or results of operations of the Company and its subsidiaries
considered as a whole, or any change in the capital stock or short-
term or long-term debt of the Company and its subsidiaries considered
as a whole.
(iv) The consolidated financial statements, together with the related
notes and schedules, set forth in the Prospectus and elsewhere in the
Registration Statement fairly present, on the basis stated in the
Registration Statement, the consolidated financial condition, results
of operations and changes in financial condition of the Company and
its consolidated subsidiaries at the respective
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dates or for the respective periods therein specified. Such
statements of the Company and related notes and schedules have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis except as may be set forth in the
Prospectus. The selected financial and statistical data set forth in
the Prospectus under the captions "Prospectus Summary - Summary
Consolidated Financial Data," "Capitalization," "Dilution," "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management -
Executive Compensation," "Certain Transactions," "Principal
Stockholders" and "Shares Eligible for Future Sale" fairly present, on
the basis stated in the Registration Statement, the information set
forth therein.
(v) BDO Xxxxxxx LLP, who have expressed their opinions on the audited
financial statements of the Company included in the Registration
Statement and the Prospectus are independent public accountants as
required by the Securities Act and the Rules and Regulations.
(vi) The Company and each of its subsidiaries have been duly organized
and are validly existing and in good standing as corporations under
the laws of their respective jurisdictions of organization, with power
and authority (corporate and other) to own or lease their properties
and to conduct their businesses as described in the Prospectus; each
of the Company and its subsidiaries is in possession of and operating
in compliance with all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders required for the
conduct of its business, all of which are valid and in full force and
effect, except where noncompliance would not materially and adversely
affect the Company and its subsidiaries taken as a whole or,
individually, the Company or any of its Subsidiaries (as hereinafter
defined) (a "Material Adverse Effect"); and the Company and each
of such subsidiaries are duly qualified to do business and in good
standing as foreign corporations in all other jurisdictions where
their ownership or leasing of properties or the conduct of their
businesses requires such qualification, except where the failure to be
qualified and in good standing would not have a Material Adverse
Effect. The Company and each of its subsidiaries have all requisite
power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and
permits of and from all public regulatory or governmental agencies and
bodies to own, lease and operate their properties and conduct their
businesses as now being conducted and as described in the Registration
Statement and the Prospectus, except where the absence thereof would
not have a Material Adverse Effect, and such consents, approvals,
authorizations, orders, registrations, qualifications, licenses and
permits do not contain materially burdensome restrictions not
adequately disclosed in the Registration Statement and the Prospectus.
The Company owns, directly or indirectly, the corporations,
associations or other entities listed in Schedule C hereto (each, a
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"Subsidiary"), each of which is owned by the Company or a subsidiary
of the Company to the extent set forth in Schedule C.
(vii) The Company's authorized and outstanding capital stock is on
the date hereof, and will be on the Closing Date, as set forth under
the heading "Capitalization" in the Prospectus and, assuming that the
105-for-1 stock split and the conversion of each outstanding share of
Class A Common Stock and Class B Common Stock into a single class of
Common Stock has been consummated, the outstanding shares of Common
Stock of the Company conform to the description thereof in the
Prospectus and have been duly authorized and validly issued and are
fully paid and nonassessable and have been issued in compliance with
all federal and state securities laws and were not issued in violation
of or, except as disclosed in the Prospectus, subject to any
preemptive rights or similar rights to subscribe for or purchase
securities and conform to the description thereof contained in the
Prospectus. Except as disclosed in or contemplated by the Prospectus
and the financial statements of the Company and related notes thereto
included in the Prospectus, the Company does not have outstanding any
options or warrants to purchase, or any preemptive rights or other
rights to subscribe for or to purchase any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations, except for options granted subsequent to
the date of information provided in the Prospectus pursuant to the
Company's employee and stock option plans as disclosed in the
Prospectus. The description of the Company's stock option and other
stock plans or arrangements, and the options or other rights granted
or exercised thereunder, as set forth in the Prospectus, accurately
and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights. Except as disclosed
in the Prospectus, all outstanding shares of capital stock of each
subsidiary have been duly authorized and validly issued, and are fully
paid and nonassessable and, except for directors' qualifying shares,
to the extent owned by the Company or a subsidiary of the Company, are
owned free and clear of any liens, encumbrances, equities or claims or
other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligations into shares of capital stock
or ownership interests in any of the Company's subsidiaries are
outstanding.
(viii) The Stock to be issued and sold by the Company to the
Underwriters hereunder has been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and nonassessable and free of
any preemptive or similar rights. The Stock conforms to the
description thereof contained in the Prospectus, and such description
conforms to the rights set forth in the instruments defining the same.
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(ix) Except as set forth in the Prospectus, (A) there are no legal or
governmental actions, suits, proceedings or claims pending to which
the Company or any of its subsidiaries or affiliates is a party or of
which any property of the Company or any subsidiary or affiliate is
subject, which might individually or in the aggregate (i) prevent or
adversely affect the transactions contemplated by this Agreement, (ii)
suspend the effectiveness of the Registration Statement, (iii) prevent
or suspend the use of the Pre-effective Prospectus in any jurisdiction
or (iv) result in a material adverse change in the condition
(financial or otherwise), properties, business, management, prospects,
net worth or results of operations of the Company and its subsidiaries
considered as a whole, (B) there is no valid basis for any such legal
or governmental proceeding and (C) to the Company's knowledge no such
proceedings are threatened or contemplated against the Company or any
subsidiary or controlled affiliate by governmental authorities or
others. The Company is not a party nor subject to the provisions of
any material injunction, judgment, decree or order of any court,
regulatory body or other governmental agency or body. The description
of the Company's litigation under the heading "Legal Proceedings" and
regulatory proceedings under the heading "Risk Factors--Pending
Regulatory Matters" in the Prospectus is true and correct and complies
with the Rules and Regulations.
(x) The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute
a summary of the terms of the capital stock, or under the captions
"Management," "Certain Transactions," "Principal Stockholders" and
"Shares Eligible for Future Sale," insofar as they purport to describe
the provisions of the documents referred to therein, are accurate and
complete in all material respects.
(xi) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of or constitute a default under any indenture, mortgage,
note, deed of trust, loan agreement, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which it or any of its properties is or may be bound, the
Certificate of Incorporation, By-laws or other organizational
documents of the Company or any of its subsidiaries, or any law,
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties and do not and will not result in the creation of
any lien or the like against such properties.
(xii) Neither the Company nor any of its subsidiaries is, or with
notice or lapse of time or both will be, in violation of or in default
under its Certificate
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of Incorporation or By-laws or other organizational documents or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, note, deed
of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound, except where such default would not have a Material Adverse
Effect.
(xiii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby, except such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or under the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the securities or "Blue Sky"
laws of any jurisdiction in connection with the purchase and
distribution of the Stock by the Underwriters.
(xiv) The Company has the full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder
(including to issue, sell and deliver the Stock), and this Agreement
has been duly and validly authorized, executed and delivered by the
Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except
to the extent that rights to indemnity and contribution hereunder may
be limited by federal or state securities laws or the public policy
underlying such laws.
(xv) Except as set forth in the Prospectus, the Company and its
Subsidiaries are in compliance with, and conduct their businesses in
conformity with all applicable federal, state, local and foreign laws,
rules and regulations or any court or governmental agency or body,
except where noncompliance would not have a Material Adverse Effect;
to the knowledge of the Company, otherwise than as set forth in the
Registration Statement and the Prospectus, no prospective change in
any of such federal or state laws, rules or regulations has been
adopted which, when made effective, would have a Material Adverse
Effect. In the ordinary course of business, employees of the Company
conduct periodic reviews of the effect of Environmental Laws (as
defined below) on the business operations and properties of the
Company and its Subsidiaries, in the ordinary course of which they
seek to identify liabilities. Except as disclosed in the Registration
Statement, the Company and its Subsidiaries are in compliance with all
applicable existing federal, state, local and, where applicable,
foreign laws and regulations relating to the protection of human
health or the environment or imposing liability or requiring standards
of conduct concerning any Hazardous Materials ("Environmental Laws"),
except for such instances of noncompliance which, either singly or in
the aggregate,
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would not have a Material Adverse Effect. The term "Hazardous
Material" means (i) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, (ii) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act, as amended, and (iii) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of
any other Environment Law.
(xvi) The Company and its subsidiaries have filed all necessary
federal, state, local and foreign income, payroll, franchise and other
tax returns and have paid all taxes shown as due thereon or with
respect to any of their properties, and there is no tax deficiency
that has been, or to the knowledge of the Company is likely to be,
asserted against the Company or any of its subsidiaries or any of
their respective properties or assets that would materially and
adversely affect the financial position, business or operations of the
Company and its subsidiaries.
(xvii) Except as disclosed in the Registration Statement and
Prospectus no person or entity has the right to require registration
of shares of Common Stock or other securities of the Company because
of the filing or effectiveness of the Registration Statement or
otherwise, except for persons and entities who have expressly waived
such right or who have been given proper notice and have failed to
exercise such right within the time or times required under the terms
and conditions of such right.
(xviii) Neither the Company nor any of its officers, directors or
controlled affiliates has taken or will take, directly or indirectly,
any action designed or intended to stabilize or manipulate the price
of any security of the Company, or which caused or resulted in, or
which might in the future reasonably be expected to cause or result
in, stabilization or manipulation of the price of any security of the
Company.
(xix) The Company has provided you with all monthly consolidated
financial statements since December 27, 1997 to the date hereof, that
are available to the officers of the Company.
(xx) The Company and its subsidiaries own or possess the right to use
all patents, trademarks (including "INFeD", "Ferrlecit" and "Unipine
XL"), trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade
secrets, know-how and rights described in the Prospectus as being
owned or used by them or any of them, and, except as disclosed in the
Prospectus, the Company is not aware of any claim to the contrary or
any challenge by any other person to the rights of the Company and its
subsidiaries with respect to the foregoing, except where such
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claims and challenges would not, singly or in the aggregate, have a
Material Adverse Effect. The Company's business as now conducted and
as proposed to be conducted does not and will not infringe or conflict
with, in any material respect, patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses or other intellectual
property or franchise right of any person (except for patent challenge
proceedings). Except as described in the Prospectus, no claim has
been made against the Company alleging the infringement by the Company
of any patent, trademark, service xxxx, trade name, copyright, trade
secret, license or other intellectual property right or franchise
right of any person.
(xxi) The Company and its subsidiaries have performed all material
obligations required to be performed by them under all contracts
required by Item 601(b)(10) of Regulation S-K under the Securities Act
to be filed as exhibits to the Registration Statement, and neither the
Company nor any of its subsidiaries nor any other party to such
contract is in default under or in breach of any such obligations.
Neither the Company nor any of its subsidiaries has received any
notice of such default or breach.
(xxii) Neither the Company nor any of its subsidiaries is involved in
any material labor dispute nor is any such dispute threatened. The
Company is not aware that (A) except as disclosed in the Prospectus,
any executive, key employee or significant group of employees of the
Company or any subsidiary plans to terminate employment with the
Company or any such subsidiary or (B) any such executive or key
employee is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement that would be violated by
the present or proposed business activities of the Company and its
subsidiaries. Neither the Company nor any subsidiary has or expects
to have any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with
respect to any pension, profit sharing or other plan which is subject
to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which the Company or any subsidiary makes or ever has
made a contribution and in which any employee of the Company or any
subsidiary is or has ever been a participant. With respect to such
plans, the Company and each subsidiary are in compliance, in all
material respects, with all applicable provisions of ERISA.
(xxiii) The Company has obtained the written agreements described in
Section 8(k) of this Agreement from each of its officers, directors
and holders of Common Stock listed on Schedule B hereto.
(xxiv) The Company and its subsidiaries have, and the Company and its
subsidiaries as of the Closing Date will have, good and marketable
title in fee
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simple to all real property and good and marketable title to all
personal property owned or proposed to be owned by them which is
material to the business of the Company or of its subsidiaries, in
each case free and clear of all liens, encumbrances and defects except
such as are described the Prospectus or such as would not have a
Material Adverse Effect; and any real property and buildings held
under lease by the Company and its subsidiaries or proposed to be held
after giving effect to the transactions described in the Prospectus
are, or will be as of each of the Closing Dates, held by them under
valid, subsisting and enforceable leases with such exceptions as would
not have a Material Adverse Effect, except as described in or
contemplated by the Prospectus.
(xxv) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are customary in the businesses in which they are
engaged or propose to engage after giving effect to the transactions
described in the Prospectus; and neither the Company nor any
subsidiary of the Company has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
subsidiaries considered as a whole, except as described in or
contemplated by the Prospectus.
(xxvi) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the
Company any brokerage or finder's fee or other similar fee or
commission as a result of any of the transactions contemplated by this
Agreement.
(xxvii) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxviii) To the Company's knowledge, neither the Company nor any of
its subsidiaries nor any employee or agent of the Company or any of
its subsidiaries has made any payment of funds of the Company or any
of its subsidiaries or received or retained any funds in violation of
any law, rule or
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regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(xxix) Neither the Company nor any of its subsidiaries is or, after
application of the net proceeds of this offering as described under
the caption "Use of Proceeds" in the Prospectus, will become an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended. The Company intends to conduct its affairs in a
manner such that it will not become an entity required to register as
an "investment company" subject to regulation under the Investment
Company Act.
(xxx) The Common Stock has been approved for quotation and trading on
the New York Stock Exchange, subject to official notice of issuance.
(xxxi) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company as to the
matters covered thereby.
3. Purchase by, and Sale and Delivery to, Underwriters--Closing Dates. The
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Company agrees to sell to the Underwriters the Firm Stock; and on the basis
of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase the Firm Stock
from the Company, the number of shares of Firm Stock to be purchased by
each Underwriter being set opposite its name in Schedule A, subject to
adjustment in accordance with Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be the price per share set forth in the table on the cover page of the
Prospectus under the heading "Proceeds to the Company" (the "Purchase
Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York Time, on the second full business day
preceding the First Closing Date (as defined below) or, if no such
direction is received, in the names of the respective Underwriters or in
such other names as Cowen may designate (solely for the purpose of
administrative convenience) and in such denominations as Cowen may
determine, against payment of the aggregate Purchase Price therefor by
certified or official bank check or checks in immediately available funds
(same day funds), payable to the order of the Company, at the offices of
Xxxxx & Xxxx llp, Xxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The
time and date of the delivery and closing shall be at _____ A.M.,
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New York Time, on _______________, 1998, in accordance with Rule 15c6-1 of
the Exchange Act. The time and date of such payment and delivery are
herein referred to as the "First Closing Date". The First Closing Date and
the location of delivery of, and the form of payment for, the Firm Stock
may be varied by agreement between the Company and Cowen. The First
Closing Date may be postponed pursuant to the provisions of Section 12.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later
than 10:00 A.M., New York Time, on the business day preceding the First
Closing Date at the offices of Xxxxx & Company, Xxxxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000.
It is understood that Cowen or Bear, Xxxxxxx & Co., Inc. or Xxxxx Xxxxxx
Inc., individually and not as Representatives of the several Underwriters,
may (but shall not be obligated to) make payment to the Company on behalf
of any Underwriter or Underwriters, for the Stock to be purchased by such
Underwriter or Underwriters. Any such payment by Cowen or Bear, Xxxxxxx &
Co., Inc. or Xxxxx Xxxxxx Inc. shall not relieve such Underwriter or
Underwriters from any of its or their other obligations hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price as soon after the
effectiveness of the Registration Statement as in their judgment is
advisable. The Representatives shall promptly advise the Company of the
making of the initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus,
the Company hereby grants to the Underwriters an option to purchase up to
an aggregate of 450,000 shares of Optional Stock. The price per share to
be paid for the Optional Stock shall be the Purchase Price. The option
granted hereby may be exercised as to all or any part of the Optional Stock
at any time, and from time to time, not more than thirty (30) days
subsequent to the effective date of this Agreement. No Optional Stock
shall be sold and delivered unless the Firm Stock previously has been, or
simultaneously is, sold and delivered. The right to purchase the Optional
Stock or any portion thereof may be surrendered and terminated at any time
upon notice by the Underwriters to the Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from Cowen to the Company setting forth the number of shares
of the Optional Stock to be purchased by them and the date and time for
delivery of and payment for the Optional Stock. Each date and time for
delivery of and payment for the Optional Stock (which may be the First
Closing Date, but not earlier) is herein called the "Option Closing Date"
and shall in no event be earlier than two (2) business days nor later than
ten (10) business days after written notice is given. (The Option Closing
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Date and the First Closing Date are herein called the "Closing Dates".)
Optional Stock shall be purchased for the account of each Underwriter in
the same proportion as the number of shares of Firm Stock set forth
opposite such Underwriter's name in Schedule A hereto bears to the total
number of shares of Firm Stock (subject to adjustment by the Underwriters
to eliminate odd lots). Upon exercise of the option by the Underwriters,
the Company agrees to sell to the Underwriters the number of shares of
Optional Stock set forth in the written notice of exercise and the
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such shares
determined as aforesaid.
The Company will deliver the Optional Stock to the Underwriters (in the
form of definitive certificates, issued in such names and in such
denominations as the Representatives may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York Time, on the second full
business day preceding the Option Closing Date or, if no such direction is
received, in the names of the respective Underwriters or in such other
names as Cowen may designate (solely for the purpose of administrative
convenience) and in such denominations as Cowen may determine, against
payment of the aggregate Purchase Price therefor by certified or official
bank check or checks in Clearing House funds (next day funds), payable to
the order of the Company, at the offices of Xxxxx & Xxxx llp, Xxx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Company shall make the
certificates for the Optional Stock available to the Underwriters for
examination not later than 10:00 A.M., New York Time, on the business day
preceding the Option Closing Date at the offices of Xxxxx & Company, Xxx
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Option Closing Date and
the location of delivery of, and the form of payment for, the Option Stock
may be varied by agreement between the Company and Cowen. The Option
Closing Date may be postponed pursuant to the provisions of Section 12.
4. Covenants and Agreements of the Company. The Company covenants and agrees
---------------------------------------
with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A of the of the Rules and
Regulations, use its best efforts to cause the Registration Statement to
become effective as soon as practicable after the execution of this
Agreement, (ii) if the Company and the Representatives have determined to
proceed pursuant to Rule 430A of the Rules and Regulations, use its best
efforts to comply with the provisions of and make all requisite filings
with the Commission pursuant to Rule 430A and Rule 424 of the Rules and
Regulations and (iii) if the Company and the Representatives have
determined to deliver Prospectuses pursuant to Rule 434 of the Rules and
Regulations, to use its best efforts to comply with all the applicable
provisions thereof. The Company will advise the Representatives promptly
as to the time at which the Registration Statement becomes effective, will
advise the Representatives promptly of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the
13
institution of any proceedings for that purpose, and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible the lifting thereof, if issued. The Company will advise
the Representatives promptly of the receipt of any comments from the
Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information and will not at any time file any amendment to the
Registration Statement or supplement to the Prospectus which shall not
previously have been submitted to the Representatives a reasonable time
prior to the proposed filing thereof or to which the Representatives shall
reasonably object in writing or which is not in compliance with the
Securities Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly upon
the request of the Representatives, any amendments or supplements to the
Registration Statement or the Prospectus which in the reasonable opinion of
the Representatives may be necessary to enable the several Underwriters to
continue the distribution of the Stock and will use its best efforts to
cause the same to become effective as promptly as possible.
(c) If at any time after the effective date of the Registration Statement
when a prospectus relating to the Stock is required to be delivered under
the Securities Act any event relating to or affecting the Company or any of
its subsidiaries occurs as a result of which the Prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Securities Act, the Company will promptly
notify the Representatives thereof and will prepare an amended or
supplemented prospectus which will correct such statement or omission; and
in case any Underwriter is required to deliver a prospectus relating to the
Stock nine (9) months or more after the effective date of the Registration
Statement, the Company, upon the request of the Representatives and at the
expense of such Underwriter, will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the Securities Act; provided, however, that the
requirements of this Section 4(c), except the notification provision
hereof, shall be suspended in the event that, and for only so long as,
there exist pending material corporate developments or similar material
events that have not yet been publicly disclosed and as to which the
Company believes that public disclosure will have a material adverse effect
on such developments or events.
(d) The Company will deliver to the Representatives, at or before the
Closing Date, signed copies of the Registration Statement, as originally
filed with the Commission, and all amendments thereto including all
financial statements and exhibits thereto, and will deliver to the
Representatives such number of copies of the Registration Statement,
including such financial statements but without exhibits, and
14
all amendments thereto, as the Representatives may reasonably request. The
Company will deliver or mail to or upon the order of the Representatives,
from time to time until the effective date of the Registration Statement,
as many copies of the Pre-effective Prospectus as the Representatives may
reasonably request. The Company will deliver or mail to or upon the order
of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the Stock is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided,
however, that the expense of the preparation and delivery of any prospectus
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its stockholders as soon
as practicable, but not later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement which will be in
reasonable detail (but which need not be audited) and which will comply
with Section 11(a) of the Securities Act, covering a period of at least
twelve (12) months beginning after the "effective date" (as defined in Rule
158 under the Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable the Stock
to be registered or qualified for offering and sale by the Underwriters and
by dealers under the securities laws of such jurisdictions as the
Representatives may designate and at the request of the Representatives
will make such applications and furnish such consents to service of process
or other documents as may be required of it as the issuer of the Stock for
that purpose; provided, however, that the Company shall not be required to
qualify to do business or to file a general consent (other than that
arising out of the offering or sale of the Stock) to service of process in
any such jurisdiction where it is not now so subject. The Company will,
from time to time, prepare and file such statements and reports as are or
may be required of it as the issuer of the Stock to continue such
qualifications in effect for so long a period as the Representatives may
reasonably request for the distribution of the Stock. The Company will
advise the Representatives promptly after the Company becomes aware of the
suspension of the qualifications or registration of (or any such exception
relating to) the Common Stock of the Company for offering, sale or trading
in any jurisdiction or of any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any orders suspending
such qualifications, registration or exception, the Company will, with the
cooperation of the Representatives use its best efforts to obtain the
withdrawal thereof.
(g) The Company will furnish to its stockholders annual reports containing
financial statements certified by independent public accountants and will
make available to its stockholders quarterly summary financial information
in reasonable detail which may be unaudited. During the period of five (5)
years from the date
15
hereof, so long as the Company remains a reporting company under the
Exchange Act, the Company will deliver to the Representatives and, upon
request, to each of the Underwriters: (i) as soon as practicable after the
end of each fiscal year (the first such fiscal year being 1998), copies of
each annual report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants, and each other
report furnished by the Company to its stockholders; (ii) copies of any
other reports (financial or other) which the Company shall publish or
otherwise make available to any of its stockholders as such; (iii) as soon
as practicable after the filing thereof, each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form
8-K or other report or financial statement filed by the Company with the
Commission, or the NASD or any securities exchange; and (iv) press releases
and such other information as the Company publicly disseminates. So long
as the Company has active subsidiaries, such financial statements will be
on a consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally. Separate financial statements shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations and for
which separate financial statements are required under the Rules and
Regulations.
(h) The Company will use its best efforts to maintain the listing of the
Stock on the New York Stock Exchange.
(i) The Company will maintain a transfer agent and registrar for its Common
Stock.
(j) For so long as a prospectus relating to the Stock is required to be
delivered under the Securities Act, prior to filing its quarterly
statements on Form 10-Q, the Company will have its independent auditors
perform a limited quarterly review of its quarterly numbers.
(k) The Company will not offer, sell, assign, transfer, encumber, contract
to sell, grant an option to purchase or otherwise dispose of any shares of
Common Stock or securities convertible into or exercisable or exchangeable
for Common Stock (including, without limitation, Common Stock of the
Company which may be deemed to be beneficially owned by the Company in
accordance with the Rules and Regulations) during the 180 days following
the date on which the price of the Common Stock to be purchased by the
Underwriters is set, other than the Company's sale of Common Stock
hereunder, the Company's issuance of Common Stock upon the exercise of
warrants and stock options which are presently outstanding and the grant of
options under the Company's stock option plan described in the Prospectus;
provided, however, that the Company may issue and deliver shares of Common
Stock
16
or securities convertible into or exercisable or exchangeable for Common
Stock in connection with any acquisition of, or joint venture or other
collaborative arrangement with, another company if the terms of issuance
provide that such Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock shall not be sold prior to the
expiration of the 180-day period hereinabove referenced.
(l) Prior to filing with the Commission any reports on Form SR pursuant to
Rule 463 of the Rules and Regulations, the Company will furnish a copy
thereof to counsel for the Underwriters and receive and consider its
comments thereon, and will deliver promptly to the Representatives a signed
copy of each report on Form SR filed by it with the Commission.
(m) The Company will apply the net proceeds from the sale of the Stock as
set forth in the description under "Use of Proceeds" in the Prospectus,
which description complies in all respects with the requirements of Item
504 of Regulation S-K.
(n) The Company will supply you with copies of all correspondence to and
from, and all documents issued to and by, the Commission in connection with
the registration of the Stock under the Securities Act.
(o) Prior to each of the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company and its subsidiaries for
any periods subsequent to the periods covered by the financial statements
appearing in the Registration Statement and the Prospectus.
(p) Except as required by applicable law, prior to each of the Closing
Dates the Company will issue no press release or other communications
directly or indirectly and hold no press conference with respect to the
Company or any of its subsidiaries, the financial condition, results of
operations, business, prospects, assets or liabilities of any of them, or
the offering of the Stock, without your prior written consent. For so long
as a prospectus relating to the Stock is required to be delivered under the
Securities Act, the Company will use its reasonable efforts to provide to
you copies of each press release or other public communications with
respect to the financial condition, results of operations, business,
prospects, assets or liabilities of the Company at least twenty-four (24)
hours prior to the public issuance thereof or such longer advance period as
may reasonably be practicable.
5. Payment of Expenses. (a) The Company will pay (directly or by
-------------------
reimbursement) all costs, fees and expenses incurred in connection with
expenses incident to the performance of the obligations of the Company
under this Agreement and in connection with the transactions contemplated
hereby, including but not limited to (i) all expenses and taxes incident to
the issuance and delivery of the Stock to the Representatives; (ii) all
expenses incident to the registration of the Stock under the
17
Securities Act; (iii) the costs of preparing stock certificates (including
printing and engraving costs); (iv) all fees and expenses of the registrar
and transfer agent of the Stock; (v) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Stock to
the Underwriters; (vi) fees and expenses of the Company's counsel and the
Company's independent accountants; (vii) all costs and expenses incurred in
connection with the printing, filing, shipping and distribution of the
Registration Statement, each Pre-effective Prospectus and the Prospectus
(including all exhibits and financial statements) and all amendments and
supplements provided for herein, the Master Agreement Among Underwriters
between the Representatives and the Underwriters, the Master Selected
Dealers' Agreement, the Underwriters' Questionnaire and the Blue Sky
memoranda (including related fees and expenses of counsel to the
Underwriters) and this Agreement; (viii) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
exemptions from the qualifying or registering (or obtaining qualification
or registration of) all or any part of the Stock for offer and sale and
determination of its eligibility for investment under the Blue Sky or other
securities laws of such jurisdictions as the Representatives may designate;
and (ix) fees and expenses, including those of counsel to the Underwriters,
paid or incurred in connection with filings made with the NASD.
(b) In addition to the other obligations of the Company under Section 6(a)
hereof, the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding arising
out of or based upon (i) any statement or omission or any alleged statement
or omission, (ii) any act or failure to act or any alleged act or failure
to act or (iii) any breach or inaccuracy in their representations and
warranties, it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company, together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced from
time to time by _______, New York, New York (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter in a
timely manner as provided below shall bear interest at the Prime Rate from
the due date for such reimbursement. This expense reimbursement agreement
will be in addition to any other liability which the Company may otherwise
have. The request for reimbursement will be sent to the Company.
18
(c) In addition to its other obligations under Section 6(b) hereof, each
Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, described in Section 6(b) hereof which relates to
information furnished to the Company pursuant to Section 6(b) hereof, it
will reimburse the Company (and, to the extent applicable, each officer,
director or controlling person) on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Underwriters' obligation to
reimburse the Company (and, to the extent applicable, each officer,
director or controlling person) for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Company (and, to the extent
applicable, each officer, director or controlling person) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
6. Indemnification and Contribution. (a) The Company agrees to indemnify and
--------------------------------
hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and agents of
each of such Underwriter (collectively, the "Underwriter Indemnified
Parties" and, each, an "Underwriter Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (including the reasonable
cost of investigating and defending against any claims therefor and counsel
fees incurred in connection therewith), joint or several, which may be
based upon the Securities Act, or any other statute or at common law, (i)
on the ground or alleged ground that any Pre-effective Prospectus, the
Registration Statement or the Prospectus (or any Pre-effective Prospectus,
the Registration Statement or the Prospectus as from time to time amended
or supplemented) includes or allegedly includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
written information furnished to the Company by any Underwriter, directly
or through the Representatives, specifically for use in the preparation
thereof or was subsequently corrected in an amendment or supplement, but
such amendment or supplement was not appropriately distributed by the
Underwriters or (ii) for any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any
manner to, the Stock or the offering contemplated hereby, and which is
included
19
as part of or referred to in any loss, claim, damage, liability or expense
arising out of or based upon matters covered by clause (i) above (provided
that the Company shall not be liable under this clause (ii) to the extent
that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, or liability or expense
resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or
willful misconduct). The Company will be entitled to participate at its
own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Company elects
to assume the defense, such defense shall be conducted by counsel chosen by
it and reasonably acceptable to the Underwriters. In the event the Company
elects to assume the defense of any such suit and retain such counsel, any
Underwriter Indemnified Parties, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such
counsel unless (i) the Company shall have specifically authorized the
retaining of such counsel or (ii) the parties to such suit include any such
Underwriter Indemnified Parties, and the Company and such Underwriter
Indemnified Parties at law or in equity have been advised by counsel to the
Underwriters that one or more legal defenses may be available to it or them
which may not be available to the Company, in which case the Company shall
not be entitled to assume the defense of such suit notwithstanding its
obligation to bear the fees and expenses of such counsel. This indemnity
agreement is not exclusive and will be in addition to any liability which
the Company might otherwise have and shall not limit any rights or remedies
which may otherwise be available at law or in equity to each Underwriter
Indemnified Party.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act (collectively, the
"Company Indemnified Parties"), against any losses, claims, damages,
liabilities or expenses (including, unless the Underwriter or Underwriters
elect to assume the defense, the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which arise out of or are based in
whole or in part upon the Securities Act, the Exchange Act or any other
federal, state, local or foreign statute or regulation, or at common law,
on the ground or alleged ground that any Pre-effective Prospectus, the
Registration Statement or the Prospectus (or any Pre-effective Prospectus,
the Registration Statement or the Prospectus, as from time to time amended
and supplemented) includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading, but only insofar as any such
statement or omission was made in reliance upon, and in conformity with,
written information furnished to the Company by such Underwriter, directly
or through the Representatives, specifically for use in the preparation
thereof; provided, however, that in no case is such Underwriter to be
liable with respect to any claims made against any Company Indemnified
Party
20
against whom the action is brought unless such Company Indemnified Party
shall have notified such Underwriter in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Company Indemnified
Party, but failure to notify such Underwriter of such claim shall not
relieve it from any liability which it may have to any Company Indemnified
Party otherwise than on account of its indemnity agreement contained in
this paragraph. Such Underwriter shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but, if such Underwriter
elects to assume the defense, such defense shall be conducted by counsel
chosen by it. In the event that any Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties and any other Underwriter or Underwriters or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, respectively. The
Underwriter against whom indemnity may be sought shall not be liable to
indemnify any person for any settlement of any such claim effected without
such Underwriter's consent. This indemnity agreement is not exclusive and
will be in addition to any liability which such Underwriter might otherwise
have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to herein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Underwriters from the offering of the Stock. If, however, the
allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by
the Company and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to
21
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
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. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating, defending, settling or compromising any such
claim. Notwithstanding the provisions of this subsection (c), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the shares of the Stock
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Underwriters' obligations to contribute
are several in proportion to their respective underwriting obligations and
not joint. 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.
7. Survival of Indemnities, Representations, Warranties, etc. The respective
---------------------------------------------------------
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made
by or on behalf of any Underwriter or the Company or any of its officers or
directors or any controlling person, and shall survive delivery of and
payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective obligations of the
---------------------------------------
several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of
each of the Closing Dates, of the representations and warranties made
herein by the Company, to compliance at and as of each of the Closing Dates
by the Company with its covenants and agreements herein contained and other
provisions hereof to be satisfied at or prior to each of the Closing Dates,
and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules
22
and Regulations, shall have been made in the manner and within the time
period required by Rule 424(b) and Rule 434 of the Rules and Regulations,
as the case may be.
(b) The Representatives shall have been satisfied that there shall not have
occurred any change, on a consolidated basis, prior to each of the Closing
Dates in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company
and its subsidiaries considered as a whole, or any change in the capital
stock or short-term or long-term debt of the Company and its subsidiaries
considered as a whole, such that (i) the Registration Statement or the
Prospectus, or any amendment or supplement thereto, contains an untrue
statement of fact which, in the opinion of the Representatives, is
material, or omits to state a fact which, in the opinion of the
Representatives, is required to be stated therein or is necessary to make
the statements therein not misleading, or (ii) it is unpracticable in the
reasonable judgment of the Representatives to proceed with the public
offering or purchase the Stock as contemplated hereby.
(c) The Representatives shall be satisfied that no legal or governmental
action, suit or proceeding affecting the Company which is material and
adverse to the Company or which affects or may affect the Company's ability
to perform its obligations under this Agreement shall have been instituted
or threatened and there shall have occurred no material adverse development
in any existing such action, suit or proceeding.
(d) At the time of execution of this Agreement, the Representatives shall
have received from BDO Xxxxxxx LLP, independent certified public
accountants, a comfort letter, dated the date hereof, in form and substance
satisfactory to the Underwriters.
(e) The Representatives shall have received from BDO Xxxxxxx LLP,
independent certified public accountants, letters, dated each of the
Closing Dates, to the effect that such accountants reaffirm, as of each of
the Closing Dates, and as though made on each of the Closing Dates, the
statements made in the letter furnished by such accountants pursuant to
paragraph (d) of this Section 8.
(f) The Representatives shall have received from Proskauer Rose LLP,
counsel for the Company, opinions, dated each of the Closing Dates, to the
effect set forth in Exhibit I hereto.
(g) The Representatives shall have received from _________, regulatory
counsel for the Company, opinions, dated each of the Closing Dates, to the
effect set forth in Exhibit II hereto.
(h) The Representatives shall have received from Xxxxx & Xxxx llp, counsel
for the Underwriters, their opinions dated each of the Closing Dates with
respect to the
23
incorporation of the Company, the validity of the Stock, the Registration
Statement and the Prospectus and such other related matters as it may
reasonably request, and the Company shall have furnished to such counsel
such documents as they may request for the purpose of enabling them to pass
upon such matters.
(i) The Representatives shall have received certificates, dated each of the
Closing Dates, of the chief executive officer or the President and the
chief financial or accounting officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the Registration
Statement has been issued, and, to the best of the knowledge of the
signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement
became effective and at all times subsequent thereto up to the
delivery of such certificate, included any untrue statement of a
material fact or omitted to state 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;
(iii) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
set forth or contemplated in the Prospectus, neither the Company nor
any of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, nor entered into any material
transactions not in the ordinary course of business and there has not
been any material adverse change in the condition (financial or
otherwise), properties, business, management, prospects, net worth or
results of operations of the Company and its subsidiaries considered
as a whole, or, except for changes in the amount outstanding under the
Company's revolving credit facility described in the Prospectus that
are not material, any change in the capital stock or short-term or
long-term debt of the Company and its subsidiaries considered as a
whole;
(iv) The representations and warranties of the Company in this
Agreement are true and correct at and as of each of the Closing Dates,
and the Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Dates; and
(v) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as disclosed in
or contemplated by the Prospectus, (i) there has not been any material
adverse
24
change or a development involving a material adverse change in the
condition (financial or otherwise), properties, business, management,
prospects, net worth or results of operations of the Company and its
subsidiaries considered as a whole; (ii) the business and operations
conducted by the Company and its subsidiaries have not sustained a
loss by strike, fire, flood, accident or other calamity (whether or
not insured) of such a character as to interfere materially with the
conduct of the business and operations of the Company and its
subsidiaries considered as a whole; (iii) no legal or governmental
action, suit or proceeding is pending or threatened against the
Company which is material to the Company, whether or not arising from
transactions in the ordinary course of business, or which may
materially and adversely affect the transactions contemplated by this
Agreement; (iv) since such dates and except as so disclosed, the
Company has not incurred any material liability or obligation, direct,
contingent or indirect, made any change in its capital stock (except
pursuant to its stock plans), made any material change in its short-
term or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and (v) the Company has not declared or paid
any dividend, or made any other distribution, upon its outstanding
capital stock payable to stockholders of record on a date prior to the
Closing Date.
(j) The Company shall have furnished to the Representatives such additional
certificates as the Representatives may have reasonably requested as to the
accuracy, at and as of each of the Closing Dates, of the representations
and warranties made herein and as to compliance at and as of each of the
Closing Dates with the covenants and agreements herein contained and other
provisions hereof to be satisfied at or prior to each of the Closing Dates,
and as to satisfaction of the other conditions to the obligations of the
Underwriters hereunder.
(k) Cowen shall have received the written agreements, substantially in the
form of Exhibit III hereto, of the officers, directors and holders of
Common Stock listed in Schedule B that each will not offer, sell, assign,
transfer, encumber, contract to sell, grant an option to purchase or
otherwise dispose of any shares of Common Stock (including, without
limitation, Common Stock which may be deemed to be beneficially owned by
such officer, director or holder in accordance with the Rules and
Regulations) during the 180 days following the date of the final
Prospectus.
(l) The New York Stock Exchange shall have approved the stock for listing,
subject only to official notice of issuance.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in
form and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters
and other documents as the Representatives shall reasonably request. If
any of the conditions hereinabove provided for in this Section
25
shall not have been satisfied when and as required by this Agreement, this
Agreement may be terminated by the Representatives by notifying the Company
of such termination in writing or by telegram at or prior to each of the
Closing Dates, but Cowen, on behalf of the Representatives, shall be
entitled to waive any of such conditions.
9. Effective Date. This Agreement shall become effective immediately as to
--------------
Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 17 and, as to all other
provisions, at 11:00 a.m. New York City time on the first full business day
following the effectiveness of the Registration Statement or at such
earlier time after the Registration Statement becomes effective as the
Representatives may determine on and by notice to the Company or by release
of any of the Stock for sale to the public. For the purposes of this
Section 9, the Stock shall be deemed to have been so released upon the
release for publication of any newspaper advertisement relating to the
Stock or upon the release by you of telegrams (i) advising Underwriters
that the shares of Stock are released for public offering or (ii) offering
the Stock for sale to securities dealers, whichever may occur first.
10. Termination. This Agreement (except for the provisions of Section 5) may
-----------
be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Representatives and may be
terminated by the Representatives at any time before it becomes effective
in accordance with Section 9 by notice to the Company. In the event of any
termination of this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this Agreement to
any other party, other than as provided in Sections 5, 6 and 11 and other
than as provided in Section 12 as to the liability of defaulting
Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to the First
Closing Date trading in securities on any of the New York Stock Exchange,
American Stock Exchange, Nasdaq National Market, Chicago Board of Options
Exchange, Chicago Mercantile Exchange or Chicago Board of Trade shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange or market, or a banking moratorium shall have been
declared by New York or United States authorities; (ii) trading of any
securities of the Company shall have been suspended on any exchange or in
any over-the-counter market; (iii) if at or prior to the First Closing Date
there shall have been (A) an outbreak or escalation of hostilities between
the United States and any foreign power or of any other insurrection or
armed conflict involving the United States or (B) any change in financial
markets or any calamity or crisis which, in the judgment of the
Representatives, makes it impractical or inadvisable to offer or sell the
Stock on the terms contemplated by the Prospectus; (iv) if there shall have
been any development or prospective development involving particularly the
business or properties or securities of the Company or any of its
subsidiaries or the transactions contemplated by this Agreement, which, in
the
26
judgment of the Representatives, makes it impracticable or inadvisable to
offer or deliver the Stock on the terms contemplated by the Prospectus; (v)
if there shall be any litigation or proceeding, pending or threatened,
which, in the judgment of the Representatives, makes it impracticable or
inadvisable to offer or deliver the Stock on the terms contemplated by the
Prospectus; or (vi) if there shall have occurred any of the events
specified in the immediately preceding clauses (i) - (v) together with any
other such event that makes it, in the judgment of the Representatives,
impractical or inadvisable to offer or deliver the Stock on the terms
contemplated by the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other provisions
-----------------------------
hereof, if this Agreement shall not become effective by reason of any
election of the Company pursuant to the first paragraph of Section 10 or
shall be terminated by the Representatives under Section 8 or Section 10,
the Company will bear and pay the expenses specified in Section 5 hereof
and, in addition to their obligations pursuant to Section 6 hereof, the
Company will reimburse the reasonable out-of-pocket expenses of the several
Underwriters (including reasonable fees and disbursements of counsel for
the Underwriters) incurred in connection with this Agreement and the
proposed purchase of the Stock, and promptly upon demand the Company will
pay such amounts to you as Representatives.
12. Substitution of Underwriters. If any Underwriter or Underwriters shall
----------------------------
default in its or their obligations to purchase shares of Stock hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent
(10%) of the total number of shares underwritten, the other Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters shall so default and the aggregate number of shares with
respect to which such default or defaults occur is more than ten percent
(10%) of the total number of shares underwritten and arrangements
satisfactory to the Representatives and the Company for the purchase of
such shares by other persons are not made within forty-eight (48) hours
after such default, this Agreement shall terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a
defaulting Underwriter or Underwriters as provided in this Section 12, (i)
the Company shall have the right to postpone the Closing Dates for a period
of not more than five (5) full business days in order that the Company may
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made
necessary, and (ii) the respective numbers of shares to be purchased by the
remaining Underwriters or substituted Underwriters shall be taken as the
basis of their underwriting obligation for all purposes of this Agreement.
Nothing herein contained
27
shall relieve any defaulting Underwriter of its liability to the Company or
the other Underwriters for damages occasioned by its default hereunder.
Any termination of this Agreement pursuant to this Section 12 shall be
without liability on the part of any non-defaulting Underwriter or the
Company, except for expenses to be paid or reimbursed pursuant to Section 5
and except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in writing and, if sent to
-------
the Underwriters shall be mailed, delivered or telegraphed and confirmed to
you, as their Representatives c/o Cowen & Company at Xxx Xxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, attention: Xxxx X. Xxxxxx, with a copy to the
office of Counsel to Investment Banking, except that notices given to an
Underwriter pursuant to Section 6 hereof shall be sent to such Underwriter
at the address furnished by the Representatives or, if sent to the Company,
shall be mailed, delivered or telegraphed and confirmed to Schein
Pharmaceutical, Inc., 000 Xxxxxx Xxxxx, Xxxxxxx Xxxx, Xxx Xxxxxx 00000,
attention: Chief Financial Officer, with a copy to Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, attention: Xxxxxx X. Xxxxxx, Esq.
14. Successors. This Agreement shall inure to the benefit of and be binding
----------
upon the several Underwriters and the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person other
than the persons mentioned in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that
the representations, warranties, covenants, agreements and indemnities of
the Company contained in this Agreement shall also be for the benefit of
the person or persons, if any, who control any Underwriter or Underwriters
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and the indemnities of the several Underwriters shall also be
for the benefit of each director of the Company, each of its officers who
has signed the Registration Statement and the person or persons, if any,
who control the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act.
15. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York.
16. Authority of the Representatives. In connection with this Agreement, you
--------------------------------
will act for and on behalf of the several Underwriters, and any action
taken under this Agreement by Cowen, as Representative, will be binding on
all the Underwriters.
17. Partial Unenforceability. The invalidity or unenforceability of any
------------------------
Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any
28
other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and
only such minor changes) as are necessary to make it valid and enforceable.
18. General. This Agreement constitutes the entire agreement of the parties to
-------
this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. In this Agreement, the masculine,
feminine and neuter genders and the singular and the plural include one
another. The section headings in this Agreement are for the convenience of
the parties only and will not affect the construction or interpretation of
this Agreement. This Agreement may be amended or modified, and the
observance of any term of this Agreement may be waived, only by a writing
signed by the Company and the Representatives.
19. Counterparts. This Agreement may be signed in two (2) 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.
29
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding
agreement between us.
Very truly yours,
SCHEIN PHARMACEUTICAL, INC.
By:____________________________
Xxxxxx Xxxxxxx
Chairman, CEO and President
30
Accepted and delivered in
New York, New York as of
the date first above written.
XXXXX & COMPANY
BEAR, XXXXXXX & CO., INC.
XXXXX XXXXXX INC.
Acting on their own behalf
and as Representatives of the several
Underwriters referred to in the
foregoing Agreement.
By: XXXXX & COMPANY
By: Cowen Incorporated,
its general partner
By: ______________________________
Xxxx X. Xxxxxx
Managing Director - Syndicate
31
SCHEDULE A
Number of Shares Number of Shares
of Firm Stock to of Optional Stock
Name be Purchased to be Purchased
---- ------------------ -----------------
Xxxxx & Company
Bear, Xxxxxxx & Co. Inc.
Xxxxx Xxxxxx Inc.
----------- ---------
3,000,000 450,000
=========== =========
A-1
SCHEDULE B
Persons Providing Lock-Up Agreements Pursuant to Section 8(k)
[TO COME]
B-1
SCHEDULE C
List of Company Subsidiaries Pursuant to Section 2(vi)
Marsam Pharmaceuticals, Inc.
Steris Laboratories, Inc.
Danbury Pharmacal, Inc.
Danbury Pharmacal Puerto Rico, Inc.
Schein Pharmaceutical International, Inc.
C-1
Exhibit I
Form of Opinion of Issuer's Counsel
[Date]
XXXXX & COMPANY
BEAR, XXXXXXX & CO. INC.
XXXXX XXXXXX, INC.
As representatives of the several
Underwriters named in Schedule A
x/x Xxxxx & Xxxxxxx
Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Schein Pharmaceutical, Inc.
3,000,000 Shares of Common Stock
Dear Ladies and Gentlemen:
We have acted as counsel for Schein Pharmaceutical, Inc., a Delaware
corporation (the "Company"), in connection with the sale by the Company and
purchase of 3,000,000 shares of Common Stock, par value $.01 per share, of the
Company (the "Shares") by the several Underwriters listed in Schedule A to the
Underwriting Agreement, dated ____, 1998, among the Company, Xxxxx & Company,
Bear, Xxxxxxx & Co. Inc. and Xxxxx Xxxxxx Inc., as representatives of the
several Underwriters named therein (the "Underwriting Agreement"). This opinion
is being furnished pursuant to Section 8(f) of the Underwriting Agreement. All
defined terms not defined herein shall have the meanings ascribed to them in the
Underwriting Agreement.
We are of the opinion that:
1. The Company and each of its subsidiaries have been duly incorporated and
are validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, except where the failure to be so
qualified and in good standing would not have a Material Adverse Effect, and
have all power and authority necessary to own or hold their respective
properties and conduct the businesses in which they are engaged;
I-1
2. The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and all of the Shares to be issued and sold by the Company to the Underwriters
pursuant to the Underwriting Agreement have been duly and validly authorized
and, when issued and delivered against payment therefor as provided for in the
Underwriting Agreement, shall be duly and validly issued, fully paid and non-
assessable; except as otherwise disclosed in the Prospectus, all of the issued
shares of capital stock of each subsidiary of the Company have been duly and
validly authorized and issued and are fully paid, non-assessable and, to the
extent owned by the Company or a subsidiary of the Company, are owned directly
or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims; and all of the issued shares of capital stock of the
Company, including the Shares, conforms to the description thereof in the
Prospectus;
3. There are no preemptive or other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer of, any of the Shares pursuant
to the Company's Certificate of Incorporation or By-Laws or any agreement or
other instrument;
4. Except as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a party
or of which any property or assets of the Company or any of its Subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, could have a Material Adverse Effect on the Company and its
subsidiaries; and, to the best of our knowledge, no such proceedings are
threatened or contemplated by governmental authorities or other third parties;
5. The Company and each of its subsidiaries own or possess the right to use
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 any 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 or any of its subsidiaries with respect to the foregoing,
except where such claims and challenges would not, singly or in the aggregate,
have a Material Adverse Effect. The Company's business as now conducted and as
proposed to be conducted does not and will not infringe or conflict with any
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses or other intellectual property or franchise right of any person (except
for patent challenge proceedings);
6. The Company and each of its subsidiaries have, and the Company and each of
its subsidiaries as of the Closing Dates will have, good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned or proposed to be owned by them which is material to the business
of the Company or any of its subsidiaries, in each case free and clear of all
liens, encumbrances and defects, except such as are described in the Prospectus
or such as would not have a Material Adverse Effect; and any real property and
buildings held under lease by the Company and its subsidiaries or proposed to be
held after giving effect to the transactions described in the Prospectus are, or
will be as
I-2
of the Closing Dates, held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect;
7. The Company has full corporate power and authority to enter into the
Underwriting Agreement and to perform its obligations thereunder (including to
issue, sell and deliver the Shares), and the Underwriting Agreement has been
duly and validly authorized, executed and delivered by the Company and is a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that rights to indemnification
and contribution thereunder may be limited by federal or state securities laws
or the public policy underlying such laws;
8. The execution, delivery and performance of the Underwriting Agreement and
the consummation of the transactions therein contemplated will not result in a
breach or violation of any of the terms or provisions of or constitute a default
under any indenture, mortgage, deed of trust, note agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which any of them or any of their properties is or may be bound, the Certificate
of Incorporation, By-laws or other organizational documents of the Company or
any of its subsidiaries, or any law, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or result in the creation of a lien;
9. No consent, approval, authorization or order of any court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by the Underwriting Agreement, except such as may be
required by the National Association of Securities Dealers, Inc. (the "NASD") or
under the Securities Act, the Securities Exchange Act of 1934, as amended, or
the securities or "Blue Sky" laws of any jurisdiction in connection with the
purchase and distribution of the Shares by the Underwriters;
10. Except as set forth in the Prospectus, the Company and each of its
subsidiaries are in compliance with, and conduct their businesses in conformity
with, all applicable federal, state, local and foreign laws, rules and
regulations, including, but not limited to, those of any governmental agency,
court or tribunal; to the best of our knowledge, no prospective change in any of
such federal, state, local or foreign laws, rules or regulations has been
adopted which, when made effective, would have a Material Adverse Effect.
Except as disclosed in the Registration Statement, the Company and its
subsidiaries are in compliance with all applicable federal, state, local and,
where applicable, foreign laws and regulations relating to the protection of
human health or the environment or imposing liability or requiring standards of
conduct concerning any Hazardous Materials, except for such instances of
noncompliance which, either singly or in the aggregate, would not have a
Material Adverse Effect;
11. The Registration Statement was declared effective under the Securities
Act as of __________, 1998, the Prospectus was filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations on __________, 1998 and no
stop order suspending the
I-3
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose is pending or, to the best of our knowledge, threatened by the
Commission;
12. The Registration Statement and the Prospectus and any amendments or
supplements thereto (except for the financial statements and other financial
data included therein, as to which we express no opinion) comply as to form in
all respects with the requirements of the Securities Act and the Rules and
Regulations and the documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
complied as to form in all respects with the requirements of the Securities Act
or the Exchange Act, as applicable, and the Rules and Regulations; and any
amendment or supplement to any such incorporated document, when they became
effective or were filed with the Commission, as the case may be, complied as to
form in all respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the Rules and Regulations;
13. To the best of our knowledge, there are no contracts or other documents
which are required by the Securities Act or by the Rules and Regulations to be
described in the Prospectus or filed as exhibits to the Registration Statement
which have not been described in the Prospectus or filed as exhibits to the
Registration Statement or incorporated therein by reference as permitted by the
Rules and Regulations;
14. Other than as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right (other than rights which have been waived or satisfied) to
require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the securities
registered pursuant to this Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the Company
under the Securities Act;
15. The descriptions in the Registration Statement and Prospectus of
statutes, rules, regulations, legal or governmental proceedings, contracts and
other documents are accurate and such descriptions fairly present the
information required to be disclosed; and to the best of our knowledge, there
are no legal or governmental proceedings, statutes, rules or regulations, or any
contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required;
16. The statements in the Prospectus under the caption "Description of
Capital Stock", insofar as they purport to constitute a summary of the terms of
capital stock, and under the captions "Certain Transactions" and "Shares
Eligible for Future Sale", insofar as they purport to describe the provisions of
the documents referred to therein, are accurate and complete in all material
respects;
I-4
17. The Company and each of its subsidiaries are not, nor will they be
immediately after receiving the proceeds from the sale of the Shares, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended;
18. The Shares have been duly authorized and approved for quotation and
trading on the New York Stock Exchange, subject to official notice of issuance.
The foregoing opinion is limited to matters governed by the Federal laws of
the United States of America, the general corporate law of the State of Delaware
and the laws of the State of New York.
We have acted as counsel to the Company on a regular basis, have acted as
counsel to the Company in connection with previous financing transactions and
have acted as counsel to the Company in connection with the preparation and
filing of the Registration Statement and the Prospectus, and based on the
foregoing, no facts have come to our attention which lead us to believe that (i)
the Registration Statement or any amendment thereto, as of the Effective Date,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus contains any untrue statement of
a material fact or omits to state a material fact Required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) any document
incorporated by reference in the Prospectus or any amendment or supplement to
any such incorporated document made by the Company, when they became effective
or were filed with the Commission, as the case may be, contained, in the case of
a registration statement which became effective under the Securities Act, any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, or, in the case of documents filed under the Exchange Act with the
Commission, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Very truly yours,
I-5
Exhibit II
Form of Opinion of Regulatory Counsel
Ladies and Gentlemen:
We have acted as United States Food and Drug regulatory counsel to Schein
Pharmaceutical, Inc. (the "Company") in connection with the sale by the Company
and purchase of 3,000,000 shares of Common Stock, par value $.01, of the Company
(the "Shares") by the several Underwriters listed in Schedule A to the
Underwriting Agreement, dated ____, 1998, among the Company, Xxxxx & Company,
Bear, Xxxxxxx & Co. Inc. and Xxxxx Xxxxxx Inc., as representatives of the
several Underwriters named therein (the "Underwriting Agreement"). This opinion
is being furnished pursuant to Section 8(g) of the Underwriting Agreement. All
defined terms not defined herein shall have the meanings ascribed to them in the
Underwriting Agreement.
A Registration Statement on Form S-1 relating to the Offering was filed with
the Securities and Exchange Commission (the "Commission") by the Company under
the Securities Act of 1933, as amended, and, as amended, was declared effective
by the Commission on _____, 1998 (such registration statement, as amended and in
the form it became effective, the "Registration Statement"; the prospectus
included in the Registration Statement the "Prospectus"). For the purpose of
this opinion, we rely solely as to matters of fact on the representations in the
Registration Statement and we have not verified the factual statements or
conclusions set forth in the Registration Statement but have assumed their
validity. Subject to the above limitations, we are of the opinion that:
(i) The descriptions in the Registration Statement of the statutes,
regulations and legal or governmental proceedings or procedures
relating to the U.S. Food and Drug Administration (the "FDA")
and the regulatory process relating to the Company's products
including, without limitation, the statements in the
Registration Statement under the captions "Risk Factors--
Dependence on Regulatory Approval and Compliance", "Risk
Factors--Pending Regulatory Matters" and "Business--Government
Regulations", are accurate in all material respects and are a
fair summary of those statutes, regulations, proceedings or
procedures.
II-1
(ii) Except as set forth in the Registration Statement and except
where noncompliance would not have a Material Adverse Effect,
the Company is in possession of and is operating its business
in compliance with all authorizations, licenses, permits,
consents, certificates and orders required from the FDA for
marketing its products in the United States, including, without
limitation, the specific products described in the Registration
Statement under the caption "Business--Products", all of which
are valid and in full force and effect.
(iii) Nothing has come to our attention that leads us to believe that
descriptions of federal laws, regulations or rules relating to
the manufacture or sale of the Company's products and the
approval process relating thereto contained in the Registration
Statement, including, without limitation, the statements in the
Registration Statement under the captions "Risk Factors--
Dependence on Regulatory Approval and Compliance", "Risk
Factors--Pending Regulatory Matters" and "Business--Government
Regulations", 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.
We do not express any opinion as to any laws other than the Federal Food,
Drug, and Cosmetic Act or other related laws administered and enforced by the
FDA.
This opinion letter may not be relied upon or distributed to any person other
than you without our prior written consent.
Very truly yours,
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Form of Lock-Up Agreement Exhibit III
Xxxxx & Company
(as Representative of the Several Underwriters)
Xxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned is an officer, director and/or owner of record or
beneficially of shares of common stock, $.01 par value per share (the "Shares"),
or options or convertible bonds that are convertible into Shares of Schein
Pharmaceutical, Inc., or of any successor or predecessor (the "Company"). The
Company proposes to issue and sell Shares in a public offering (the "Offering")
pursuant to a registration statement, and prospectus included therein (the
"Registration Statement" and the "Prospectus"), to be filed with the United
States Securities and Exchange Commission and to be underwritten by a syndicate
of underwriters for whom Xxxxx & Company is acting as representative (the
"Representative"). The undersigned recognizes that the Offering will benefit
the Company by, among other things, raising additional capital for its
operations and creating a public trading market for the Shares.
In consideration of the foregoing, the undersigned hereby agrees that,
without the prior written approval of Xxxxx & Company, the undersigned will not
directly or indirectly sell, offer, pledge, contract to sell or grant any option
to purchase or otherwise dispose of or transfer any Shares, or securities
convertible into or exchangeable or exercisable for Shares, which securities are
owned either of record or beneficially by the undersigned as of the date of this
letter or acquired on or prior to the date of effectiveness of the Registration
Statement, or are received upon the exercise of options or the conversion of
convertible bonds held by the undersigned on such dates (collectively, the
"Securities"), for a period of 180 days after the date of the final Prospectus;
provided, that such restrictions shall not apply to Shares sold in the Offering.
The foregoing agreement and representation shall terminate if the Offering has
not occurred on or before April 30, 1998.
The undersigned agrees and consents to the entry of stop transfer
instructions with the transfer agent for the Company's Shares against any
transfer of Securities by it in contravention of the restrictions set forth
herein. The undersigned acknowledges that the Representative and the Company
are relying on the foregoing agreement of the undersigned in carrying out the
Offering and in entering into underwriting arrangements with respect thereto.
III-1
Notwithstanding the foregoing, if the undersigned is an individual, he
or she may transfer any Securities either during his or her lifetime or on death
by will or by intestacy to his or her immediate family or to a trust the
beneficiaries of which are exclusively the undersigned and/or a member or of his
or her immediate family or to a charitable organization; provided, however, that
in any case it shall be a condition to the transfer that the transferee execute
an agreement stating that the transferee is receiving and holding the Securities
transferred subject to the provisions of this Agreement, and there shall be no
further transfer of such Securities except in accordance with this Agreement.
For purposes of this Agreement, "immediate family" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor and "charitable
organization" shall mean an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended.
Notwithstanding the foregoing, if the undersigned is a partnership, the
partnership may transfer any Securities to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner, and any partner who is an
individual may transfer such Securities by gift, will or intestate succession to
his or her spouse or lineal descendants or ancestors; and if the undersigned is
a corporation, the corporation may transfer such Securities to any shareholder
or subsidiary of such corporation and any shareholder who is an individual may
transfer Securities by gift, will, or intestate succession to his or her
immediate family or to a charitable organization; provided, however, that in any
such case, it shall be a condition to the transfer that the transferee execute
an agreement stating that the transferee is receiving and holding the
Securities subject to the provisions of this Agreement, and there shall be no
further transfer of such Securities except in accordance with this Agreement.
Very truly yours,
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(Signature)
----------------------------------
(Name)
----------------------------------
(Title)
----------------------------------
(Date)
III-2
