Delcath Systems, Inc.
1,200,000 Units consisting of
1,200,000 Shares of Common Stock
(Par Value $.01 Per Share)
and
Redeemable Warrants to Purchase
1,200,000 Shares of Common Stock
UNDERWRITING AGREEMENT
----------------------
Whale Securities Co., L.P. New York, New York
650 Fifth Avenue October , 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Delcath Systems, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Whale Securities Co., L.P. (the "Underwriter") an aggregate
of one million two hundred thousand (1,200,000) units (the "Offered Units") at a
price of $6.00 per Offered Unit, consisting of an aggregate of one million two
hundred thousand (1,200,000) shares of common stock of the Company, par value
$.01 per share (the "Offered Shares"), which Offered Shares are presently
authorized but unissued shares of the common stock, par value $.01 per share
(individually, a "Common Share" and collectively the "Common Shares"), of the
Company, and one million two hundred thousand (1,200,000) Common Share purchase
warrants (the "Offered Warrants"), entitling the holder of each Offered Warrant
to purchase, at any time commencing on the Separation Date (as hereinafter
defined) until October , 2005, one (1) Common Share, at an exercise price of Six
Dollars Sixty Cents ($6.60) (subject to adjustment in certain circumstances).
The Offered Shares and the Offered Warrants will be offered to the public in
Offered Units consisting of one Offered Share and one Offered Warrant at a
public offering price of Six Dollars ($6.00) per Offered Unit. The securities
comprising the Offered Units will become detachable and separately transferable
commencing one year from the Effective Date (as hereinafter defined) or such
earlier date as to which the Underwriter consents (the "Separation Date"). The
Company shall have the right to call each Offered Warrant for redemption upon
not less than thirty (30) days' written notice at any time commencing on the
Separation Date at a redemption price of Ten Cents ($.10) per Offered Warrant;
provided, that the closing bid quotation of the Common Stock on all twenty (20)
of the trading days ending on the third trading day prior to the day on which
the Company gives notice (the "Call Date") of redemption has been at least 150%
(currently $9.90, subject to adjustment) of the then effective exercise price of
the Warrants and the Company obtains the written consent of the Underwriter with
respect to such redemption prior to the Call Date. In addition, the Underwriter,
in order to cover over-allotments in the sale of the Offered Units, may purchase
up to an aggregate of one hundred eighty thousand (180,000) Units (the "Optional
Units"), each Optional Unit consisting of one Common Share (collectively, the
"Optional Shares") and one Common Share purchase warrant identical to the
Offered Warrants (collectively, the "Optional Warrants"). The Offered Units and
the Optional Units are sometimes collectively referred to as the "Units"; the
Offered Shares and the Optional Shares are hereinafter sometimes collectively
referred to as the "Shares"; and the Offered Warrants and the Optional Warrants
are hereinafter sometimes collectively referred to as
the "Warrants." The Warrants will be issued pursuant to a Warrant Agreement
filed as Exhibit 4.3 to the Registration Statement (the "Warrant Agreement") to
be dated as of the Closing Date (as hereinafter defined) by and among the
Company, the Underwriter and American Stock Transfer & Trust Company, as warrant
agent (the "Warrant Agent").
The Company also proposes to issue and sell to the Underwriter, for its
own account and the accounts of its designees, warrants (the "Underwriter's
Warrants") to purchase up to an aggregate of one hundred twenty thousand
(120,000) units (the "Underlying Units"), the Underlying Unit consisting of one
Common Share (collectively, the "Underlying Shares") and/or one warrant similar
but not identical to the Warrants (collectively, the "Underlying Warrants"),
which sale will be consummated in accordance with the terms and conditions of
the form of Underwriter's Warrant Agreement filed as an exhibit to the
Registration Statement (as hereinafter defined). The Underlying Shares, the
Underlying Warrants and the Common Shares issuable upon exercise of the
Underlying Warrants (the "Underlying Warrant Shares") are hereinafter sometimes
referred to as the "Underlying Securities". The Units, Shares, the Warrants, the
Common Shares issuable upon exercise of the Warrants (the "Warrant Shares"), the
Underwriter's Warrants, the Underlying Securities (collectively, the
"Securities") are more fully described in the Registration Statement and the
Prospectus, as defined below.
The Company hereby confirms its agreement with the Underwriter as
follows:
1. Purchase and Sale of Offered Units. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby agrees to sell the Offered Units
to the Underwriter, and the Underwriter agrees to purchase the Offered Units
from the Company, at a purchase price of $5.40 per Offered Unit. The Underwriter
plans to offer the Offered Units to the public at a public offering price of
$6.00 per Offered Unit.
2. Payment and Delivery.
(a) Payment for the Offered Units will be made to the Company by wire
transfer or certified or official bank check or checks payable to its order in
New York Clearing House funds, at the offices of the Underwriter, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, against delivery of the Offered Units to the
Underwriter. Such payment and delivery will be made at 10:00 A.M., New York City
time, on the third business day following the Effective Date (as hereinafter
defined) (the fourth business day following the Effective Date in the event that
trading of the Offered Units commences on the day following the Effective Date),
the date and time of such payment and delivery being herein called the "Closing
Date." The certificates representing the Offered Units to be delivered will be
in such denominations and registered in such names as the Underwriter may
request not less than two full business days prior to the Closing Date, and will
be made available to the Underwriter for inspection, checking and packaging at
the office of the Company's transfer agent or correspondent in New York City,
American Stock Transfer & Trust Company, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 not less than one full business day prior to the Closing Date.
(b) On the Closing Date, the Company will sell the Underwriter's
Warrants to the Underwriter or to the Underwriter's designees limited to
officers and partners of the Underwriter, members of the selling group and/or
their officers or partners (collectively, the
2
"Underwriter's Designees"). The Underwriter's Warrants will be in the form of,
and in accordance with, the provisions of the Underwriter's Warrant attached as
an exhibit to the Registration Statement. The aggregate purchase price for the
Underwriter's Warrants is One Hundred Dollars ($100.00). The Underwriter's
Warrants will be restricted from sale, transfer, assignment or hypothecation for
a period of one (1) year from the Effective Date, except to the Underwriter's
Designees. Payment for the Underwriter's Warrants will be made to the Company by
check or checks payable to its order on the Closing Date against delivery of the
certificates representing the Underwriter's Warrants. The certificates
representing the Underwriter's Warrants will be in such denominations and such
names as the Underwriter may request prior to the Closing Date.
3. Option to Purchase Optional Units.
(a) For the purposes of covering any over-allotments in connection with
the distribution and sale of the Offered Units as contemplated by the
Prospectus, the Underwriter is hereby granted an option to purchase all or any
part of the Optional Shares from the Company. The purchase price to be paid for
the Optional Units will be the same price per Optional Unit as the price per
Offered Unit set forth in Section 1 hereof. The option granted hereby may be
exercised by the Underwriter as to all or any part of the Optional Units at any
time within 45 days after the Effective Date. The Underwriter will not be under
any obligation to purchase any Optional Units prior to the exercise of such
option.
(b) The option granted hereby may be exercised by the Underwriter by
giving oral notice to the Company, which must be confirmed by a letter, telex or
telegraph setting forth the number of Optional Units to be purchased, the date
and time for delivery of and payment for the Optional Units to be purchased and
stating that the Optional Units referred to therein are to be used for the
purpose of covering over-allotments in connection with the distribution and sale
of the Offered Units. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment will not be earlier than
either two full business days thereafter or the Closing Date, whichever occurs
later. If such notice is given on or after the Closing Date, the date set forth
therein for such delivery and payment will not be earlier than two full business
days thereafter. In either event, the date so set forth will not be more than 15
full business days after the date of such notice. The date and time set forth in
such notice is herein called the "Option Closing Date." Upon exercise of such
option, through the Underwriter's delivery of the aforementioned notice, the
Company will become obligated to convey to the Underwriter, and, subject to the
terms and conditions set forth in Section 3(d) hereof, the Underwriter will
become obligated to purchase, the number of Optional Units specified in such
notice.
(c) Payment for any Optional Units purchased will be made to the
Company by wire transfer or certified or official bank check or checks payable
to its order in New York Clearing House funds, at the office of the Underwriter,
against delivery of the Optional Units purchased to the Underwriter. The
certificates representing the Optional Units to be delivered will be in such
denominations and registered in such names as the Underwriter requests not less
than two full business days prior to the Option Closing Date, and will be made
available to the Underwriter for inspection, checking and packaging at the
aforesaid office of the Company's transfer agent or correspondent not less than
one full business day prior to the Option Closing Date.
3
(d) The obligation of the Underwriter to purchase and pay for any of
the Optional Units is subject to the accuracy and completeness (as of the date
hereof and as of the Option Closing Date) of and compliance in all material
respects with the representations and warranties of the Company herein, to the
accuracy and completeness of the statements of the Company or its officers made
in any certificate or other document to be delivered by the Company pursuant to
this Agreement, to the performance in all material respects by the Company of
its obligations hereunder, to the satisfaction by the Company of the conditions,
as of the date hereof and as of the Option Closing Date, set forth in Section
3(b) hereof, and to the delivery to the Underwriter of opinions, certificates
and letters dated the Option Closing Date substantially similar in scope to
those specified in Section 5, 6(b), (c), (d) and (e) hereof, but with each
reference to "Offered Units" and "Closing Date" to be, respectively, to the
Optional Units and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority, corporate and other, to own or lease, as the case may be, and operate
its properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement and to execute, deliver and perform this
Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the
Consulting Agreement described in Section 5(r) hereof (the "Consulting
Agreement") and to consummate the transactions contemplated hereby and thereby.
The Company has no subsidiaries. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and where failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. The Company has no equity interests in any entity.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, and each of the
Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement, when executed and delivered by the Company on the Closing Date, will
be the valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms. The execution, delivery and
performance of this Agreement, the Underwriter's Warrant Agreement, the Warrant
Agreement and the Consulting Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement, the Consulting Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement have been duly
authorized by all necessary corporate action and do not and will not, with or
without the giving of notice or the lapse of time, or both, (i) result in any
violation of the Certificate of Incorporation or By-Laws, each as amended, of
the Company; (ii) result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to any indenture, mortgage, note, contract, commitment or other
agreement or instrument to which the Company is a party or by which the
4
Company or any of its properties or assets is or may be bound or affected; (iii)
violate any existing applicable law, rule, regulation, judgment, order or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company, or any of its properties or business; or (iv) have any effect
on any permit, certification, registration, approval, consent order, license,
franchise or other authorization (collectively, the "Permits") necessary for the
Company to own or lease and operate any of its properties and to conduct its
business.
(c) No Permits of any court or governmental agency or body, other than
under the Securities Act of 1933, as amended (the "Act"), the Regulations (as
hereinafter defined) and applicable state securities or Blue Sky laws, are
required (i) for the valid authorization, issuance, sale and delivery of the
Shares to the Underwriter, and (ii) the consummation by the Company of the
transactions contemplated by this Agreement, the Consulting Agreement, the
Underwriter's Warrant Agreement or the Warrant Agreement.
(d) The conditions for use of a registration statement on Form SB-2 set
forth in the General Instructions to Form SB-2 have been satisfied with respect
to the Company, the transactions contemplated herein and in the Registration
Statement. The Company has prepared in conformity with the requirements of the
Act and the rules and regulations (the "Regulations") of the Securities and
Exchange Commission (the "Commission") and filed with the Commission a
registration statement (File No. 333-39470) on Form SB-2 and has filed one or
more amendments thereto, covering the registration of the Shares under the Act,
including the related preliminary prospectus or preliminary prospectuses (each
thereof being herein called a "Preliminary Prospectus") and a proposed final
prospectus. Each Preliminary Prospectus was endorsed with the legend required by
Item 501(a)(5) of Regulation S-B of the Regulations and, if applicable, Rule
430A of the Regulations. Such registration statement including any documents
incorporated by reference therein and all financial schedules and exhibits
thereto, as amended at the time it becomes effective, and the final prospectus
included therein are herein, respectively, called the "Registration Statement"
and the "Prospectus," except that, (i) if the prospectus filed by the Company
pursuant to Rule 424(b) of the Regulations differs from the Prospectus, the term
"Prospectus" will also include the prospectus filed pursuant to Rule 424(b), and
(ii) if the Registration Statement is amended or such Prospectus is supplemented
after the date the Registration Statement is declared effective by the
Commission (the "Effective Date") and prior to the Option Closing Date, the
terms "Registration Statement" and "Prospectus" shall include the Registration
Statement as amended or supplemented.
(e) Neither the Commission nor, to the best of the Company's knowledge
after due investigation, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge after due investigation, threatened
to institute any proceedings with respect to such an order.
(f) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with the
Commission pursuant to Rule 424(b), and both documents as of the Closing Date
and the Option Closing Date, referred to below, will contain all statements
which are required to be stated therein in accordance with the Act and the
Regulations and will in all material respects conform to the requirements of the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, on such dates, will contain
any untrue
5
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished in writing to the
Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Underwriter expressly for use therein.
(g) The Company had at the date or dates indicated in the Prospectus a
duly authorized and outstanding capitalization as set forth in the Registration
Statement and the Prospectus. Based on the assumptions stated in the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth therein. Except as set forth in
the Registration Statement or the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(h) The descriptions in the Registration Statement and the Prospectus
of contracts and other documents are accurate and present fairly the information
required to be disclosed, and there are no contracts or other documents required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the Regulations which
have not been so described or filed as required.
(i) KPMG LLP, the accountants who have certified certain of the
financial statements filed and to be filed with the Commission as part of the
Registration Statement and the Prospectus, are independent public accountants
within the meaning of the Act and Regulations. The financial statements and
schedules and the notes thereto filed as part of the Registration Statement and
included in the Prospectus are complete, correct and present fairly the
financial position of the Company as of the dates thereof, and the results of
operations and changes in financial position of the Company for the periods
indicated therein, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved except
as otherwise stated in the Registration Statement and the Prospectus. The
selected financial data set forth in the Registration Statement and the
Prospectus present fairly the information shown therein and have been compiled
on a basis consistent with that of the audited and unaudited financial
statements included in the Registration Statement and the Prospectus.
(j) The Company has filed with the appropriate federal, state and local
governmental agencies, and all appropriate foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such returns and all assessments
received by it to the extent that the same have become due; and the provisions
for income taxes payable, if any, shown on the financial statements filed with
or as part of the Registration Statement are sufficient for all accrued and
unpaid foreign and domestic taxes, whether or not disputed, and for all periods
to and including the dates of such financial state-ments. Except as disclosed in
writing to the Underwriter, the Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the period for
6
assess-ment or collection of any income taxes and is not a party to any pending
action or proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or collection of
taxes have been asserted against the Company.
(k) The outstanding Common Shares and outstanding options and warrants
to purchase Common Shares have been duly authorized and validly issued. The
outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
Company has duly reserved a sufficient number of Common Shares from its
authorized but unissued Common Shares for issuance upon exercise of the
outstanding options and warrants. None of the outstanding Common Shares or
options or warrants to purchase Common Shares has been issued in violation of
the preemptive rights of any stockholder of the Company. None of the holders of
the outstanding Common Shares is subject to personal liability solely by reason
of being such a holder. The offers and sales of the outstanding Common Shares
and outstanding options and warrants to purchase Common Shares were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized Common Shares and outstanding options and warrants to purchase Common
Shares conform to the descriptions thereof contained in the Registration
Statement and Prospectus. Except as set forth in the Registration Statement and
the Prospectus, on the Effective Date and the Closing Date, there will be no
outstanding options or warrants for the purchase of, or other outstanding rights
to purchase or acquire, Common Shares or securities convertible into Common
Shares.
(l) No securities of the Company have been sold by the Company or by or
on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(m) The issuance and sale of the Units have been duly authorized. When
the Units have been issued and duly delivered against payment therefor as
contemplated by this Agreement. The Units and the Shares will be validly issued,
fully paid and nonassessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. None of the Units,
Shares, Warrants or Warrant Shares will be subject to preemptive rights of any
stockholder of the Company.
(n) The issuance and sale of the Underlying Shares and Underlying
Warrant Shares have been duly authorized and, when such Common Shares have been
duly delivered against payment therefor, as contemplated by the Underwriter's
Warrant Agreement, such Common Shares will be validly issued, fully paid and
nonassessable. Holders of Underlying Shares and Underlying Warrant Shares
issuable upon the exercise of the Underwriter's Warrants will not be subject to
personal liability solely by reason of being such holders. Neither the
Underwriter's Warrants nor the Underlying Shares or Underlying Warrant Shares
issuable upon exercise thereof will be subject to preemptive rights of any
stockholder of the Company. The Company has reserved a sufficient number of
Common Shares from its authorized but unissued Common Shares for issuance upon
exercise of the Underwriter's Warrants and the Underlying Warrants in accordance
with the provisions of the Underwriter's Warrant Agreement and the Underlying
Warrants. The Underwriter's Warrants conform to the
7
descriptions thereof contained in the Registration Statement and the Prospectus.
(o) The Company is not in violation of, or in default under, (i) any
term or provision of its Certificate of Incorporation or By-Laws, each as
amended; (ii) any material term or provision or any financial covenants of any
indenture, mortgage, contract, commitment or other agreement or instrument to
which it is a party or by which it or any of its property or business is or may
be bound or affected; or (iii) any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of the Company's properties
or businesses. The Company owns, possesses or has obtained all governmental and
other (including those obtain-able from third parties) Permits, necessary to own
or lease, as the case may be, and to operate its properties, whether tangible or
intangible, and to conduct its respective business and operations as presently
conducted and all such Permits are outstanding and in good standing, and there
are no proceedings pending or, to the best of the Company's knowledge after due
investigation, threatened, or any basis therefor, seeking to cancel, terminate
or limit such Permits.
(p) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's
knowledge after due investigation, threatened against the Company or involving
the Company's properties or business which, if determined adversely to the
Company, would, individually or in the aggregate, result in any material adverse
change in the financial position, stockholders' equity, results of operations,
properties, business, management or affairs or business prospects of the Company
or which question 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; nor, to the best of the Company's knowledge
after due investigation, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no outstanding
orders, judgments or decrees of any court, governmental agency or other tribunal
naming the Company and enjoining the Company from taking, or requiring the
Company to take, any action, or to which the Company, or the Company's
properties or business is bound or subject.
(q) Neither the Company nor any of its affiliates has incurred any
liability for any finder's fees or similar payments in connection with the
transactions herein contemplated.
(r) The Company owns or possesses adequate and enforceable rights to
use all patents, patent applications, trademarks, service marks, copyrights,
rights, trade secrets, confidential information, processes and formulations used
or proposed to be used in the conduct of its business as described in the
Prospectus (collectively the "Intangibles"); to the best of the Company's
knowledge, after due investigation the Company has not infringed nor is
infringing upon the rights of others with respect to the Intangibles; and the
Company has not received any notice of conflict with the asserted rights of
others with respect to the Intangibles which could, singly or in the aggregate,
materially adversely affect its business as presently conducted or the
prospects, financial condition or results of operations of the Company, and the
Company knows of no basis therefor; and, to the best of the Company's knowledge,
no others have infringed upon the Intangibles of the Company.
8
(s) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus and the Company's latest financial
statements, the Company has not incurred any material liability or obligation,
direct or contingent, or entered into any material transaction, whether or not
incurred in the ordinary course of business, and has not sustained any material
loss or interference with its business from fire, storm, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there have not been, and prior to the Closing Date referred to below
there will not be, any changes in the capital stock or any material increases in
the long-term debt of the Company or any material adverse change in or affecting
the general affairs, management, financial condition, stockholders' equity,
results of operations or prospects of the Company, otherwise than as set forth
or contemplated in the Prospectus.
(t) The Company does not own any real property. The Company has good
title to all personal property (tangible and intangible) owned by it, free and
clear of all security interests, charges, mortgages, liens, encumbrances and
defects, except such as are described in the Registration Statement and
Prospectus or such as do not materially affect the value or transferability of
such property and do not interfere with the use of such property made, or
proposed to be made, by the Company. The leases, licenses or other contracts or
instruments under which the Company leases, holds or is entitled to use with
respect to any property, real or personal, are valid, subsisting and enforceable
only with such exceptions as are not material and do not interfere with the use
of such property made, or proposed to be made, by the Company, and all rentals,
royalties or other payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid, and the Company, to the best of the
Company's knowledge after due investigation, is not aware of any other party in
default thereunder and, to the best of the Company's knowledge after due
investigation, no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default thereunder. The Company
has not received notice of any violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties. The
Company has adequately insured its properties against loss or damage by fire or
other casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar businesses
located in its geographic area.
(u) Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its properties or
businesses is or may be bound or affected and to which reference is made in the
Prospectus has been duly and validly executed, is in full force and effect in
all material respects and is enforceable against the parties thereto in
accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and the Company, to the best of the Company's knowledge
after due investigation is not, and any other party is not, in default
thereunder and, to the best of the Company's knowledge after due investigation,
no event has occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
None of the material provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any of its respective assets or businesses, including, without limitation,
the United States Food and Drug Administration (the "FDA") and the United States
Federal Trade Commission (the "FTC"), and comparable foreign state
9
and local regulatory authorities.
(v) The employment, consulting, confidentiality and non-competition
agreements between the Company and its officers, employees, consultants and any
other third parties described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforce-ability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, the Company does not have
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the pro-visions of the Employee Retirement Income Security Act of 1974.
(x) To the best of the Company's knowledge after due investigation, no
labor problem exists with any of the Company's employees or is imminent which
could adversely affect the Company.
(y) The Company has not directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(z) The Shares have been approved for listing on the Nasdaq SmallCap
Market and the Boston Stock Exchange.
(aa) Neither the Company nor any of its officers or directors has
distributed, and will not distribute prior to the later of (i) the Closing Date
or any date on which Optional Shares are to be purchased, as the case may be, or
(ii) the expiration of the period during which dealers effecting transactions in
the Shares may be required to deliver a Prospectus, any offering material in
connection with the offering and sale of the Shares, other than any Preliminary
Prospectus, the Prospectus, the Registration Statement and other materials, if
any, permitted by the Act.
(ab) The Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with the offering of the Shares were
identical to the versions of the Preliminary Prospectus and Prospectus filed
with the Commission via the Commission's Electronic Data Gathering Analysis and
Retrieval System, except to the extent permitted by Regulation S-T.
(ac) The Company has provided to Blank Rome Xxxxxx Xxxxxxxxxx LLP,
counsel to the Underwriter ("Underwriter's Counsel"), all agreements,
certificates, correspondence and other items, documents and information in its
possession and/or available to it requested by such counsel's Corporate Review
Memorandum dated April 3, 2000 (the "Memorandum") and the Company's response to
such Memorandum is accurate and complete in all material respects.
10
Any certificate or questionnaire signed by an officer of the Company and
delivered to the Underwriter or to Underwriter's Counsel shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
5. Certain Covenants of the Company. The Company covenants with the
Underwriter as follows:
(a) The Company will not at any time, whether before the Effective Date
or thereafter during such period as the Prospectus is required by law to be
delivered in connection with the sales of the Units, Shares and Warrants by the
Underwriter or a dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Underwriter has not been
previously advised and furnished a copy, or to which the Underwriter shall
object in writing.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Underwriter immediately, and,
if requested by the Underwriter, confirm such advice in writing, (i) when the
Registration Statement, or any post-effective amendment to the Registration
Statement or any supplemented Prospectus is filed with the Commission; (ii) of
the receipt of any comments from the Commission; (iii) of any request of the
Commission for amendment or supplementation of the Registration Statement or
Prospectus or for additional information; and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any Preliminary
Prospectus, or of the suspension of the qualification of the Units, Shares
and/or Warrants for offering or sale in any jurisdiction, or of the initiation
of any proceedings for any of such purposes. The Company will use its best
efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and to obtain as soon as possible the lifting
thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter, without charge, from
time to time until the Effective Date, as many copies of each Preliminary
Prospectus as the Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
a signed copy of the Registration Statement as originally filed and of all
amendments thereto, whether filed before or after the Registration Statement
becomes effective, a copy of all exhibits filed therewith and a signed copy of
all consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to
11
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Registration Statement and Prospectus to comply with the Act or the regulations
thereunder, the Company will promptly file with the Commission, subject to
Section 5(a) hereof, an amendment or supplement which will correct such
statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information as may be required
and otherwise cooperate in qualifying the Shares for offering and sale under the
securities or Blue Sky laws relating to the offering in such jurisdictions as
the Underwriter may reasonably designate, provided that no such qualification
will be required in any jurisdiction where, solely as a result thereof, the
Company would be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such jurisdiction.
(f) The Company will make generally available to its securityholders,
in the manner specified in Rule 158(b) under the Act, and deliver to the
Underwriter and Underwriter's Counsel as soon as practicable and in any event
not later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earning statement meeting the requirements of Rule 158(a) under the Act covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
(g) For a period of five years from the Effective Date, the Company
will deliver to the Underwriter and to Underwriter's Counsel on a timely basis
(i) a copy of each report or document, including, without limitation, reports on
Forms 8-K, 10-K (or 10-KSB), 10-Q (or 10-QSB) and exhibits thereto, filed or
furnished to the Commission, any securities exchange or the National Association
of Securities Dealers, Inc. (the "NASD") on the date each such report or
document is so filed or furnished; (ii) as soon as practicable, copies of any
reports or communications (financial or other) of the Company mailed to its
securityholders; (iii) as soon as practicable, a copy of any Schedule 13D, 13G,
14D-1 or 13E-3 received or prepared by the Company from time to time; (iv)
monthly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet, profit
and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company; and (v) such additional
information concerning the business and financial condition of the Company as
the Underwriter may from time to time reasonably request and which can be
prepared or obtained by the Company without unreasonable effort or expense. The
Company will furnish to its stockholders annual reports containing audited
financial statements and such other periodic reports as it may determine to be
appropriate or as may be required by law.
(h) Neither the Company nor any person that controls, is controlled by
or is under common control with the Company will take any action designed to or
which might be reasonably expected to cause or result in the stabilization or
manipulation of the price of the Units, Common Shares or Warrants.
(i) If the transactions contemplated by this Agreement are consummated,
the Underwriter shall retain the $50,000 previously paid to it, and the Company
will pay or cause to be paid the following: all costs and expenses incident to
the performance of the obligations of the Company under this Agreement,
including, but not limited to, the fees and
12
expenses of accountants and counsel for the Company; the preparation, printing,
mailing and filing of the Registration Statement (including financial statements
and exhibits), Preliminary Prospectuses and the Prospectus, and any amendments
or supplements thereto; the printing and mailing of the Selected Dealer
Agreement, the issuance and delivery of the Shares to the Underwriter; all
taxes, if any, on the issuance of the Shares; the fees, expenses and other costs
of qualifying the Shares for sale under the Blue Sky or securities laws of those
states in which the Shares are to be offered or sold, including fees and
disbursements of counsel in connection therewith, and including those of such
local counsel as may have been retained for such purpose; the filing fees
incident to securing any required review by the NASD and either the Boston Stock
Exchange or Pacific Stock Exchange; the cost of printing and mailing the "Blue
Sky Survey"; the cost of furnishing to the Underwriter copies of the
Registration Statement, Preliminary Prospectuses and the Prospectus as herein
provided; the costs of placing "tombstone advertisements" in any publications
which may be selected by the Underwriter; and all other costs and expenses
incident to the performance of the Company's obligations hereunder which are not
otherwise specifically provided for in this Section 5(i).
In addition, at the Closing Date or the Option Closing Date, as the
case may be, the Underwriter will deduct from the payment for the Offered Units
or any Optional Units three percent (3%) of the gross proceeds of the offering
(less the sum of $50,000 previously paid to the Underwriter), as payment for the
Underwriter's nonaccountable expense allowance relating to the transactions
contemplated hereby, which amount will include the fees and expenses of
Underwriter's Counsel (other than the fees and expenses of Underwriter's Counsel
relating to Blue Sky qualifications and registrations, which, as provided for
above, shall be in addition to the three percent (3%) nonaccountable expense
allowance and shall be payable directly by the Company to Underwriter's Counsel
on or prior to the Closing Date).
(j) If the transactions contemplated by this Agreement or related
hereto are not consummated because the Company decides not to proceed with the
offering for any reason or because the Underwriter decides not to proceed with
the offering as a result of a breach by the Company of its representations,
warranties or covenants in the Agreement or as a result of adverse changes in
the affairs of the Company, then the Company will be obligated to reimburse the
Underwriter for its accountable expenses up to the sum of $75,000, inclusive of
the $50,000 previously paid to the Underwriter by the Company. In all cases
other than those set forth in the preceding sentence, if the Company or the
Underwriter decide not to proceed with the offering, the Company will only be
obligated to reimburse the Underwriter for its accountable expenses up to
$25,000, and inclusive of the amounts previously paid to the Underwriter by the
Company. In no event, however, will the Underwriter, in the event the offering
is terminated, be entitled to retain or receive more than an amount equal to its
actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds from the sale of the
Units for the purposes set forth in the Prospectus. Except as set forth in the
Prospectus, no portion of the net proceeds from the sale of the Shares will be
used to repay any indebtedness.
(l) During the period of twelve (12) months from the Effective Date
hereof, neither the Company nor any of its officers, directors or
securityholders will offer for sale or sell or otherwise dispose of, directly or
indirectly, any securities of the Company, in any manner whatsoever, whether
pursuant to Rule 144 of the Regulations or otherwise, and no holder
13
of registration rights relating to securities of the Company will exercise any
such registration rights, in either case, without the prior written consent of
the Underwriter. During the 12-month period commencing one year from the date
hereof, no officer, director or securityholder who beneficially owns or holds 5%
or more of the outstanding Common Shares (calculated in accordance with Rule
13d-3(d)(i) under the Exchange Act) may sell any Common Shares in excess of the
amount that they would be allowed to sell if they were deemed "affiliates" of
the Company and their shares were deemed "restricted," as those terms are
defined in Rule 144 promulgated under the Securities Act, without the prior
written consent of the Underwriter.
(m) 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 twelve (12) months from the Effective Date,
without the Underwriter's prior written consent.
(n) The Company maintains and will continue to 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 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.
(o) The Company will use its best efforts to maintain the listing of
the Units, Shares and Warrants on the Nasdaq SmallCap Market and will, if so
qualified, list the Units, Shares and Warrants, and maintain such listing for so
long as qualified, on the Nasdaq National Market System.
(p) The Company will, concurrently with the Effective Date, register
the classes of equity securities of which the Units, Shares and Warrants are a
part under Section 12(b) or 12(g) of the Exchange Act and the Company will
maintain such registration for a minimum of five (5) years from the Effective
Date.
(q) Subject to the sale of the Offered Units, the Underwriter and its
successors will have the right to designate a nominee for election, at its or
their option, either as a member of or a non-voting advisor to the Board of
Directors of the Company (which board, during such period, shall meet at least
quarterly, have no members who are related (by marriage or otherwise) to any of
its Board members, and be comprised of members, a majority of which are not
otherwise affiliated with the Company, its management or its founders), and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of three (3) years from the Effective Date. Each of the Company's
current officers, directors and stockholders agree to vote all of the Common
Shares owned by such person or entity so as to elect and continue in office such
nominee of the Underwriter. Following the election of such nominee as a director
or advisor, such person shall receive no more or less compensation than is paid
to other non-officer directors of the Company for attendance at meetings of the
Board of Directors of the Company and shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to, food, lodging and transportation. The Company agrees to
14
indemnify and hold such director or advisor harmless, to the maximum extent
permitted by law, against any and all claims, actions, awards and judgments
arising out of his service as a director or advisor and, in the event the
Company maintains a liability insurance policy affording coverage for the acts
of its officers and directors, to include such director or advisor as an insured
under such policy. The rights and benefits of such indemnification and the
benefits of such insurance shall, to the extent possible, extend to the
Underwriter insofar as it may be or may be alleged to be responsible for such
director or advisor.
If the Underwriter does not exercise its option to designate a member
of or advisor to the Company's Board of Directors, the Underwriter shall
nonetheless have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give the Underwriter notice of each such
meeting and to provide the Underwriter with an agenda and minutes of the meeting
no later than it gives such notice and provides such items to the directors.
(r) The Company agrees to employ the Underwriter or a designee of the
Underwriter as a financial consultant for a period of two (2) years from the
Closing Date, pursuant to a separate written consulting agreement between the
Company and the Underwriter and/or such designee (the "Consulting Agreement"),
which will provide that the Company will pay the Underwriter (exclusive of any
accountable out-of-pocket expenses) a finder's fee in the event the Underwriter
originates a financing, merger, acquisition, joint venture or other transaction
to which the Company is a party. The Company further agrees to deliver a duly
and validly executed copy of said Consulting Agreement, in form and substance
acceptable to the Underwriter, on the Closing Date.
(s) Subject to the provisions of applicable law, the Underwriter shall
be entitled to receive a warrant solicitation fee of five percent (5%) of the
aggregate exercise price of the Warrants for each Warrant exercised during the
period commencing one year after the Effective Date; provided, however, that the
Underwriter will not be entitled to receive such compensation in Warrant
exercise transactions in which (i) the market price of the Common Shares 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 the Registration Statement and in documents provided
to holders of Warrants at the time of exercise; (iv) the holder thereof has not
confirmed in writing that the Underwriter solicited the exercise of the
Warrants; or (v) the solicitation or exercise of the Warrants was in violation
of Regulation M promulgated under the Exchange Act.
(t) The Company shall retain a transfer agent for the Units, Common
Shares and Warrants, reasonably acceptable to the Underwriter, for a period of
three (3) years from the Effective Date. In addition, for a period of three (3)
years from the Effective Date, the Company, at its own expense, shall cause such
transfer agent to provide the Underwriter, if so requested in writing, with
copies of the Company's daily transfer sheets, and, when requested by the
Underwriter, a current list of the Company's securityholders, including a list
of the beneficial owners of securities held by a depository trust company and
other nominees.
(u) The Company hereby agrees, at its sole cost and expense, to supply
and deliver to the Underwriter and Underwriter's Counsel, within a reasonable
period from the date hereof, four bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
15
(v) The Company shall, as of the date hereof, have applied for listing
in Standard & Poor's Corporation Records Service (including annual report
information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual not
being sufficient for these purposes) and shall use its best efforts to have the
Company listed in such manual and shall maintain such listing for a period of
five (5) years from the Effective Date.
(w) For a period of five (5) years from the Effective Date, the Company
shall provide the Underwriter, on a not less than annual basis, with internal
forecasts setting forth projected results of operations for each quarterly and
annual period in the two (2) fiscal years following the respective dates of such
forecasts. Such forecasts shall be provided to the Underwriter more frequently
than annually if prepared more frequently by management, and revised forecasts
shall be prepared and provided to the Underwriter when required to reflect more
current information, revised assumptions or actual results that differ
materially from those set forth in the forecasts.
(x) For a period of three (3) years from the Effective Date, or until
such earlier time as the Common Shares are listed on the New York Stock Exchange
or the American Stock Exchange, the Company shall cause its legal counsel to
provide the Underwriter with a list, to be updated at least annually, of those
states in which the Common Shares may be traded in non-issuer transactions under
the Blue Sky laws of the 50 states.
(y) For a period of three (3) years from the Effective Date, the
Company shall continue to retain KPMG LLP (or such other nationally recognized
accounting firm acceptable to the Underwriter) as the Company's independent
public accountants.
(z) For a period of three (3) years from the Effective Date, the
Company, at its expense, shall cause its then independent certified public
accountants, as described in Section 5(y) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other equivalent report) and the
mailing of quarterly financial information to stockholders.
(aa) For a period of twenty-five (25) days from the Effective Date, the
Company will not issue press releases or engage in any other publicity without
the Underwriter's prior written consent, other than normal and customary
releases issued in the ordinary course of the Company's business or those
releases required by law.
(bb) The Company will not increase or authorize an increase in the
compensation of its five (5) most highly paid employees greater than those
increases provided for in their employment agreements with the Company in effect
as of the Effective Date and disclosed in the Registration Statement, without
the prior written consent of the Underwriter, for a period of three (3) years
from the Effective Date.
(ab) For a period of three (3) years from the Effective Date, the
Company will promptly submit to the Underwriter copies of accountant's
management reports and similar correspondence between the Company's accountants
and the Company.
16
(ac) For a period of two (2) years from the Effective Date, the Company
will not offer or sell any of its securities (i) pursuant to Regulation S
promulgated under the Act or (ii) at a discount to market or in a discounted
transaction, without the prior written consent of the Underwriter, other than
the issuance of Common Shares upon exercise of options and warrants outstanding
on the Closing Date and described in the Prospectus.
(ad) For a period of three (3) years from the Effective Date, the
Company will provide to the Underwriter ten (10) day's written notice prior to
any issuance by the Company or its subsidiaries of any equity securities or
securities exchangeable for or convertible into equity securities of the
Company, except for (i) Common Shares issuable upon exercise of currently
outstanding options and warrants or conversion of currently outstanding
convertible securities and (ii) options available for future grant pursuant to
any stock option plan in effect on the Effective Date and the issuance of shares
of Common Shares upon the exercise of such options.
(ae) Prior to the Effective Date and for a period of two (2) years
thereafter, the Company will retain a financial public relations firm reasonably
acceptable to the Underwriter.
(af) For a period of five (5) years from the Effective Date, the
Company will cause its Board of Directors to meet, either in person or
telephonically, a minimum of four (4) times per year and will hold a
stockholder's meeting at least once per annum.
(ag) Prior to the Effective Date, the Company shall have obtained
Director's and Officer's insurance naming the Underwriter as an additional
insured party, in an amount equal to twenty-five percent (25%) of the gross
proceeds of the offering, and the Company will maintain such insurance for a
period of at least three (3) years from the Closing Date.
6. Conditions of the Underwriter's Obligation to Purchase the Offered
Units from the Company. The obligation of the Underwriter to purchase and pay
for the Offered Units which it has agreed to purchase from the Company is
subject (as of the date hereof and the Closing Date) to the accuracy of and
compliance in all material respects with the representations and warranties of
the Company herein, to the accuracy of the statements of the Company or its
officers made pursuant hereto, to the performance in all material respects by
the Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement will have become effective not later
than 10:00 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Underwriter may
agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Underwriter's or the Company's knowledge, will be contemplated
by the Commission; and any request on the part of the Commission for additional
information will have been complied with to the satisfaction of Underwriter's
Counsel.
17
(b) At the time that this Agreement is executed and at the Closing
Date, there will have been delivered to the Underwriter a signed opinion of each
of Morse, Zelnick, Rose & Lander LLP, Xxxxxxxxx & Xxxxxxx and Xxxxxxxxxxx &
Xxxxxxxx LLP, counsels for the Company (individually and collectively, "Company
Counsel"), dated as of the date hereof or the Closing Date, as the case may be
(and any other opinions of counsel referred to in such opinion of Company
Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full power
and authority, corporate and other, and with all Permits necessary to own or
lease, as the case may be, and operate its properties, whether tangible or
intangible, and to conduct its business as described in the Registration
Statement. To the best of Company Counsel's knowledge, the Company has no
subsidiaries. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company.
(ii) The Company has full power and authority, corporate and
other, to execute, deliver and perform this Agreement, the Consulting Agreement,
the Warrant Agreement, the Warrants and the Underwriter's Warrant Agreement and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Consulting Agreement, the
Warrant Agreement, the Warrants and the Underwriter's Warrant Agreement by the
Company, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this Agreement,
the Consulting Agreement, the Warrant Agreement, the Warrants and the
Underwriter's Warrant Agreement have been duly authorized by all necessary
corporate action, and this Agreement has been duly executed and delivered by the
Company. This Agreement is (assuming for the purposes of this opinion that it is
valid and binding upon the other party thereto) and, when executed and delivered
by the Company on the Closing Date, each of the Consulting Agreement, the
Warrant Agreement, the Warrants and the Underwriter's Warrant Agreement will be,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions set
forth in Section 7 hereof and the contribution provisions set forth in Section 8
hereof may be limited by the federal securities laws or public policy underlying
such laws.
(iii) The execution, delivery and performance of this Agreement,
the Consulting Agreement, the Warrant Agreement, the Warrants and the
Underwriter's Warrant Agreement by the Company, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the
Company with the terms of this Agreement, the Consulting Agreement, the Warrant
Agreement, the Warrants and the Underwriter's Warrant Agreement do not, and will
not, with or without the giving of notice or the lapse of time, or both, (A)
result in a violation of the Certificate of Incorporation or By-Laws, each as
amended, of the Company, (B) result in a breach of or conflict with any terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or
18
result in the creation or imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company pursuant to any
indenture, mortgage, note, contract, commitment or other material agreement or
instrument to which the Company is a party or by which the Company, or any of
the Company's properties or assets are or may be bound or affected; (C) violate
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company, or any of the Company's properties or business; or (D) have any effect
on any Permit necessary for the Company to own or lease, as the case may be, and
operate its properties or conduct its business or the ability of the Company to
make use of its properties or business.
(iv) To the best of Company Counsel's knowledge, no Permits of
any court or governmental agency or body (other than under the Act, the
Regulations and applicable state securities or Blue Sky laws) are required for
the valid authorization, issuance, sale and delivery of the Units or the
Underwriter's Warrants to the Underwriter, and the consummation by the Company
of the transactions contemplated by this Agreement, the Consulting Agreement,
the Warrant Agreement, the Warrants or the Underwriter's Warrant Agreement.
(v) The Registration Statement has become effective under the
Act; to the best of Company Counsel's knowledge, 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, threatened or contemplated
under the Act or applicable state securities laws.
(vi) The Registration Statement and the Prospectus, as of the
Effective Date, and each amendment or supplement thereto as of its effective or
issue date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which Company Counsel need not
express an opinion) comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company.
(vii) The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents (including opinions of such counsel); and the response to Item
13 of Form SB-2 have been reviewed by Company Counsel, and, based upon such
review, are accurate in all material respects and present fairly the information
required to be disclosed, and there are no material statutes, regulations or
government classifications, or, to the best of Company Counsel's knowledge,
material contracts or documents, of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
None of the material provisions of the contracts or instruments
described above violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company, or any of its assets or
businesses, including, without limitation, the FDA and FTC and comparable
foreign, state and local regulatory authorities.
19
(viii) The outstanding Common Shares and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any stockholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and sales
of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants to purchase Common Shares conform to the descriptions thereof
contained in the Registration Statement and Prospectus. To the best of Company
Counsel's knowledge, except as set forth in the Prospectus, no holders of any of
the Company's securities has any rights, "demand", "piggyback" or otherwise, to
have such securities registered under the Act.
(ix) The issuance and sale of the Units, Shares and Warrants have
been duly authorized and, when the Shares and Warrant Shares have been issued
and duly delivered against payment therefor as contemplated by this Agreement,
the Shares and Warrant Shares will be validly issued, fully paid and
nonassessable, and the holders thereof will not be subject to personal liability
solely by reason of being such holders. Neither the Shares nor the Warrant
Shares are subject to preemptive rights of any stockholder of the Company. The
Company has reserved a sufficient number of Common Shares from its authorized
but unissued Common Shares for issuance upon exercise of the Warrants in
accordance with the provisions of the Warrant Agreement. The certificates
representing the Shares and the Warrants are in proper legal form.
(x) The issuance and sale of the Underlying Shares and Underlying
Warrant Shares have been duly authorized and, when such Common Shares have been
duly delivered against payment therefor, as contemplated by the Underwriter's
Warrant Agreement, such Common Shares will be validly issued, fully paid and
nonassessable. Holders of Underlying Shares and Underlying Warrant Shares will
not be subject to personal liability solely by reason of being such holders.
Neither the Underwriter's Warrants nor the Underlying Shares or Underlying
Warrant Shares issuable upon exercise thereof will be subject to preemptive
rights of any stockholder of the Company. The Company has reserved a sufficient
number of Common Shares from its authorized, but unissued, Common Shares for
issuance upon exercise of the Underwriter's Warrants and the Underlying Warrants
in accordance with the provisions of the Underwriter's Warrant Agreement. The
Underwriter's Warrants conform to the descriptions thereof in the Registration
Statement and Prospectus.
(xi) Upon delivery of the Offered Units to the Underwriter
against payment therefor as provided in this Agreement, the Underwriter
(assuming it is a bona fide purchaser within the meaning of the Uniform
Commercial Code) will acquire good title to the Offered Units, free and clear of
all liens, encumbrances, equities, security interests and claims.
(xii) Assuming that the Underwriter exercises the over-allotment
option to purchase any of the Optional Units and makes payment therefor in
accordance with the terms of this Agreement, upon delivery of the Optional Units
to the Underwriter hereunder, the Underwriter (assuming it is a bona fide
purchaser within the meaning of the Uniform Commercial Code) will acquire good
title to such Optional Units, free and clear of any liens, encumbrances,
equities, security interests and claims.
20
(xiii) To the best of Company Counsel's knowledge, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, foreign or domestic, or
before any private arbitration tribunal, pending or threatened against the
Company, or involving the Company's properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company which,
individually and in the aggregate, is not material.
(xiv) The Company owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, service marks,
copyrights, rights, trade secrets, confidential information, processes and
formulations used or proposed to be used in the conduct of its business as
described in the Prospectus (collectively the "Intangibles"); to the best of
Company Counsel's knowledge, the Company has not infringed nor is infringing
with the rights of others with respect to the Intangibles; and, to the best of
Company Counsel's knowledge, the Company has not received any notice that it has
or may have infringed, is infringing upon or is conflicting with the asserted
rights of others with respect to the Intangibles which might, singly or in the
aggregate, materially adversely affect its business, results of operations or
financial condition and such counsel is not aware of any licenses with respect
to the Intangibles which are required to be obtained by the Company other than
those licenses which the Company has obtained. The opinions described in this
Section 6(b)(xiv) may be given by Company Counsel in reliance on the opinion of
an attorney, reasonably acceptable to Underwriter's Counsel, practicing in the
patent area.
Company Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement (except
as to the financial statements and other financial data contained therein, as to
which Company Counsel need not express an opinion), on the Effective Date,
contained any untrue statement of a material fact required to be stated therein
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, or that (B) the Prospectus (except as to the
financial statements and other financial data contained therein, as to which
Company Counsel need not express an opinion) contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each counsel giving an opinion must give the opinion set
forth in this paragraph as to such subject matter of its opinion.
In rendering its opinion pursuant to this Section 6(b), Company Counsel
may rely upon the certificates of government officials and officers of the
Company as to matters of fact, provided that Company Counsel shall state that
they have no reason to believe, and do not believe, that they are not justified
in relying upon such opinions or such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
21
The opinion letters delivered pursuant to this Section 6(b) shall
state that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
(c) At the Closing Date, there will have been delivered to the
Underwriter a signed opinion of Underwriter's Counsel, dated as of the Closing
Date, to the effect that the opinions delivered pursuant to Section 6(b) hereof
appear on their face to be appropriately responsive to the requirements of this
Agreement, except to the extent waived by the Underwriter, specifying the same,
and with respect to such related matters as the Underwriter may require.
(d) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto 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,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
Prospectus indicate might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the business, property,
financial condition or results of operations of the Company, other than as set
forth in the Registration Statement and the Prospectus. At the Closing Date,
there will be delivered to the Underwriter a certificate signed by the Chairman
of the Board or the President or a Vice President of the Company, dated the
Closing Date, evidencing compliance with the provisions of this Section 6(d) and
stating that the representations and warranties of the Company set forth in
Section 4 hereof were accurate and complete in all material respects when made
on the date hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to or as of the Closing Date; and that, as of
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to the best of his knowledge, are contemplated or threatened. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter or Underwriter's Counsel may
reasonably request.
22
(e) At the time that this Agreement is executed and at the Closing
Date, the Underwriter will have received a signed letter from KPMG LLP, dated
the date such letter is to be received by the Underwriter and addressed to it,
confirming that it is a firm of independent public accountants within the
meaning of the Act and Regulations and stating that: (i) insofar as reported on
by them, in their opinion, the financial statements of the Company included in
the Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable Regulations; (ii) on the
basis of procedures and inquiries (not constituting an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
unaudited interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus and the latest available unaudited
interim financial statements of the Company, if more recent than that appearing
in the Registration Statement and Prospectus, inquiries of officers of the
Company responsible for financial and accounting matters as to the transactions
and events subsequent to the date of the latest audited financial statements of
the Company, and a reading of the minutes of meetings of the stockholders, the
Board of Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, nothing has come to their
attention which, in their judgment, would indicate that (A) during the period
from the date of the latest financial statements of the Company appearing in the
Registration Statement and Prospectus to a specified date not more than three
business days prior to the date of such letter, there have been any decreases in
net current assets or net assets as compared with amounts shown in such
financial statements or decreases in net sales or decreases [increases] in total
or per share net income [loss] compared with the corresponding period in the
preceding year or any change in the capitalization or long-term debt of the
Company, except in all cases as set forth in or contemplated by the Registration
Statement and the Prospectus, and (B) the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting principles and
practices on a basis substantially consistent with the audited financial
statements included in the Registration Statement or the Prospectus; and (iii)
they have compared specific dollar amounts, numbers of shares, numerical data,
percentages of revenues and earnings, and other financial information pertaining
to the Company set forth in the Prospectus (with respect to all dollar amounts,
numbers of shares, percentages and other financial information contained in the
Prospectus, to the extent that such amounts, numbers, percentages and
information may be derived from the general accounting records 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.
(f) There shall have been duly tendered to the Underwriter certificates
representing the Offered Units to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Units by the
Underwriter.
23
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date or
the Option Closing Date, as the case may be, for any member firm of the NASD to
execute transactions (as principal or as agent) in the Units, Shares or
Warrants, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Underwriter's or the
Company's knowledge, shall be contemplated by the Commission or the NASD. The
Company represents at the date hereof, and shall represent as of the Closing
Date or Option Closing Date, as the case may be, that it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD.
(i) The Company meets the current and any existing and proposed
criteria for inclusion of the Units, Shares and Warrants on Nasdaq SmallCap
Market.
(j) All proceedings taken at or prior to the Closing Date or the Option
Closing Date, as the case may be, in connection with the authorization, issuance
and sale of the Units, Shares and Warrants shall be reasonably satisfactory in
form and substance to the Underwriter and to Underwriter's Counsel, and such
counsel shall have been furnished with all such documents, certificates and
opinions as they may request for the purpose of enabling them to pass upon the
matters referred to in Section 6(c) hereof and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance by
the Company with any of the conditions herein contained.
(k) As of the date hereof, the Company will have delivered to the
Underwriter the written undertakings of its officers, directors and
securityholders and/or registration rights holders, as the case may be, to the
effect of the matters set forth in Sections 5(l) and (q).
If any of the conditions specified in this Section 6 have not been
fulfilled, this Agreement may be terminated by the Underwriter on notice to the
Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Underwriter,
each officer, director, partner, employee and agent of the Underwriter, and each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions
in respect thereof), to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Underwriter and each such person, if
any, for any legal or other expenses reasonably incurred by them or any of them
in connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained (i) in the Registration
Statement, in any Preliminary Prospectus or in the Prospectus (or the
Registration Statement or Prospectus as from time to time amended or
24
supplemented) or (ii) in any application or other document executed by the
Company, or based upon written information furnished by or on behalf of the
Company, filed in any jurisdiction in order to qualify the Units under the
securities laws thereof (hereinafter "application"), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter or any such person through the
Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Units which are the subject thereof from the
Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Units to such
person; and (C) the Prospectus did not contain any untrue statement or alleged
untrue statement or omission or alleged omission giving rise to such cause,
claim, damage, expense or liability.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any and all losses, claims, damages, expenses or liabilities, joint or several
(and actions in respect thereof), to which they or any of them may become
subject under the Act or under any other statute or at common law or otherwise,
and, except as hereinafter provided, will reimburse the Company and each such
director, officer or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in the Registration Statement, in any Preliminary Prospectus
or in the Prospectus (or the Registration Statement or Prospectus as from time
to time amended or supplemented) or (ii) in any application (including any
application for registration of the Units under state securities or Blue Sky
laws), or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, in light of the
circumstances under which they were made, but only insofar as any such statement
or omission was made in reliance upon and in conformity with information
furnished in writing to the Company in connection therewith by the Underwriter
expressly for use therein.
(c) Promptly after receipt of notice of the commencement of any action
in respect of which indemnity may be sought against any indemnifying party under
this Section 7, the indemnified party will notify the indemnifying party in
writing of the commencement thereof, and the indemnifying party will, subject to
the provisions hereinafter stated, assume the defense of such action (including
the employment of counsel satisfactory to the indemnified party and the payment
of expenses) insofar as such action relates to an alleged liability in respect
of which indemnity may be sought against the indemnifying party. After notice
from the indemnifying party of its election to assume the defense of such claim
or action, the indemnifying party shall no longer be liable to the indemnified
party under this Section 7 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the reasonable
judgment of the indemnified party or parties, it is advisable for the
25
indemnified party or parties to be represented by separate counsel, the
indemnified party or parties shall have the right to employ a single counsel to
represent the indemnified parties who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the indemnified parties
thereof against the indemnifying party, in which event the fees and expenses of
such separate counsel shall be borne by the indemnifying party. Any party
against whom indemnification may be sought under this Section 7 shall not be
liable to indemnify any person that might otherwise be indemnified pursuant
hereto for any settlement of any action effected without such indemnifying
party's consent, which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 7
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any director of the Company, any officer of the Company who
signed the Registration Statement and any controlling person of the Company) as
one entity and the Underwriter (including, for this purpose, any contribution by
or on behalf of each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee and agent of the Underwriter) as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, so that the Underwriter
is responsible for the proportion thereof equal to the percentage which the
underwriting discount per Unit set forth on the cover page of the Prospectus
represents of the initial public offering price per Unit set forth on the cover
page of the Prospectus and the Company is responsible for the remaining portion;
provided, however, that if applicable law does not permit such allocation, then,
if applicable law permits, other relevant equitable considerations such as the
relative fault of the Company and the Underwriter in connection with the facts
which resulted in such losses, liabilities, claims, damages and expenses shall
also be considered. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission or
alleged omission relates to information supplied by the Company or by the
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Underwriter agree that it
would be unjust and inequitable if the respective obligations of the Company and
the Underwriter for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee and
agent of the Underwriter will have the same rights to contribution as the
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
26
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary not-withstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of the
Underwriter, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Units.
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Units for public offering. The time when the
Underwriter "releases the Offered Units for public offering" for the purposes of
this Section 10 means the time when the Underwriter releases for publication the
first newspaper advertisement, which is subsequently published, relating to the
Offered Units, or the time when the Underwriter releases for delivery to members
of a selling group copies of the Prospectus and an offering letter or an
offering telegram relating to the Offered Units, whichever will first occur.
(b) This Agreement, including without limitation, the obligation
to purchase the Units and the obligation to purchase the Optional Units after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Units or such
Optional Units, as the case may be, if, prior to such time, any of the following
shall have occurred: (i) the Company withdraws the Registration Statement from
the Commission or the Company does not or cannot expeditiously proceed with the
public offering; (ii) the representations and warranties in Section 4 hereof are
not materially correct or cannot be complied with; (iii) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange will
have been suspended; (iv) limited or minimum prices will have been established
on either such Exchange; (v) a banking moratorium will have been declared either
by federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities, including the Offered Units or the Optional
Units, will be established by either of such Exchanges, by the Commission, by
any other federal or state agency, by action of the Congress or by Executive
Order; (vii) trading in any securities of the Company shall have been suspended
or halted by any national securities exchange, the NASD or the Commission;
(viii) there has been a materially adverse change in the condition (financial or
otherwise), prospects or obligations of the Company; (ix) the Company will have
sustained a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity; (x) any action has been taken by the government of
the United States or any department or agency thereof which, in the judgment of
the Underwriter, has had a material adverse effect upon the market or potential
market for securities in general; or (xi) the market for securities in general
or political, financial or economic conditions will have so materially adversely
changed that, in the judgment of the Underwriter, it will be impracticable to
offer for sale, or to enforce contracts made by the Underwriter for the resale
of, the Offered Units or the Optional Units, as the case may be.
27
(c) If this Agreement is terminated pursuant to Section 6 hereof
or this Section 10 or if the purchases provided for herein are not consummated
because any condition of the Underwriter's obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company to comply with any of the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
11. Information Furnished by the Underwriter to the Company. It is
hereby acknowledged and agreed by the parties hereto that for the purposes of
this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and 8
hereof, the only information given by the Underwriter to the Company for use in
the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the information in the third paragraph on page 44
with respect to concessions and reallowances, the information in the third
sentence of the third paragraph on page 45 with respect to the determination of
the public offering price and the statements appearing in the fifth and sixth
paragraphs on page 45 with respect to stabilizing the market price of Units, as
such information appears in any Preliminary Prospectus and in the Prospectus.
12. Confidentiality.
(a) The Underwriter agrees to treat as confidential the
information which is delivered to it by the Company pursuant to Section 5(v)
hereof (the "Information"). All Information shall be kept in confidence and not
disclosed to a third party or used by the Underwriter, except as required for
the consummation of the transactions contemplated by this Agreement or as
provided in Section 12(b) hereof. The Underwriter further agrees to reveal the
Information only to those of its representatives who need to know the
Information for the purposes of consummating the transactions contemplated by
this Agreement and who are informed of and agree to be bound by the confidential
nature of the Information.
(b) The restrictions set forth in Section 12(a) hereof do not
apply to any Information which: (i) is or becomes generally available to the
public; (ii) was known to the Underwriter prior to its receipt of Information
from the Company; (iii) the Underwriter obtained from an independent third party
who obtained such Information lawfully and was under no obligation of
confidentiality; or (iv) is disclosed when such disclosure is compelled pursuant
to legal, judicial or administrative proceedings, or otherwise required by law,
subject to the Underwriter giving reasonable prior notice to the Company to
allow the Company to participate in such proceedings.
28
13. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telegraphed to, the following
addresses: if to the Underwriter, to Whale Securities Co., L.P., Attention:
Xxxxxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy to
Blank Rome Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X. Xxxxxxx, Esq., 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it
at Delcath Systems, Inc., 0000 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000,
Attention: X.X. Xxxx, with a copy to Morse, Zelnick, Rose & Lander, LLP, 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X. Xxxxxxx, Esq.
This Agreement shall be deemed to have been made and delivered in New
York City and shall be governed as to validity, interpretation, construction,
effect and in all other respects by the internal laws of the State of New York.
The Company (1) 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, (2) waives any objection which the Company
may have now or hereafter to the venue of any such suit, action or proceeding,
and (3) 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 proceeding. The Company further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District 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.
14. Parties in Interest. This Agreement is made solely for the benefit
of the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter, each officer, director, partner,
employee and agent of the Underwriter, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Units from the
Underwriter, as such purchaser.
29
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
DELCATH SYSTEMS, INC.
By______________________________
Name: X.X. Xxxx
Title: Chief Executive Officer
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By__________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
