Exhibit 1.1
2,000,000 Units, each Unit Consisting of
One (1) Share of Common Stock and
One Redeemable Class A Common Stock Purchase Warrant
of
BIODELIVERY SCIENCES INTERNATIONAL, INC.
FORM OF
UNDERWRITING AGREEMENT
New York, New York
____________, 2002
Roan/Xxxxxx Associates, L.P.,
as Representative of the
several Underwriters named in
Schedule I
x/x 00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
BioDelivery Sciences International, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell 2,000,000 units (the "Units"), each Unit
comprised of: one (1) share ("Share") of the Company's common stock, par value
$.01 per share (the "Common Stock") and one (1) Redeemable Class A Common Stock
Purchase Warrant (the "Class A Warrants") in a public offering ("Offering")
under Section 5 of the Securities Act of 1933, as amended. The aforesaid
2,000,000 Units, Shares and Class A Warrants (together, referred to as the "Firm
Securities") and together with all or any part of the up to 300,000 additional
Units subject to the overallotment option described in Section 2(b) hereof (the
"Overallotment Securities") are hereinafter collectively referred to as the
"Securities." This agreement confirms the agreement by the underwriters named in
Schedule I ("Underwriters") to purchase the Firm Securities from the Company
upon the terms and conditions contained herein. Roan/Xxxxxx Associates, L.P.
shall act as representative (the "Representative") of the several underwriters.
The Company also proposes to issue and sell to the Underwriters, an
option (the "Underwriters' Unit Purchase Option") pursuant to the Underwriters'
Purchase Option Agreement (the "Underwriters' Unit Purchase Option Agreement")
for the purchase of an aggregate of 10% of the number of Units being sold (the
"Underwriters' Option Units"), as provided in Section
3(d) hereof. The Securities, the Underwriters' Purchase Option Agreement and
Underwriters' Option Units are more fully described in the Registration
Statement (as defined in Subsection 1(a) hereof) and the Prospectus (as defined
in Subsection 1(a) hereof) referred to below. Unless the context otherwise
requires, all references to the "Company" shall include all presently existing
subsidiaries and any entities acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel required hereunder shall cover any such subsidiaries and
acquired entities.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters as of the date
hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2 (SEC File
No. 333-72872) including any related preliminary prospectus (each a "Preliminary
Prospectus"), for the registration of the offer and sale of Securities under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
any amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act and the rules and regulations of the Commission
under the Act. The Registration Statement with respect to the Securities,
including any Preliminary Prospectus, copies of which have heretofore been
delivered to the Representatives, has been carefully prepared by the Company in
conformity with the requirements of the Securities Act and the rules and
regulations thereunder. Following execution of this Agreement, the Company will
promptly file (i) if the Registration Statement has been declared effective by
the Commission, (A) a Term Sheet (as defined in the Rules and Regulations (as
hereinafter defined)) pursuant to Rule 434 under the Act or (B) a Prospectus
under Rules 430A and/or 424(b) under the Act, in either case in form
satisfactory to the Underwriters or (ii) in the event the registration statement
has not been declared effective, a further amendment to said registration
statement in the form heretofore delivered to the Underwriter and will not,
before the registration statement becomes effective, file any other amendment
thereto unless the Underwriter shall have consented thereto after having been
furnished with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations)(as hereinafter
defined), is hereinafter
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called the "Registration Statement" and the form of prospectus in the form first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations,
is hereinafter called the "Prospectus." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or Prospectus or any part
thereof and no proceedings for a stop order have been instituted or are pending
or, to the best knowledge of the Company, threatened. Each of the Preliminary
Prospectus, the Registration Statement and the Prospectus at the time of filing
thereof conformed in all material respects with the requirements of the Act and
the Rules and Regulations, and neither the Preliminary Prospectus, the
Registration Statement nor the Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein and necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Overallotment
Closing Date (as hereinafter defined) and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement, nor any amendment thereto, at the time the
Registration Statement or such amendment is declared effective under the Act,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, not misleading, and the Prospectus at the time the Registration
Statement becomes effective, at the Closing Date and at any Overallotment
Closing Date, will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to statements made
or
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statements omitted in reliance upon and in conformity with information supplied
to the Company in writing by or on behalf of the Underwriters expressly for use
in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company has been duly incorporated and is now, and
at the Closing Date and any Overallotment Closing Date will be, validly existing
as a corporation in good standing under the laws of the State of Delaware. Other
than as described in the Registration Statement, the Company does not own,
directly or indirectly, an interest in any corporation, partnership, trust,
joint venture or other business entity. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of its properties or the character of its
operations require such qualification to do business, except where the failure
to so qualify would not have a material adverse effect on the Company. The
Company has all requisite corporate power and authority, and has obtained any
and all necessary applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations except where the failure to comply would not
have a material adverse effect upon the Company; and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures, if any, in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the caption
"Capitalization" and will have the adjusted capitalization set forth therein on
the Closing Date and the Overallotment Closing Date, if any, based upon the
assumptions set forth therein. The Company is not a party to or bound by
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any instrument, agreement or other arrangement providing for the Company to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Underwriters' Unit Purchase Option and as otherwise
described in the Prospectus under the Section, "Description of Capital Stock."
The Securities, the Underwriters' Unit Purchase Option and the Underwriters'
Option Units and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform in all respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; the holders thereof
have no rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of any security
of the Company, or similar contractual rights granted by the Company to
subscribe for or purchase securities. The Securities, the Underwriters' Unit
Purchase Option and the Underwriters' Option Units to be issued and sold by the
Company hereunder, and upon payment therefor, are not and will not be subject to
any preemptive or other similar rights of any stockholder to subscribe for or
purchase securities, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof and thereof, will be validly
issued, fully paid and non-assessable and will conform to the descriptions
thereof contained in the Prospectus, and the holders thereof will not be subject
to any liability solely as such holders. All corporate action required to be
taken for the authorization, issuance and sale of the Securities, the
Underwriters' Unit Purchase Option and the Underwriters' Option Units has been
duly and validly taken; and the certificates, if any, representing the
Securities and the Underwriters' Option Units will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the Securities to
be sold to the Underwriter by the Company hereunder, the Underwriter will
acquire good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with
the related notes and schedules thereto, included in the Registration Statement,
the Preliminary Prospectus and the Prospectus fairly present the financial
position and the results of operations of the Company at the respective dates
and for the respective periods to which they apply; and such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Rules and Regulations, consistently applied throughout the
periods involved. Other than as described in the Prospectus, there has been no
material adverse change or development involving a prospective change in the
condition, financial or otherwise, or in the
5
earnings, business affairs, position, prospects, value, operation, properties,
business, or results of operation of the Company, whether or not arising in the
ordinary course of business, since the dates of the financial statements
included in the Registration Statement and the Prospectus and the outstanding
debt, the property, both tangible and intangible, and the business of the
Company, conform in all material respects to the descriptions thereof contained
in the Registration Statement and in the Prospectus.
(g) 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.
(h) Xxxxx Xxxxxxxx LLP, and Xxxxx Xxxxxx & Associates LLC.
whose reports are filed with the Commission as a part of the Registration
Statement, are each independent certified public accountant as required by the
Act and the Rules and Regulations.
(i) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, payroll
withholding taxes and taxes payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), (ii) has furnished all tax and information
returns it is required to furnish pursuant to the Code, and has established
adequate reserves for such taxes which are not due and payable, and (iii) does
not have knowledge of any tax deficiency or claims outstanding, proposed or
assessed against it.
(j) The Company maintains insurance, which is in full force
and effect, of the types and in the amounts which it reasonably believes to be
adequate for its business ( but in no event less than $1,000,000 per occurrence
and $3,000,000 in the aggregate), including, but not limited to, personal injury
and product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(k) There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the knowledge of the Company, threatened
against (or circumstances that may give
6
rise to the same), or involving the properties or business of the Company which:
(i) questions the validity of the capital stock of the Company or this Agreement
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement; (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects); or (iii) might materially affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(l) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriters' Purchase Option Agreement, and the
Warrant Agreement and to consummate the transactions provided for in such
agreements; and this Agreement and the Underwriters' Purchase Option Agreement
have each been duly authorized, executed and delivered by the Company. Each of
this Agreement and the Underwriters' Purchase Option Agreement constitutes a
legally valid and binding agreement of the Company, subject to due
authorization, execution and delivery by the Underwriter, enforceable against
the Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law). Neither the Company's execution or delivery of this
Agreement, the Warrant Agreement, the Underwriters' Purchase Option Agreement,
its performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any
material lien, charge, claim, encumbrance, pledge, security interest defect or
other restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of: (i) the
Certificate of Incorporation or By-Laws of the Company; (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over
7
environmental or similar matters), domestic or foreign, having jurisdiction over
the Company or any of its activities or properties.
(m) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Firm Securities and Overallotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Underwriters' Unit Purchase
Option or the Underwriters' Option Units.
(n) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to the
extent there is no material adverse effect upon the Company. The descriptions
contained in the Registration Statement of material contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts, government grants,
collaborative relationships, or other documents which are required by the Act or
the Rules and Regulations to be described in the Registration Statement or filed
as exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct copies
of the documents of which they purport to be copies.
(o) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein, the
Company has not: (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money in any material amount;
(ii) entered into any transaction other than in the ordinary course of business;
(iii) declared or paid any dividend or made any other distribution on or in
respect of its capital stock; or (iv) made any changes in capital stock,
material changes in debt (long or short term) or liabilities other than in the
ordinary course of business; or (v) made any material changes in or affecting
the general affairs,
8
management, financial operations, stockholders equity or results of operations
of the Company.
(p) No default exists in the due performance and observance
of any material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected except where such default does
not, and will not, have a material adverse effect upon the Company.
(q) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(r) Since January 6, 1997, the Company has not incurred any
fines or penalties arising under or as a result of the application of the
provisions of the Act or the Exchange Act.
(s) Except as disclosed in the Prospectus, the Company does
not presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan " or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Except as disclosed in the Prospectus, the Company does not
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA.
(t) The Company is not aware of any violation in any
material respect of any domestic or foreign laws, ordinances or governmental
rules or regulations to which it is subject.
(u) Except for registration rights for securities which are
disclosed in all material respects in the Prospectus under the section entitled
"Description of Capital Stock", and all of which have been waived by the holders
thereof, no holders of any securities of the Company or of any options, warrants
or other convertible or exchangeable securities of the Company exercisable for
or convertible or exchangeable for securities of the Company have the right to
include any securities issued by the Company in the Registration Statement or
any registration statement to be
9
filed by the Company or to require the Company to file a registration statement
under the Act.
(v) Neither the Company, nor, to the Company's best
knowledge after due inquiry, any of its employees, directors, stockholders or
affiliates (within the meaning of the Rules and Regulations) has taken, directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
(w) To its knowledge after reasonable investigation, none of
the patents, patent applications, trademarks, service marks, trade names and
copyrights, or licenses and rights to the foregoing presently owned or held by
the Company are in dispute or are in any conflict with the right of any other
person or entity within the Company's current area of operations nor has the
Company received notice of any of the foregoing. Except as described in the
Prospectus, the Company: (i) owns or has the right to use, free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, all patents, trademarks,
service marks, trade names and copyrights, technology and licenses and rights
with respect to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing; and (ii) except as
set forth in the Prospectus, is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service xxxx trade
name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(x) To its knowledge after reasonable investigation, the
Company owns and has the unrestricted right to use all material trade secrets,
trade-marks, trade names, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
patents, patent applications, inventions, designs, processes, works of
authorship, computer programs and technical data and information (collectively
herein "Intellectual Property") required for or incident to the development,
manufacture, operation and sale of all products and services sold or proposed to
be sold by the Company, free and clear of and without violating any right, lien,
or claim of others, including without limitation, former employers of its
employees; provided, however, that the possibility exists that other persons or
entities, completely independently of the Company, or employees
10
or agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(y) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all the Intellectual Property
material to its operations.
(z) Except as disclosed in the Prospectus, the Company has
good and marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects, or
other restrictions or equities of any kind whatsoever, other than liens for
taxes or assessments not yet due and payable.
(aa) On or before the effective date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which (i) each of the Company's stockholders
holding in excess of 5% shares of the Company's Common Stock (including persons
holding securities convertible into Common Stock under Section 13(d) of the
Exchange Act), has agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber any of their shares of Common Stock or other securities
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein for a period commencing on the
Effective Date and ending on the last day of the 180th day after the closing
date of the Offering without the prior written consent of the Underwriter, and
(ii) The holders of options to purchase shares of the Company's Common Stock
have agreed not to, directly or indirectly, offer to sell, sell, grant any
option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber any of their shares of Common Stock underlying such options (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of
any beneficial interest therein for a period commencing on the Effective Date
and ending on the last day of the 180th day after the closing date of the
Offering without the prior written consent of the Underwriter. The Company will
cause the Transfer Agent, as defined below, to xxxx an appropriate legend on the
face of stock certificates representing all of such shares of Common Stock.
(bb) The Company has not incurred any liability and there are
no arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
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(cc) The Firm Securities have been approved for quotation on
the Nasdaq SmallCap Stock Market, Inc. subject to official notice of issuance.
(dd) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, except with respect to the beneficial ownership
of not more than 1% of the outstanding shares of capital stock of any
publicly-held entity; or (ii) a beneficial interest in any contract or agreement
to which the Company is a party or by which it may be bound or affected. Except
as set forth in the Prospectus under "Certain Transactions", there are no
existing agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, or principal stockholder of the Company, or
any affiliate or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
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(gg) The Company has entered into an employment agreement
with Xxxxxxx Xxxxxxx as described in the Prospectus. The Company has obtained
key person life insurance with an insurer rated at least AA or better in the
most recent addition of "Best's Life Reports" in the amount of $2,000,000 on the
life of Xxxxxxx Xxxxxxx. Such insurance shall be maintained in full force and
effect for a period of three years. The Company shall be the sole beneficiary of
such policy.
(hh) No securities of the Company have been sold by the
Company in the last three fiscal years, except as disclosed in Part II of the
Registration Statement.
(ii) The minute books of the Company have been made available
to Underwriters' Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Stockholders of the Company since its date
of formation. The stock ledgers of the Company are correct and accurate and
reflect the record ownership of all owners of the Company's capital stock. All
persons who are owners of 5% or more of the Common Stock of the Company as set
forth in the section of the Prospectus entitled "Principal Stockholders" are
properly included therein and all transactions between "promoters" of the
Company and the Company have been properly described in accordance with SEC
Rules and Regulations.
(jj) Except as disclosed in writing to the Underwriters, no
officer, or director or stockholder of the Company has any affiliation or
association with any member of the NASD.
(kk) Effective January 7, 2002, BioDelivery Sciences
International, Inc., and Bio Delivery Sciences, Inc., a Delaware corporation
("BDS") completed a merger (the "Merger"), the effect of which was that BDS was
merged with and into BioDelivery Sciences International, Inc., and BDS no longer
has any separate corporate existence. The Merger was duly authorized under the
laws of the states of Indiana and Delaware, respectfully, and approved by all
necessary corporate action on the part of each of BDS and BioDelivery Sciences
International, Inc., including without limitation, all necessary shareholder
consents. No shareholders of BDS have exercised appraisal rights under the laws
of the state of Delaware. Additionally, on or prior to the date hereof, the
Company completed a reincorporation under the laws of the state of Delaware in
compliance with the laws of the states of Indiana and Delaware.
2. Purchase, Sale and Delivery of the Securities and Agreement to
Issue Underwriters' Purchase Option
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms
13
and conditions herein set forth, the Company agrees to sell to Underwriters and
each Underwriter agrees, severally and not jointly, to purchase from the Company
the respective number of Firm Securities set forth in Schedule A hereto opposite
its name, subject to Section (b) hereof at the price per Unit set forth below in
Section 2(c).
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase severally and not jointly, up to an additional 300,000
Units. The option granted hereby will expire 45 days after the date of the
Prospectus, and may be exercised in whole or in part from time to time only for
the purpose of covering over- allotments which may be made in connection with
the offering and distribution of the Firm Securities upon notice by the
Underwriters through the Representative to the Company, setting forth the number
of Overallotment Securities as to which the Underwriter is then exercising the
option and the time and date of payment and delivery for such Overallotment
Securities. Any such time and date of delivery shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Representative
and the Company. In the event such option is exercised, the Underwriters shall
purchase such number of Overallotment Securities then being purchased which
shall have been allocated to the Underwriters, and which such shall have agreed
to purchase, subject in each case to such adjustments as the Underwriters in
their discretion shall make to eliminate any sales or purchases of fractional
Securities. Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Overallotment Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, Xxxx-Xxxxxx Associates, L.P., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other place as shall be designated by the
Representative for the respective accounts of the several Underwriters. Such
delivery and payment shall be made at 10:00 a.m. New York City time on ________
__, 2002 or at such other time and date as shall be designated by the
Representative, but not more than three (3) business days after the Effective
Date of the Registration Statement (such time and date of payment and delivery
being hereafter called "Closing Date"). In addition, in the event that any or
all of the Overallotment Securities are purchased by the Underwriters, payment
of the purchase price for, and delivery of certificates for such Overallotment
Securities shall be made at the above-mentioned
14
office or at such other place and at such time (such time and date of payment
and delivery being hereinafter called "Overallotment Closing Date") as shall be
agreed upon by the Underwriters and the Company on each Overallotment Closing
Date as specified in the notice from the Underwriters to the Company. Delivery
of the certificates for the Firm Securities and the Overallotment Securities, if
any, shall be made to the Underwriters against payment by the Underwriters of
the purchase price for the Firm Securities and the Overallotment Securities, if
any, to the order of the Company as the case may be by certified check in New
York Clearing House funds, certificates for the Firm Securities and the
Overallotment Securities, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least two
(2) business days prior to Closing Date or the relevant Overallotment Closing
Date, as the case may be. The certificates for the Firm Securities and the
Overallotment Securities, if any, shall be made available to the Underwriters at
the above-mentioned office or such other place as the Underwriter may designate
for inspection, checking and packaging no later than 9:30 a.m. on the last
business day prior to Closing Date or the relevant Overallotment Closing Date,
as the case may be.
The purchase price of the Securities to be paid by the
Underwriters to the Company for the Securities purchased under clauses (a) and
(b) above will be [____] per Unit (which price is net of the Underwriters'
discount and commissions). The Company shall not be obligated to sell any
Securities hereunder unless all Firm Securities to be sold by the Company are
purchased hereunder. The Company agrees to issue and sell the Securities to the
Underwriter in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriters, the Underwriters' Purchase Option at a purchase price of
$200.00 which Underwriters' Purchase Option shall entitle the holders thereof to
purchase an aggregate of 200,000 Units. The Underwriters' Purchase Option shall
not be exercisable for one year after the Effective Date and will expire five
years after such date and will have an initial exercise price equal to one
hundred and fifty percent (150%) of the initial public offering price of the
Units. The Underwriters' Purchase Option shall not be redeemable, provided,
however, the Class A Warrants issuable upon exercise of the Underwriters'
Purchase Option shall be redeemable upon the same terms as the Class A warrants
sold to the public. The Underwriters' Purchase Option Agreement and form of
Units Purchase Option Certificate shall be substantially in the form filed as an
exhibit to the Registration Statement. The Securities to be received by the
Underwriters upon exercise of the Underwriters' Units Purchase Option shall be
the same as delivered to the public in the Offering. Payment for the
15
Underwriters' Units Purchase Option shall be made on the Closing Date. The
Company has reserved and shall continue to reserve a sufficient number of Units,
Shares and Warrants for issuance upon exercise of the Underwriters' Purchase
Option. The Underwriters' Purchase Option will be restricted from sale,
transfer, assignment or hypothecation for a period of one year from the
effective date of the offering except to officers or partners (not directors) of
the underwriter and members of the selling group and/or their officers or
partners in compliance with NASD Rule 2710(c)(7)(A).
3. Public Offering of the Securities. As soon after the
Registration Statement becomes effective and as the Underwriters deems
advisable, but in no event more than three (3) business days after such
Effective Date, the Underwriters shall make a public offering of the Securities
(other than to residents of or in any jurisdiction in which qualification of the
Securities is required and has not become effective) at the price and upon the
other terms set forth in the Prospectus and otherwise in compliance with the
Rules and Regulations. The Underwriters may allow such concessions and discounts
upon sales to other dealers as set forth in the Prospectus. The Underwriters may
from time to time increase or decrease the public offering price after
distribution of the Securities has been completed to such extent as the
Underwriters, in their sole discretion, deem advisable.
4. Covenants of the Company. The Company covenants and agrees with
the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act: (i) before termination of the Offering of the Securities
by the Underwriters which the Underwriters shall not previously have been
advised and furnished with a copy; or (ii) to which the Underwriters shall have
objected; or (iii) which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and confirm by notice in
writing: (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any
16
order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution or
proceeding for that purpose; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Underwriters
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the Offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriters
or Xxxxxxxxx & XxXxxxx, LLP ("Underwriters' Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be required to qualify as
a foreign corporation or file a general
17
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriters agree that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period commencing on the day after the end
of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof
and provided that the Company is required to file reports with the Commission
under Section 12 of the Exchange Act, the Company will furnish to its
stockholders, as soon as practicable,
18
annual reports (including financial statements audited by independent public
accountants), and will deliver to the Representative:
(i) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
Nasdaq Stock Market or any securities exchange;
(iii) every press release and every material news item
or article of interest to the financial community in respect of the Company and
any future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature
concerning the Company and any future subsidiaries or their respective
businesses which the Underwriters may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or
13E-4 received or filed by the Company from time to time.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports
with the Commission under Section 12 of the Exchange Act, the Company will
maintain a Transfer Agent and Warrant Agent, which may be the same entity, and,
if necessary under the same jurisdiction of incorporation as the Company, as
well as a Registrar (which may be the same entity as the Transfer and Warrant
Agent) for its Common Stock.
(j) The Company will furnish to the Underwriters or pursuant
to the Underwriters' direction, without charge, at such place as the
Underwriters may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (one of which copies will be manually executed and will include all
financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Underwriters may reasonably request.
19
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale
of the Securities in the manner, and subject to the provisions, set forth under
the caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used directly or indirectly to acquire any securities previously issued
by the Company.
(m) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriters as early
as practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to Section 6(k) hereof.
(o) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Representative's request; (ii) a list of holders of Securities upon the
Representatives' request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Representative's request.
(p) Until a date which is two (2) years from the Closing
Date, the Representative shall be entitled to appoint an individual who shall be
permitted to attend all meetings of the Board and to receive all notices and
other correspondence and communications sent by the Company to members of the
Board, and copies of all minutes thereof. The Company shall reimburse the
Underwriters' designee for his or her out-of-pocket expenses reasonably incurred
and authorized in advance by the Company in connection with his or her
attendance of the Board meetings. The Representative understands and agrees that
the individual so appointed may receive material non-public information in
connection with his duties, and,
20
therefore, including the Company's policies, will comply with all rules and
regulations regarding the use of such information.
(q) For a period equal to the lesser of (i) five (5) years
from the date hereof, or (ii) the sale to the public of the Underwriters' Option
Units, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Form S-1 or, if applicable, Form S-3 (or other
appropriate form) for the registration under the Act of the Underwriters' Option
Units and underlying warrants and shares of Common Stock.
(r) For a period of five (5) years from the date hereof, use
its best efforts at its cost and expense to maintain the listing of the
Securities on the Nasdaq SmallCap Stock Market.
(s) Following the Effective Date of the Registration
Statement and for a period of two (2) years thereafter, the Company shall, at
its sole cost and expense, prepare and file such blue sky trading applications
with such jurisdictions as the Representative may reasonably request after
consultation with the Company in order to provide for the resale of the
Securities and the Underwriters' Unit Option and underlying Securities, and on
the Underwriters' request, furnish the Underwriters with an opinion of counsel
with respect to the secondary sale of the Securities under the blue sky laws of
the various states prepared by securities counsel to the Company.
(t) The Company shall not amend or alter any term of any
written employment agreement between the Company and any executive officer, or
alter or amend the amount of compensation payable to such employee during the
term of such written employment agreement, in a manner more favorable to such
employee, without the express written consent of the Underwriters.
(u) Until the completion of the distribution of the
Securities and the termination of the Overallotment Option period, the Company
shall not without the prior written consent of the Representative, which consent
shall not be unreasonably withheld, issue, directly or indirectly, any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations or as required by the
Rules and Regulations.
(v) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of six (6) years from
the Closing Date.
(w) For a period of 13 months commencing on the Closing
Date, except with the written consent of the Representative, the
21
Company will not issue or sell, directly or indirectly, any shares of its
capital stock, or sell or grant options, or warrants or rights to purchase any
shares of its capital stock, except pursuant to (i) this Agreement, (ii) the
Underwriters' Purchase Option, (iii) the exercise of warrants and options of the
Company heretofore issued and described in the Prospectus, and (iv) the grant of
options and the issuance of shares issued upon exercise of options issued or to
be issued under the Company's stock option plan as described in the Prospectus
("Stock Option Plan"). Except as discussed in the Prospectus, prior to the
Closing Date, the Company will not issue any options or warrants without the
prior written consent of the Representative. The Company shall not, for a period
of 13 months from the Closing Date offer or sell any securities pursuant to
Regulation S or similar regulation.
(x) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 13 months following the Closing
Date without the Representative's prior written consent.
(y) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular repayments of
principal and interest on existing indebtedness) or other securities of the
Company, any material adverse change in the condition (financial or other),
business, operations, income, net worth or properties, including any material
loss or damage to the properties of the Company (whether or not such loss is
insured against), which could materially adversely affect the condition
(financial or other), business, operations, income, net worth or properties of
the Company; and (iii) the Company shall not pay or declare any dividend or
other distribution on its Common Stock or its other securities or redeem or
repurchase any of its Common Stock or other securities.
(z) Except as disclosed in or contemplated by the
Registration Statement and Prospectus, the Company, for a period of 12 months
following the Closing Date, shall not redeem any of its securities, and shall
not pay any dividends or make any other cash distribution in respect of its
securities in excess of the amount of the Company's current or retained earnings
derived after the Closing Date without obtaining the Representative's prior
written consent, which consent shall not be unreasonably withheld. The
Representative shall either approve or disapprove such contemplated redemption
of securities or dividend payment or distribution within
22
ten (10) business days from the date the Representative receives written notice
of the Company's proposal with respect thereto; a failure of the Representative
to respond within the ten (10) business day period shall be deemed approval of
the transaction.
(aa) In connection with the redemption of the Class A
warrants, the Representative shall be entitled to a fee of a fee of 5% of the
exercise price for each Class A or Class B Warrant exercised; provided, however,
that the Representative will not be entitled to receive such compensation in
warrant exercise transactions in which (i) the market price of Common Stock at
the time of exercise is lower than the exercise price of the warrants; (ii) the
warrants are held in any discretionary account; (iii) disclosure of compensation
arrangements is not made, in addition to the disclosure provided in this
Prospectus, in documents provided to holders of warrants at the time of
exercise; (iv) the holder of the warrants has not confirmed in writing that the
Representative solicited such exercise; or (v) the solicitation of exercise of
the warrants was in violation of Regulation M promulgated under the Securities
Act. The Company hereby covenants and agrees that it not employee, retain or
hire any other person or broker dealer in connection with the redemption of the
Class A warrants, without the prior written consent of the Representative. The
covenants and agreements contained in this clause 4 (aa) shall survive
termination of this Agreement.
(bb) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Overallotment Closing Date (to the extent not paid at the Closing Date)
all its expenses and fees (other than fees of Underwriters' counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without
23
limitation: (i) the fees and expenses of accountants and counsel for the
Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, mailing, printing and filing of the Registration
Statement and the Prospectus and any amendments and supplements thereto and the
printing, mailing and delivery of this Agreement, the Selected Dealer
Agreements, Agreement Between Underwriters, and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters in quantities as hereinabove stated; (iii) the printing, engraving,
issuance and delivery of the Securities and Underwriters' Option Units including
any transfer or other taxes payable thereon; (iv) disbursements and fees of
Underwriters' Counsel in connection with the qualification of the Securities
under state or foreign securities or "Blue Sky" laws and determination of the
status of such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental
Blue Sky Memorandum" and "Legal Investments Survey," if any, which Underwriters'
Counsel fees (exclusive of filing fees and disbursements) shall equal $25,000
and of which $15,000 has previously been paid; (v) advertising costs and
expenses, including but not limited to costs and expenses in connection with one
information meeting held in New York, New York, one tombstone advertisement, at
least four bound volumes of the Offering documents for the Underwriters and its
counsel and prospectus memorabilia; (vi) fees and expenses of the transfer
agent; (vii) the fees payable to the NASD; and (viii) the fees and expenses
incurred in connection with the listing of the Securities on the Nasdaq Stock
Market. All fees and expenses payable to the Underwriters hereunder shall be
payable at the Closing Date or Overallotment Closing Date, as applicable;
provided, however, the Company shall pay such fees and costs in advance of the
Closing Date if requested by the Underwriter. The Underwriters shall be
responsible for all of its own costs of counsel.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Underwriters for up to $150,000
out-of-pocket actual expenses reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriters of which the Underwriters acknowledge $75,000 has been paid
prior to the date hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of
24
the Firm Securities, $75,000 of which has been paid to date to the Underwriters.
The Company will pay the remainder of the non-accountable expense allowance on
the Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
In the event the Underwriters elect to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriters on the Overallotment Closing Date (by certified or bank cashier's
check or, at the Underwriters' election, by deduction from the proceeds of the
offering) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Overallotment
Securities.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy in all
material respects of the representations and warranties of the Company herein as
of the Closing Date and each Overallotment Closing Date, if any, as if they had
been made on and as of the Closing Date or each Overallotment Closing Date, as
the case may be; the accuracy on and as of the Closing Date or Overallotment
Closing Date, if any, of the statements of officers of the Company made pursuant
to the provisions hereof; and the performance by the Company on and as of the
Closing Date and each Overallotment Closing Date, if any, of each of its
material covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have be declared
effective by the Commission not later than 5:30 P.M., New York time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Underwriters, and, at Closing Date and each Overallotment Closing
Date, if any, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated to the knowledge of the
Company by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
25
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, and the opinion of its
counsel is material or omits to state a fact which, in the Representative's
opinion, is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
Representative's reasonable opinion, or the opinion of its counsel is material,
or omits to state a fact which, in the Representative's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The Company's registration statement pursuant to the
Exchange Act on Form 8-A has been declared effective by the Commission.
(d) At the Closing Date and the Overallotment Closing Date,
the Representative shall have received the favorable opinion of Ellenoff,
Grossman, Schole & Cyruli, LLP, special securities counsel to the Company, dated
the Closing Date, or Overallotment Closing Date, as the case may be, addressed
to the Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) The Company: (A) has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect upon the
Company; and (C) to the best of counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation or modification of
any such license or qualification which revocation or modification would have a
material adverse effect upon the Company.
(ii) The Registration Statement, each Preliminary
Prospectus that has been circulated and the Prospectus and any post-effective
amendments or supplements thereto (other than the exhibits, financial
statements, schedules and other financial and statistical data included therein,
as to which no opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and
26
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company.
(iii) To the best of such counsel's knowledge, except
as described in the Prospectus, the Company does not own an interest of a
character required to be disclosed in the Registration Statement in any
corporation, partnership, joint venture, trust or other business entity;
(iv) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus as of the date
indicated therein, under the caption "Capitalization". The Securities,
Underwriters' Purchase Option and the Underwriters' Option Units conform or upon
issuance will conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and, to the best knowledge of counsel, all shares of capital stock are
fully paid and non-assessable; the holders thereof are not, except by reason of
their own conduct or acts, subject to personal liability by reason of being such
holders, and none of such securities were issued in violation of the preemptive
rights of any holder of any security of the Company. The Securities to be sold
by the Company hereunder, the Underwriters' Purchase Option to be sold by the
Company under the Underwriters' Purchase Option Agreement and Underwriters'
Option Units have been duly authorized and, when issued, paid for and delivered
in accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and conform or upon issuance will conform to the description
thereof contained in the Prospectus; are not subject to any preemptive or other
similar rights of any stockholder of the Company; that, to such counsel's
knowledge, the holders of the Securities and Underwriters' Option Units shall
not be personally liable for the payment of the Company's debts solely by reason
of being such holders except as they may be liable by reason of their own
conduct or acts; and that the certificates representing the Units, Underwriters'
Purchase Option and Underwriters' Option Units are in due and proper legal form.
Upon delivery of the Units to the Underwriters against payment therefor as
provided for in this Agreement, the Underwriters (assuming they are bona fide
purchasers within the meaning of the Uniform Commercial Code) will acquire good
title to the Units, free and clear of all liens, encumbrances, equities,
security interests and claims.
(v) Each of the Registration Statement and the Form
8-A has been declared effective under the Act, and, if applicable, filing of all
pricing information has been timely made in the appropriate form under Rule
430A, and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
27
and to the best of such counsel's knowledge, no proceedings for that purpose
have been instituted or are pending or threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A)
there are no material contracts or other documents required to be described in
the Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement, the Underwriters' Purchase
Option Agreement and the Warrant Agreement between the Company, the Warrant
Agent and Representative have each been duly and validly authorized, executed
and delivered by the Company, and assuming that each is a valid and binding
agreement of the Underwriter, as the case may be, constitutes a legally valid
and binding agreement of the Company, enforceable as against the Company in
accordance with their respective terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the Company
of this Agreement, the Underwriters' Purchase Option Agreement or the Warrant
Agreement, nor its performance hereunder or thereunder, nor its consummation of
the transactions contemplated herein or therein, nor the issuance of the
Securities pursuant to this Agreement, conflicts with or will conflict with or
results or will result in any material breach or violation of any of the terms
or provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever upon, any property or assets (tangible or intangible) of the
Company except to the extent such event will not have a material adverse effect
upon the Company pursuant to the terms of, (A) the Certificate of Incorporation
or By-Laws of the Company, (B) to the best knowledge of such counsel, any
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit
28
agreement or any other agreement or instrument that is material to the Company
to which the Company is a party or by which it is bound or to which its
properties or assets (tangible or intangible) are subject, or any indebtedness,
or (C) to the best knowledge of such counsel, and except to the extent it would
not have a material adverse effect on the Company, any statute, judgment,
decree, order, rule or regulation applicable to the Company or any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body, having jurisdiction over the Company or any of its respective activities
or properties.
(ix) No consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body
(other than such as may be required under state securities laws, as to which no
opinion need be rendered) is required in connection with the issuance by the
Company of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement and the Underwriters' Option
Agreement by the Company, and the taking of any action by the Company
contemplated hereby or thereby, which has not been obtained;
(x) Except as described in the Prospectus, to the
best knowledge of such counsel, the Company is not in breach of, or in default
under, any material term or provision of any indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and, to the best knowledge of counsel, the
Company is not in violation of any material term or provision of its Certificate
of Incorporation or By-Laws or in violation of any material franchise, license,
permit, judgment, decree, order, statute, rule or regulation material to the
Company business;
(xi) The statements in the Prospectus under the
captions "DESCRIPTION OF BUSINESS" "MANAGEMENT," "PRINCIPAL STOCKHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR
FUTURE SALE" and "RISK FACTORS" have been reviewed by such counsel, and only
insofar as they refer to statements of law, descriptions of statutes, rules or
regulations or legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge, except
as described in the Prospectus, no person, corporation, trust, partnership,
29
association or other entity holding securities of the Company has the
contractual right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement;
(xiii) the Securities are eligible for listing on the
Nasdaq SmallCap Stock Market and the Boston Stock Exchange; and
(xiv) the merger of the Company and BioDelivery
Sciences, Inc. was duly authorized and was completed on January 7, 2001 in
accordance with the laws of the states of Indiana and Delaware; and (xv) the
reincorporation of the Company as a corporation under the laws of the State of
Delaware was duly authorized by the shareholders of the Company and has been
consummated in accordance with the laws of the states of Delaware and Indiana.
In addition, such counsel shall state that such counsel has participated
in meetings and teleconferences with officers and other Underwriters of the
Company, Underwriters of the independent public accountants for the Company and
Underwriters of the Underwriters at which the contents of the Registration
Statement, the Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus and made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to the
attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the Prospectus as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus or with respect to
statements or omissions made therein in reliance upon information furnished in
writing to the Company on behalf of any Underwriters expressly for use in the
Registration Statement or the Prospectus).
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and New York to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to
30
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws of such other jurisdictions, (B) as
to matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company; provided, that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested, and (c) upon the opinion of
____________, as patent counsel to the Company, for the opinions set forth on
Exhibit A annexed hereto. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, the Underwriters and they are justified in
relying thereon.
(e) At each Overallotment Closing Date, if any, the
Underwriters shall have received the favorable opinion of counsel to the
Company, each dated the Overallotment Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of the Overallotment Closing Date the statements made by such
firm, in their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the
Overallotment Closing Date, Underwriters' Counsel shall have been furnished such
documents, certificates and other legal opinions (including, without limitation,
legal opinions related to patent, trademark or Food and Drug matters) as they
may reasonably require and request for the purpose of enabling them to review or
pass upon the matters referred to in subsection (d) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date and each Overallotment Closing
Date, if any: (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in material
default under any provision of any instrument relating to any outstanding
indebtedness for money borrowed, except as described in the Prospectus; (iv) no
material amount of the assets of the
31
Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall have been pending or to its knowledge threatened against the
Company, or affecting any of its properties or businesses before or by any court
or federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus;
and (vi) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(h) At the Closing Date and each Overallotment Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Overallotment
Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the
Company in this Agreement are, in all material respects, true and correct, as if
made on and as of the Closing Date or the Overallotment Closing Date, as the
case may be, and the Company has complied with all agreements and covenants and
satisfied all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Overallotment Closing Date, as
the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits 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 and neither the
Preliminary Prospectus nor any supplement thereto 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 except to the extent
any such material fact may be corrected in the Final Prospectus;
32
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (B) the Company has not paid or declared
any dividends or other distributions on its capital stock; (C) the Company has
not entered into any material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of the
Company; (E) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation which is
pending or, to the Company's knowledge, threatened against the Company which is
required to be set forth in an amended or supplemented Prospectus which has not
been set forth; and
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Units.
(i) Pharmaceutical Product Development, Inc. )"PPDI") has
purchased 690,000 Units in the Offering (or such lesser amount as the
representative may agree in its sole discretion).
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
(j) By the Closing Date, the Underwriters shall have
received clearance from NASD as to the amount of compensation allowable or
payable to the Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters, from Xxxxx Xxxxxxxx, LP.
33
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the
combined financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriters may rely upon the opinion of Xxxxx
Xxxxxxxx, LP, with respect to the financial statements and supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim combined
financial statements of the Company (with an indication of the date of the
latest available unaudited interim combined financial statements), a reading of
the latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention that would lead them to believe that (A) the unaudited
combined financial statements and supporting schedules of the Company included
in the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited combined financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the Effective Date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any decrease in
the stockholders' equity or net current assets or net assets of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from December
31, 2001, to a specified date not more than five (5) days prior to the Effective
Date of the Registration Statement, there was any decrease in net revenues, net
earnings or increase in net earnings per common share of the Company, in each
case as compared with the corresponding period beginning January 1, 2000 other
than as set forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
34
(iv) setting forth, at a date not later than five (5)
days prior to the Effective Date of the Registration Statement, the amount of
liabilities of the Company (including a breakdown of commercial paper and notes
payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of Securities, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness", as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in the Company's internal controls;
(vii) stating that they have in addition carried out
certain specified procedures, not constituting an audit, with respect to certain
pro forma financial information which is included in the Registration Statement
and the Prospectus and that nothing has come to their attention as a result of
such procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriters may reasonably request.
(l) At the Closing Date and each Overallotment Closing Date,
the Underwriters shall have received from Xxxxx Xxxxxxxx, LP, a letter, dated as
of the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and
35
Regulations, to the further effect that they have carried out procedures as
specified in clause (iii) of subsection (i) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (iii).
(m) On each of Closing Date and Overallotment Closing Date,
if any, there shall have been duly tendered to the Underwriters for their
accounts the appropriate number of Securities against payment therefore.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Overallotment Closing Date, if any, and no proceedings for that purpose shall
have been instituted or to its knowledge or that of the Company shall be
contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
36
7. Indemnification
37
(a) The Company agrees to indemnify and hold harmless each
of the Underwriters, including specifically each person who controls the
Underwriters ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all losses, claims,
damages, reasonable expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriters or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus (except that the indemnification contained in
this paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriters or to the benefit of any person controlling the
Underwriters on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriters to any person if a copy
of the Prospectus, as amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included Securities of the Company issued
or issuable upon exercise of the Underwriters' Unit Purchase Option; or (iii) in
any application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriters by or on behalf of such
Underwriter, through its Counsel, directly or through the Representative,
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new
38
registration statement or prospectus or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriters, severally but not jointly, hereby
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, its agents and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto in any post-effective amendment, new registration statement
or prospectus, or in any application made in reliance upon, and in conformity
with, written information furnished to the Company with respect to the
Underwriters by such Underwriters expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, directly related to the
transactions effected by the Underwriters in connection with this Offering;
provided that such written information or omissions only pertain to disclosures
in the Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any such application, provided,
further, that the liability of each Underwriters to the Company shall be limited
to the product of the Underwriters' discount or commission for the Units
multiplied by the number of Units sold by the Underwriters hereunder. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities set forth under the heading "Underwriting" and the
stabilization legend and the last paragraph of the cover page in the Prospectus
have been furnished by the Underwriters expressly for use therein and any
information furnished by or on behalf of the Underwriters filed in any
jurisdiction in order to qualify the Securities under State Securities laws or
filed with the Commission, the NASD or any securities exchange constitute the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus and the Underwriters hereby confirm that such
statements and information are true and correct in all material respects on the
date hereof and do not omit a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall be so on each
Closing Date and Overallotment Closing Date.
39
(c) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve it
from any liability which it may have under this Section 7 except to the extent
that it has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them that are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
40
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriters are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriter,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriters
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. 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 by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriters shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriters has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the
41
Act, each officer of the Company who has signed the Registration Statement, and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to this subparagraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Overallotment Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters, the Company, or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriters.
9. Effective Date
This Agreement shall become effective ________, 2002, at _____
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time which shall be concurrent with the Registration
Statement becoming effective as the Underwriters, in their discretion, shall
release the Securities for the sale to the public, provided, however that the
provisions of Sections 5, 7 and 10 of this Agreement shall at all times be
effective. For purposes of this Section 9, the Securities to be purchased
hereunder shall be deemed to have been so released upon the earlier of dispatch
by the Representative of telegrams to securities dealers releasing such
Securities for offering or the release by the Representative for publication of
the first newspaper advertisement which is subsequently published relating to
the Securities.
42
10. Termination; Substitution of Underwriters
(a) The Representative shall have the right to terminate
this Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated by
the Registration Statement, or (viii) if there shall have been such material
adverse general market conditions as in the Underwriters' reasonable judgment
would make it inadvisable to proceed with the Offering, sale or delivery of the
Securities; or (ix) if PPDI shall have failed to consummate the purchase of
690,000 Units.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5(b) shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
(c) If any Underwriter or Underwriters shall default in its
or their obligations to purchase Units hereunder and the aggregate numbers of
Units 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 Underwriter shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the Units which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters shall so default and the aggregate number of Units
with respect to which such default or defaults occur is more than ten percent
(10%) of the total number of Units underwritten and arrangements
43
satisfactory to the Underwriters and the Company for the purchase of such Units
by other persons are not made within forty-eight (48) hours after such default,
this Agreement shall terminate.
If the remaining Underwriter or substituted Underwriters are required
hereby or agree to take up all or part of the Units of a defaulting Underwriter
or Underwriters as provided in this Section 10, (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 number of Units 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 shall relieve any defaulting Underwriters 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 10 shall be without liability on the part of any non-defaulting
Underwriters or the Company, except for expenses to be paid or reimbursed
pursuant to Section 5 and except for the provisions of Section 7.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Overallotment Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Overallotment Securities to be purchased on an Overallotment Closing Date,
the Underwriters may at the Underwriters' option, by notice from the
Underwriters to the Company, terminate the Underwriters' obligations to purchase
Securities from the Company on such date) without any liability on the part of
any non-defaulting party other than pursuant to Section 5 and Section 7 hereof.
No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Roan/Xxxxxx Associates, L.P., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxxxx, with a copy to Xxxxxxxxx &
XxXxxxx, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
X. Xxxxxxxx, Esq. Notices to the Company shall be directed
44
to the Company at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxxxxx Xxxxxxxx 0, Xxxxxx,
Xxx Xxxxxx 00000, Attention: Xx. Xxxxx X'Xxxxxxx, with a copy to Ellenoff,
Grossman, Schole & Cyruli, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the several Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriters shall be deemed to be a successor by reason
merely of such purchase.
14. Governing Law/Construction/Jurisdiction
(a) This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to conflict of laws.
(b) The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (b) waives
any objection which the Company may have now or hereafter to the venue of any
such suit, action or proceeding, and (c) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or procedure. Each of the Company and the Underwriters further
agree to accept and acknowledge service of any and all process which may be
served in any suit, action or proceeding in the New York State Supreme Court for
the Southern District of New York, and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the company in any such suit,
action or proceeding. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
45
16. Waiver. The waiver by either party of the breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.
17. Assignment. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
18. Titles and Captions. All article, section and paragraph titles
or captions contained in this Agreement are for convenience only and shall not
be deemed part of the context nor affect the interpretation of this Agreement.
19. Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
20. Entire Agreement. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
46
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding agreement among us.
Very truly yours,
BIODELIVERY SCIENCES INTERNATIONAL, INC.
By:
-----------------------------------
Name: Xx. Xxxxxxx X. X'Xxxxxxx
Title: Chief Executive Officer
Confirmed and accepted as of the date first above written
XXXX-XXXXXX ASSOCIATES, L.P., as Representative
By: Xxxxxx Xxxxxxx Securities Group
General Partner
By:
-----------------------------
Name: Xxxxx Xxxxxx
Title: President
47
SCHEDULE I
Underwriters
Roan/Xxxxxx Associates, L.P.
48
SCHEDULE II
Warrant Agent
American Stock Transfer and Trust Company
49
