Exhibit 1
AYURCORE, INC.
1,250,000 Shares of Common Stock
($.001 par value per share)
UNDERWRITING AGREEMENT
New York, New York
_______ __, 1998
X.X. Xxxxxxxx & Co., Inc.
as Representative of the
Several Underwriters named
in Schedule A hereto
0 Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
AyurCore, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the underwriters (the "Underwriters") named in Schedule A to
this Underwriting Agreement (the "Agreement"), for whom XX Xxxxxxxx & Co., Inc.
(the "Representative") is acting as representative, one million two hundred and
fifty thousand (1,250,000) shares of common stock, par value $.001 per share
(the "Offered Shares"), which Offered Shares are presently authorized but
unissued shares of the common stock, par value $.001 per share (individually a
"Common Share" and collectively the "Common Shares"), of the Company. In
addition, the Representative, in order to cover over-allotments in the sale of
the Offered Shares, may purchase from the Company, for its own account, up to an
aggregate of one hundred eighty-seven thousand five hundred (187,500) Common
Shares (the "Optional Shares"; the Offered Shares and the Optional Shares are
hereinafter sometimes collectively referred to as the "Shares"). The Shares are
described in the Registration Statement, as defined below. The Company also
proposes to issue and sell to the Representative for its own account and/or the
accounts of its designees, warrants to purchase an aggregate of one hundred
twenty-five thousand (125,000) Common Shares (the "Warrant Shares") at an
exercise price of $____ per Warrant Share [135% of the initial public offering
price per Share] (the "Representative's Warrants"), which sale will be
consummated in accordance with the terms and conditions of the form of
Representative's Warrant Agreement filed as an exhibit to the Registration
Statement.
The Representative hereby warrants to the Company that it has been
authorized by each of the Underwriters to enter into this Underwriting Agreement
on their behalf and to act for them in the manner herein provided. The Company
hereby confirms its respective agreements with the Representative and each of
the Underwriters, on whose behalf the Representative is signing this Agreement,
as follows:
1. Purchase and Sale of Offered Shares. 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
Shares to the Underwriters, severally, and each Underwriter agrees severally and
not jointly, to purchase from the Company, at a purchase price of $____ per
share, the number of Offered Shares set forth opposite the name of such
Underwriter in Schedule A attached hereto, plus any additional Offered Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof. The Underwriters plan to offer the Offered
Shares to the public at a public offering price of $____ per share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to the Company
by wire transfer against delivery of the Offered Shares to the Representative.
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 (the fourth business day
following the Effective Date in the event that trading of the Offered Shares
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 Shares to be delivered will be in such denominations
and registered in such names as the Representative may request not less than two
full business days prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of American
Stock Transfer & Trust Company, the Company's transfer agent, at 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
Representative's Warrants to the Representative or to its designees (limited to
officers and partners of the Representative and/or, at the Representative's
direction, members of the selling group or underwriting syndicate participating
in the distribution of the Offered Shares and/or their respective officers or
partners). The Representative's Warrants will be in the form of, and in
accordance with, the provisions of the Representative's Warrant Agreement
attached as an exhibit to the Registration Statement. The aggregate purchase
price for the Representative's Warrants is $125.
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The Representative's Warrants will be restricted from sale, transfer,
assignment, pledge or hypothecation for a period of one year from the
Effective Date, except to officers or partners of the Representative and
Underwriters and members of the selling group and/or their officers or
partners. Payment for the Representative'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 Representative's Warrants. The
certificates representing the Representative's Warrants will be in such
denominations and such names as the Representative may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Offered Shares as contemplated
by the Prospectus as defined below, the Representative is hereby granted an
option to purchase for its own account, and not as representative of the
Underwriters, all or any part of the Optional Shares from the Company. The
purchase price to be paid for the Optional Shares will be the same price per
Optional Share as the price per Offered Share set forth in Section 1 hereof.
The option granted hereby may be exercised by the Representative as to all or
any part of the Optional Shares at any time within 45 days after the Effective
Date. The Representative will not be under any obligation to purchase any
Optional Shares prior to the exercise of such option.
(b) The option granted hereby may be exercised by the
Representative by giving oral notice to the Company, which must be confirmed by
a letter, telex or telegraph setting forth the number of Optional Shares to be
purchased, the date and time for delivery of and payment for the Optional Shares
to be purchased and stating that the Optional Shares referred to therein are to
be used for the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. 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 (2) 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, the Company will become obligated
to convey to the Representative, and, subject to the terms and conditions set
forth in Section 3(d) hereof, the Representative will become obligated to
purchase, the number of Optional Shares specified in such notice.
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(c) Payment for any Optional Shares purchased will be made to
the Company by wire transfer against delivery of the Optional Shares purchased
to the Representative. The certificates representing the Optional Shares to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the Option
Closing Date, and will be made available to the Representatives 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.
(d) The obligation of the Representative to purchase and pay for
any of the Optional Shares 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 Representative of
opinions, certificates and letters dated the Option Closing Date substantially
similar in scope to those specified in Sections 5 and 6(b), (c), (d) (e) and (f)
hereof, but with each reference to "Offered Shares" and "Closing Date" to be,
respectively, to the Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Underwriters 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
corporate power and authority 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 and the Representative's Warrant Agreement and to consummate the
transactions contemplated hereby and thereby. The Company has no subsidiaries
other than Bio-Ved Pharmaceuticals Private Limited, a corporation duly organized
and validly existing under the laws of India (the "Subsidiary") and the Company
has no equity interest in any other entity. Unless the context otherwise
requires, all references to the "Company" in this Agreement shall include the
Subsidiary. Each of the Company and the Subsidiary 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
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effect on the financial condition, results of operations, business or
properties of the Company or the Subsidiary. The Subsidiary has full
corporate power and authority to own or lease, as the case may be, and
operate its properties and to conduct its business as described in the
Prospectus. The Company owns ___% of the issued and outstanding shares of
capital stock of the Subsidiary free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been
duly authorized and validly issued and are fully paid and nonassessable.
There are no options or warrants for the purchase of, or other rights to
purchase, or outstanding securities convertible into or exchangeable for, any
capital stock or other securities of the Subsidiary.
(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 Representative's Warrant Agreement and the Consulting Agreement
described in Section 5(af) hereof (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 Representative's 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 Representative's Warrant Agreement and the Consulting 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 or the Subsidiary; (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 or the Subsidiary pursuant to any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company, the Subsidiary
or any of their respective 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, the Subsidiary or any of their respective
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 or the
Subsidiary to own or lease and operate its properties and conduct its business
or on the ability of the Company to make use thereof.
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(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 Underwriters, and (ii) the consummation by the Company of
the transactions contemplated by this Agreement, the Representative's Warrant
Agreement and the Consulting Agreement or, if so required, all such Permits,
have been duly obtained and are in full force and effect.
(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 and the transactions contemplated herein. 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-_____) 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, 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, 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)
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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 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 Representative, or by any Underwriter through the
Representative, 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 holder 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 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) Xxxxxxx X. Xxxxxx & Company, LLP, the accountants who have
certified certain of the combined financial statements of the Company and the
Subsidiary (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
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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) Each of the Company and the Subsidiary 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
Statements. Except as disclosed in writing to the Representative, neither the
Company nor the Subsidiary has executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment 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 or the Subsidiary.
(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. 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 shareholder 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
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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, 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 Shares and the Warrant Shares
have been duly authorized and, when the Shares and the Warrant Shares have been
issued and duly delivered against payment therefor as contemplated by this
Agreement and the Representative's Warrant Agreement, respectively, the Shares
and the 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 will be
subject to preemptive rights of any shareholder of the Company.
(n) The issuance and sale of the Representative's Warrants have
been duly authorized and, when issued, paid for and delivered as contemplated by
the Representative's Warrant Agreement, the Representative's Warrants will
constitute valid and binding obligations of the Company, enforceable as to the
Company in accordance with their terms. The Representative's Warrants will not
be subject to preemptive rights of any shareholder of the Company. The Warrant
Shares have been duly reserved for issuance upon exercise of the
Representative's Warrants in accordance with the provisions of the
Representative's Warrant Agreement. The Representative's Warrants conform to
the description thereof contained in the Registration Statement and the
Prospectus.
(o) Neither the Company nor the Subsidiary is 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, the
Subsidiary or any of the their respective properties or business. Each of the
Company and the Subsidiary owns, possesses or has obtained all governmental and
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other (including those obtainable from third parties) Permits necessary to own
or lease, as the case may be, and operate its properties, whether tangible or
intangible, and conduct its 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, threatened (nor,
to the best of the Company's knowledge, is there any basis therefor), which seek
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, threatened against the Company or the Subsidiary or involving the
Company's or the Subsidiary's properties or business which, if determined
adversely to the Company or the Subsidiary would, individually or in the
aggregate, result in any material adverse change in the financial position,
shareholders' equity, results of operations, properties, business, management or
affairs or business prospects of the Company or the Subsidiary 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, 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 or the Subsidiary and
enjoining the Company or the Subsidiary from taking, or requiring the Company or
the Subsidiary to take, any action, or to which the Company or the Subsidiary or
the Company's or the Subsidiary'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) Each of the Company and the Subsidiary 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, neither the Company nor
the Subsidiary has infringed or is infringing upon the rights of others with
respect to the Intangibles; and neither the Company nor the Subsidiary has
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 bus-
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iness as presently conducted or the prospects, financial condition or results
of operations of the Company or the Subsidiary 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 or the Subsidiary.
(s) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus and the latest combined
financial statements included in the Prospectus, neither the Company nor the
Subsidiary has 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, or 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
the Subsidiary or any material adverse change in or affecting the general
affairs, management, financial condition, shareholders' equity, results of
operations or prospects of the Company or the Subsidiary, other than as set
forth or contemplated in the Prospectus.
(t) Each of the Company and the Subsidiary has good and
marketable title in fee simple to all real property and 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 or the Subsidiary. The leases, licenses or other contracts or
instruments under which the Company and the Subsidiary lease, hold or are
entitled to use 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 or
the Subsidiary, and all rentals, royalties or other payments, if any, accruing
thereunder which became due prior to the date of this Agreement have been duly
paid, and neither the Company nor, to the best of the Company's knowledge, any
other party is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default thereunder. Neither the Company
nor the Subsidiary has received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties. Each of the Company
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and the Subsidiaries 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 or the Subsidiary is a party or by which their
respective 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 or the Subsidiary, and neither the
Company nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, 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 the Subsidiary or any of their respective assets or businesses.
(v) Except as set forth in the Prospectus, each of the Company
and the Subsidiary (i) is in all material respects in compliance with the
provisions of all laws relating to the regulation of the Company's products,
including the Federal Food Drug and Cosmetic act (the "FD&C Act") and all
comparable state, local and foreign laws, the rules and regulations promulgated
thereunder and all rules and regulations promulgated by the United States Food
and Drug Administration (the "FDA") and all comparable state, local and foreign
regulatory authorities; (ii) has all authorizations, approvals, consents,
orders, registrations, licenses or permits of any court or the FDA and all
comparable state and foreign regulatory authorities which are necessary or
required to conduct its business; (iii) has had no material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, on account of such regulatory
matters and (iv) does not manufacture, fabricate or market any product or
perform any service which is subject to regulation by the FDA, or to any
provision of the FD&C Act, or any rule or regulation promulgated thereunder.
The language contained in the Prospectus with respect to the FDA and all
comparable state and foreign regulatory authorities, the laws relating to the
regulation of the Company's products, including the FD&C Act and all comparable
state, local and foreign laws, rules and regulations, and all other such
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regulatory matters, is accurate, complete and true in all material respects and
does not 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.
(w) The employment, consulting, confidentiality and
non-competition agreements between the Company and its officers, employees and
consultants and between the Subsidiary and its officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(x) Except as set forth in the Prospectus, the Company has no
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
(y) To the best of the Company's knowledge, no labor problem
exists with any of the Company's employees or any of the Subsidiary's employees
or is imminent which could adversely affect the Company or the Subsidiary.
(z) Neither the Company nor the Subsidiary has, 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, in each case, 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.
(aa) The Shares have been approved for listing on the Nasdaq
SmallCap Market of the National Association of Securities Dealers, Inc.
("NASDAQ").
(ab) The Company has provided Xxxxxx Xxxxxxxxxx LLP, counsel to
the Underwriters ("Underwriters' Counsel"), all agreements, certificates,
correspondence and other items, documents and information requested by such
counsel's Corporate Review Memorandum dated October 8, 1997.
13
Any certificate signed by an officer of the Company or by an
officer of the Subsidiary and delivered to the Representative or to the
Underwriters' Counsel shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants with the
several Underwriters 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 Shares by the
Representative or a dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has not been
previously advised and furnished a copy, or to which the Representative shall
object in writing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the Representative
immediately, and, if requested by the Representative, 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
Shares 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 each Underwriter, without
charge, from time to time until the Effective Date, as many copies of each
Preliminary Prospectus as each 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 each 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 each Underwriter may
reasonably request. The Company has furnished or will furnish to the
Representative a signed copy of the Registration Statement as originally filed
and
14
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 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 Representative 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 security
holders, in the manner specified in Rule 158(b) under the Act, and deliver to
the Representative and Underwriters' 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 three years from the Effective Date, the
Company will deliver to the Representative and to Underwriters' 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) and 10-Q (or 10-QSB) and
exhibits thereto, filed or furnished to the Commission, any securities exchange
or the
15
National Association of Securities Dealers, Inc. ("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 security holders; (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) quarterly 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 Representative 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
shareholders 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 Common Shares.
(i) If the transactions contemplated by this Agreement are
consummated, the Representative 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 expenses of
accountants and counsel for the Company; the costs of preparing, printing and
delivering the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto (all in such quantities as the Underwriters may reasonably
require); the costs of printing and delivering the Underwriting Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement and related
documents (all in such quantities as the Underwriters may reasonably require);
the costs of preparing and printing stock certificates and issuing and
delivering the Shares to the Representative; all taxes, if any, on the issuance
of the Shares; transfer agent and registrar fees; the filing fees, costs and
expenses incurred in filing and securing any required review by the Commission,
the NASD, Nasdaq and either the Boston Stock Exchange or the Pacific Stock
Exchange; the filing fees, costs and expenses incurred in qualifying the Shares
for sale under the "Blue Sky" or securities laws of those states, as specified
by the Representative, in which the Shares are to be offered or sold, including
the legal fees and disbursements of Underwriters' Counsel
16
(which legal fees and disbursements, not including filing and listing fees
paid by Underwriters' Counsel on the Company's behalf, shall not exceed
$35,000) incurred in connection therewith, and the cost of printing and
mailing the "Blue Sky" Survey; the cost of furnishing to the several
Underwriters copies of the Registration Statement, Preliminary Prospectuses
and the Prospectus as herein provided; the costs of conducting a background
check on the two most senior executives of the Company; the costs (up to a
maximum of $10,000) of placing "tombstone advertisements" in any publications
which may be selected by the Representative; subject to their prior written
approval by the Company, "road show" expenses, including related travel and
meeting costs, 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 Representative will deduct from the payment for the Offered
Shares and Optional Shares, as the case may be, three percent (3%) of the gross
proceeds of the offering (less the sum of $50,000 previously paid to the
Representative), as payment for the Representative's nonaccountable expense
allowance relating to the transactions contemplated hereby, which amount will
include the fees and expenses of Underwriters' Counsel (other than those payable
by the Company in connection with "Blue Sky" qualifications referred to in the
preceding paragraph).
(j) If the transactions contemplated by this Agreement or
related hereto are not consummated for any reason other than because of the
Representative's termination of the offering for "cause" (as defined herein),
the Company will only be obligated to reimburse the Representative for up to
Fifty Thousand Dollars ($50,000) of the Representative's actual out-of-pocket
expenses incurred in connection with the offering (including, without
limitation, the reasonable fees and disbursements of Underwriters' Counsel),
inclusive of the Fifty Thousand Dollars ($50,000) previously paid to the
Representative (the "Advance") as part of the three percent (3%)
nonaccountable expense allowance described in Section 5(j) above (it being
understood that if any portion of the Advance is not needed for the
effectuation of such reimbursement, such portion will be returned to the
Company). However, if the transactions contemplated herein are not
consummated due to the Representative's termination of the offering for
"cause" ("cause" being understood to mean a breach by the Company of any of
the covenants, warranties or representations in this Agreement), the Company
will be obligated to promptly reimburse the Representative for up to
_____________________ Dollars ($______)
[the aggregate amount of the potential three percent (3%) nonaccountable
expense allowance described in Section 5(j) above] of its actual out-of-pocket
expenses incurred in connection with the offering (including, without
limitation the reasonable fees and
17
disbursements of Underwriters' Counsel), inclusive of the Advance (it being
understood that if any portion of the Advance is not needed for the
effectuation of such reimbursement, such portion will be returned to the
Company). Additionally, if the transactions contemplated by this Agreement
or related hereto are not consummated for any reason, any amounts paid by the
Company to Underwriters' Counsel in respect of "Blue Sky" matters shall be
retained by such counsel to the extent of its actual charges for fees and
disbursements relating to such "Blue Sky" matters (it being understood that
any balance remaining after payment of such fees and expenses will be
returned to the Company).
(k) The Company intends to apply the net proceeds from the sale
of the Shares for the purposes set forth in the Prospectus. No portion of the
net proceeds from the sale of the shares will be used to repay any indebtedness
without the prior written consent of the Representative.
(l) During the period of twelve (12) months following the date
hereof, without the Representative's prior written consent (i) neither the
Company nor any of its officers, directors or securityholders will offer for
sale, sell, contract to sell, grant an option for the sale of, issue, assign,
transfer, pledge or otherwise dispose of, directly or indirectly, any
securities of the Company owned by them as of the date hereof, in any manner
whatsoever, whether pursuant to Rule 144 of the Regulations or otherwise,
other than: (a) the grant of options pursuant to an employee stock option
plan approved by the Representative; (b) up to 25,000 options, each to
purchase one Common Share at $____ [the initial public offering price],
currently owned by Xx. Xxxxxxx Xxxxxxxx; (c) up to 5,000, 1,250, 2,000,
5,000, 2,500, 2,500, 750 and 3,750 options, each to purchase one Common Share
at $3.00, currently owned by Bhushen Patwardham, Ph.D., Xxxx Xxxxxx, Ph.D.,
Subramaniam Shastri, Ph.D., Xxxxxx Xxxxxx, M.D., Xxxxx Xxxxxxx, Ph.D., Xxxxxx
Xxxxxxx, M.D., Xxxxxxxxx Xxxxx and Xxxx Xxxxxx, respectively; and (d) by bona
fide gift, will or the laws of descent and distribution to the
securityholder's spouse, children or grandchildren, a trust for the benefit
of such securityholder's spouse, children or grandchildren, a partnership,
the general partner of which is the securityholder (or a corporation, a
majority of whose outstanding stock is owned of record or beneficially by the
securityholder or any of the foregoing) or partners of the securityholder in
connection with the securityholder partnership's distribution of its Common
Shares to its partners; provided in each case that the transferee first
executes and delivers to the Representative an undertaking to be bound by the
provisions of this Section 5(l); and (ii) no holder of registration rights
relating to securities of the Company will execute any such registration
rights. The Company will deliver to the Representative the undertakings as
of the date hereof of its officers, directors and securityholders to this
effect.
18
(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 following the
date hereof without the Representative'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 or quotation of its Common Shares on the Nasdaq market for so long as
the Common Shares are qualified for such listing or quotation.
(p) The Company will, concurrently with the Effective Date,
register the class of equity securities of which the Shares are a part under
Section 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 Shares, the
Representative and its successors will have the right to designate a nominee for
election, at its or their option, as a member of the Board of Directors of the
Company (the "Director-Designee"), and the Company will use its best efforts to
cause such Director-Designee to be elected and continued in office as a director
of the Company until the expiration of five (5) years from the Effective Date.
Each of the Company's current officers, directors and shareholders agrees to
vote all of the Common Shares owned by such person or entity so as to elect and
continue in office such Director-Designee. Following the election of such
Director-Designee as a director, such person shall receive no more or less
compensation than is paid to other non-employee 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 to
the same extent that other directors are reimbursed for such expenses. If the
Representative does not exercise its option to designate a member of the
Company's Board of Directors, the Representative shall
19
nonetheless have the right to have a designee of the Representative appointed
as a non-voting advisor (the "Advisor") to the Board or 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
indemnify and hold the Director-Designee or the Advisor, as the case may be,
harmless, to the maximum extent permitted by law, against any and all claims,
actions, awards and judgments arising out of his or her 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 the Director-Designee or the Advisor, as the case may be, 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 Representative insofar as it may be or may be alleged to be responsible
for the Director-Designee or the Advisor. The Company agrees to give the
Representative notice of each such meeting and to provide the Representative
and, if designated by the Representative, the Advisor, 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 shall retain a transfer agent for the Common
Shares, reasonably acceptable to the Representative, for a period of three (3)
years following the Effective Date. In addition, for a period of three (3)
years following the Effective Date, the Company, at its own expense, shall cause
its transfer agent to provide the Representative with copies of the Company's
daily transfer sheets and when requested by the Representative, a current list
of the Company's security holders, including a list of the beneficial owners of
securities held by a depository trust company and other nominees.
(s) The Company hereby agrees, at its sole cost and expense, to
supply and deliver to Underwriters' Counsel, within a reasonable period from the
date hereof, five bound volumes, including the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement, the
Prospectus and all other underwriting documents.
(t) 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 following the Effective Date.
(u) For a period of three (5) years from the Effective Date, the
Company shall provide the Representative, on a
20
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 Representative more frequently than
annually if prepared more frequently by management, and revised forecasts
shall be prepared and provided to the Representative when required to reflect
more current information, revised assumptions or actual results that differ
materially from those set forth in the forecasts.
(v) For a period of three (3) years following the Effective
Date, the Company shall continue to retain Xxxxxxx X. Xxxxxx & Co. (or such
other nationally recognized accounting firm as is acceptable to the
Representative) as the Company's independent public accountants.
(w) For a period of three (3) years following the Effective
Date, the Company, at its expense, shall cause its independent certified public
accountants, as described in Section 5(v) 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 shareholders.
(x) For a period of three (3) years from the Effective Date, the
Company will not offer or sell any of its securities pursuant to Regulation S of
the Act or at a discount from market or in a discounted transaction, without the
prior written consent of the Representative.
(y) For a period of twenty-five (25) days following the Effective
Date, the Company will not issue press releases or engage in any other publicity
without the Representative'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.
(z) For a period of three (3) years from the Effective Date, the
Company will not increase or authorize an increase in the compensation of its
three (3) most highly paid employees, other than increases provided for in
employment agreements with the Company in effect as of the Effective Date and
disclosed in the Prospectus, without the prior written consent of the
Representative.
(aa) For a period of three (3) years following the Effective
Date, the Company will promptly submit to the Representative copies of
accountant's management reports and
21
similar correspondence between the Company's accountants and the Company.
(ab) For a period of three (3) years following the Effective
Date, the Company will provide to the Representative ten 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) shares of Common Stock issuable upon exercise of
currently outstanding options and warrants or conversion of currently
outstanding convertible securities and (ii) options (and shares issuable upon
exercise of such options) available for future grant pursuant to any stock
option plan in effect on the Effective Date and the issuance of shares of
Common Stock upon the exercise of such options.
(ac) For a period of three (3) years following the Effective
Date, the Company will retain a financial public relations firm reasonably
acceptable to the Representative.
(ad) For a period of five (5) years following the Effective
Date the Company's Board of Directors shall be comprised of seven (7) persons,
at least three (3) of whom (including, if designated, the Representative's
director designee) must, during such period, be persons not otherwise affiliated
with the Company, its management or its founders. In addition, during such
period, 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
shareholder's meeting at least once per annum.
(ae) Prior to the Effective Date, the Company shall have
obtained directors' and officers' insurance naming the Representative as an
additional insured party, in an amount equal to the lesser of (i) twenty-five
percent (25%) of the gross proceeds of the offering and (ii) One Million
Dollars ($1,000,000) and will maintain such insurance until at least three
(3) years following the Closing Date.
(af) The Company will employ the Representative or a designee
of the Representative as a financial consultant on a non-exclusive basis for
a period of two (2) years from the Closing Date, pursuant to a separate
written consulting agreement between the Company and the Representative
and/or such designee (the "Consulting Agreement"), at an annual rate of
Fifteen Thousand Dollars ($15,000) (exclusive of any accountable
out-of-pocket expenses), the entire Thirty Thousand Dollars ($30,000) payable
in full, in advance, on the Closing Date. In addition, the Consulting
Agreement shall provide that the Company will pay the Representative a
finder's fee in the event that the Company consummates a merger or
acquisition directly or indirectly
22
originated by the Representative during the term of the Consulting Agreement.
The Company further agrees to deliver a duly and validly executed copy of
said Consulting Agreement, in form and substance acceptable to the
Representative, on the Closing Date.
(ag) For a period of five (5) 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 Representative with a list, to be updated at least
annually, of those states in which the Offered Units, Shares and Warrants may
be traded in non-issuer transactions under the Blue Sky laws of the 50 states.
6. Conditions of the Underwriters' Obligation to Purchase Shares
from the Company. The obligation of the several Underwriters to purchase and
pay for the Offered Shares which they have 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 9:00 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
Representative 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 Representative'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 Underwriters' Counsel.
(b) At the time that this Agreement is executed and at the
Closing Date, there will have been delivered to the Representative a signed
opinion of Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx, counsel for the Company, and
____________, Indian counsel for the Company (collectively referred to as
"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 opinions
of Company Counsel or relied upon by Company Counsel in rendering their
opinions), reasonably satisfactory to Underwriters' Counsel, to the effect
that:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of
23
the State of Delaware, with full corporate power and authority 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. The Company has no subsidiaries
other than the Subsidiary and no equity interests in any other entity. The
Subsidiary is a corporation duly organized and validly existing under the
laws of its state of incorporation. Unless the context otherwise requires,
all references to the "Company" in this opinion shall include the Subsidiary.
Each of the Company and the Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and the failure to so qualify could have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company and the Subsidiary. The Subsidiary has
full corporate power and authority, with all Permits necessary to own or
lease, as the case may be, and operate its properties and to conduct its
business as described in the Prospectus.
The Company owns ___% of the issued and outstanding shares of
capital stock of the Subsidiary free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been
duly authorized and validly issued and are fully paid and nonassessable.
(ii) The Company has full power and authority,
corporate and other, to execute, deliver and perform this Agreement, the
Consulting Agreement and the Representative's Warrant Agreement and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Consulting Agreement and the
Representative'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 and the
Representative'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 each of the
Consulting Agreement and the Representative's Warrant Agreement, when
executed and delivered by the Company on the Closing Date, 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
24
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 and the Representative'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 and the Representative'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 or the
Subsidiary, (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 result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets
of the Company or any the Subsidiary pursuant to, any indenture, mortgage,
note, contract, commitment or other material agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of the Company's or the Subsidiary'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 the
Subsidiary or any of the Company's or the Subsidiary's properties or
business; or (D) have any effect on any Permit necessary for the Company or
the Subsidiary to own or lease and operate its properties or conduct its
business or on the ability of the Company to make use thereof.
(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
Shares or the Representative's Warrants, and the consummation by the Company
of the transactions contemplated by this Agreement or the Representative'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
25
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 for 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
having jurisdiction over the Company or the Subsidiary or any of their assets
or businesses. To the best of Company Counsel's knowledge, the Company is
not in default under any contract or agreement material to its business or
under any promissory note or other evidence of indebtedness for borrowed
funds.
(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 shareholder 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
26
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 Shares and the
Warrant Shares have been duly authorized and, when the Shares and the Warrant
Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement and the Representative's Warrant Agreement,
respectively, the Shares and the 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. None of the
Offered Units, the Shares nor the Warrant Shares are subject to preemptive
rights of any shareholder of the Company. The certificates representing the
Shares are in proper legal form.
(x) The issuance and sale of the Representative's
Warrants have been duly authorized and, when paid for, issued and delivered
pursuant to the terms of the Representative's Warrant Agreement, they will
constitute the valid and binding obligations of the Company, enforceable as
to the Company in accordance with their terms, to issue and sell the Warrant
Shares. The Representative's Warrants will not be subject to preemptive
rights of any shareholder of the Company. The Warrant Shares have been duly
reserved for issuance upon exercise of the Representative's Warrants in
accordance with the provisions of the Representative's Warrant Agreement.
The Representative's Warrants conform to the descriptions thereof contained
in the Registration Statement and the Prospectus.
(xi) Upon delivery of the Offered Shares to the
Underwriters against payment therefor as provided in this Agreement, the
Underwriters (assuming they are bona fide purchasers within the meaning of
the Uniform Commercial Code) will acquire good title to the Offered Shares,
free and clear of all liens, encumbrances, equities, security interests and
claims.
(xii) Assuming that the Representative exercises the
over-allotment option to purchase any of the Optional Shares and make payment
therefor in accordance with the terms of this Agreement, upon delivery of the
Optional Shares so purchased to the Representative hereunder, the
Representative (assuming it is a bona fide purchaser within the meaning of
the Uniform Commercial Code) will acquire good title to such Optional Shares,
free and clear of any liens, encumbrances, equities, security interests and
claims.
(xiii) To the best of Company Counsel's knowledge,
there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental
27
agency, court or tribunal, foreign or domestic, or before any private
arbitration tribunal, pending or threatened against the Company or the
Subsidiary, or involving the Company's or the Subsidiary's properties or
business, 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) Each of the Company and the Subsidiary 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,
neither the Company nor the Subsidiary has infringed nor is infringing upon
the rights of others with respect to the Intangibles; and, to the best of
Company Counsel's knowledge, neither the Company nor the Subsidiary has
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 or the Subsidiary.
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 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.
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 certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
28
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 time this Agreement is executed, and at the Closing
Date there will have been delivered to the Representative a signed opinion of
__________________, special regulatory counsel for the Company ("Special
Counsel") dated as of the date hereof on the Closing Date, as the case may
be, reasonably satisfactory to Underwriters' Counsel, to the effect that:
(i) Each of the Company and the Subsidiary is in
compliance, in all material respects, with the provisions of all laws
relating to the regulation of the Company's products, including the Federal
Food, Drug and Cosmetic Act (the "FD&C Act") and all state laws comparable to
the FD&C Act, the rules, regulations promulgated thereunder and all rules and
regulations promulgated by the Food and Drug Administration ("FDA") and all
Comparable state regulatory authorities;
(ii) Each of the Company and the Subsidiary has all
authorizations, approvals, consents, orders, registrations, licenses or
permits of any Court or the FDA and all state regulatory authorities
comparable to the FDA which are necessary or required for the Company to
conduct its current business in material compliance with the FD&C Act or
Comparable state law;
(iii) Neither the Company nor the Subsidiary has any
material liabilities, debts, obligations or claims asserted against it,
whether accrued, absolute, contingent or otherwise, and whether due or to
become due, on account of such regulatory matters;
(iv) The Company and the Subsidiary do not manufacture,
fabricate, assemble or receive any products or component parts in violation
of the FD&C Act or any comparable state law, or any rule or regulation
promulgated thereunder, or contract for the manufacture, fabrication,
assembly or delivery of any products or component parts in violation of the
FD&C Act or any comparable state law, or any rule or regulation promulgated
thereunder;
(v) None of the material provisions of the contracts or
instruments, as described in the Registration Statement, 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 assets or business relating to or promulgated by the FDA or any
comparable state regulatory authorities.
29
(vi) The discussion contained in the Registration
Statement with respect to the FDA and comparable state regulatory authorities
and of the laws relating to the regulation of the Company's products,
including the FD&C Act and comparable state laws, rules and regulations, is
accurate, complete and true in all material respects and does not 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.
Special 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 Special Counsel deemed necessary, no facts came to its
attention which lead it to believe that the sections of the Registration
Statement entitled "Risk Factors - Government Regulation; No Assurance of
Regulatory Approvals" and "Business," 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.
(d) At the Closing Date, there will have been delivered to the
Representative a signed opinion of Underwriters' Counsel, dated as of the
Closing Date, to the effect that the opinions delivered pursuant to Sections
6(b) and (c) hereof appear on their face to be appropriately responsive to
the requirements of this Agreement, except to the extent waived by the
Representative, specifying the same, and with respect to such other related
matters as the Representative may require.
(e) 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
30
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 Representative 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(e)
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 Representative
will have received such other and further certificates of officers of the
Company as the Representative or Underwriters' Counsel may reasonably request.
(f) At the time that this Agreement is executed and at the
Closing Date, the Representative will have received a signed letter from
Xxxxxxx X. Xxxxxx & Co., dated the date such letter is to be received by the
Representative 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 it, in its 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 shareholders, the
31
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 its attention which, in its 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 in total or per share net income 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) it has 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.
(g) There shall have been duly tendered to the Representative
certificates representing the Offered Shares to be sold on the Closing Date.
(h) The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of the Offered Shares by
the Underwriters or the sale of the Shares by the Representative.
(i) 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
Shares, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Representative's
or the Company's knowledge, shall be contemplated
32
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
contemplatedby the Commission or the NASD.
(j) The Company meets the current and any existing and proposed
criteria for inclusion of the Offered Shares in NASDAQ.
(k) 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 Shares shall be reasonably
satisfactory in form and substance to the Representative and to Underwriters'
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(d) 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.
(l) As of the date hereof, the Company will have delivered to
the Underwriters the written undertakings of its officers, directors and
security holders 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 Representative on
notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, including specifically each person that may be substituted for
an Underwriter as provided in Section 10 hereof, each officer, director,
partner, employee and agent of any Underwriter, and each person, if any, who
controls any of the Underwriters 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 each of the Underwriters 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
33
Statement or Prospectus as from time to time amended or 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 Shares 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 an
Underwriter or any such person through an 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 an 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 Shares
which are the subject thereof from such Underwriter or other indemnified
person; (B) such 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 Shares 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) Each Underwriter (including specifically each person that
may be substituted for an Underwriter as provided in Section 10 hereof)
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 Shares 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
34
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 such Underwriter, or by the
Representative on behalf of such 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 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 Underwriters
(including, for this purpose, any contribution by or on behalf of each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and each officer,
35
director, partner, employee and agent of any of the Underwriters) 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
Underwriters are responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share set forth on the cover
page of the Prospectus represents of the initial public offering price per
Share 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 Underwriters 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
Underwriters, 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, on one hand, and the
Underwriters, on the other hand, agree that it would be unjust and
inequitable if the respective obligations of the Company and the Underwriters
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 any of the Underwriters 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 any of the Underwriters will have the same rights to
contribution as the Underwriters, 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 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 notwithstanding, 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 Underwriters contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained in this Agreement
shall remain operative and
36
in full force and effect, regardless of any termination or cancellation of
this Agreement or any investigation made by or on behalf of the Underwriters,
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 Shares.
10. Substitution of Underwriters.
(a) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase does not exceed 10% of the total number of the
Offered Shares, the non-defaulting Underwriters will be obligated severally
to purchase and pay for (in addition to the number of Offered Shares set
forth opposite their names in Schedule A attached hereto) the full number of
Offered Shares agreed to be purchased by all defaulting Underwriters, and not
so purchased, in proportion to their respective commitments hereunder. In
such event the Representative, for the accounts of the several nondefaulting
Underwriters, may take up and pay for all or any part of such additional
Offered Shares to be purchased by each such Underwriter under this Section
10(a), and may postpone the Closing Date to a time not exceeding three full
business days after the Closing Date determined as provided in Section 2
hereof.
(b) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase exceeds 10% of the total number of Offered Shares, or
if one or more Underwriters for any reason permitted hereunder should cancel
its or their obligation to purchase and pay for Offered Shares hereunder, the
non-cancelling and non-defaulting Underwriters (hereinafter called the
"remaining Underwriters") will have the right to purchase such Offered Shares
in such proportion as may be agreed among them at the Closing Date determined
as provided in Section 2 hereof. If the remaining Underwriters do not
purchase and pay for such Offered Shares at such Closing Date, the Closing
Date will be postponed for 24 hours and the remaining Underwriters will have
the right to purchase such Offered Shares, or to substitute another person or
persons to purchase the same, or both, at such postponed Closing Date. If
purchasers have not been found for such Offered Shares by such postponed
Closing Date, the Closing Date will be postponed for a further 24 hours, and
the Company will have the right to substitute another person or persons,
reasonably satisfactory to the Representative to purchase such Offered Shares
at such second postponed Closing Date. If it shall be arranged for the
remaining Underwriters or substituted underwriters to take up the Offered
Shares of the defaulting Underwriter or Underwriters as provided in this
Section, the Company shall have the right to postpone the time of delivery
for a period of not more than three (3) full business days, in order to
effect whatever changes may
37
thereby be made necessary in the Registration Statement or the Prospectus or
in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary. If the Company has not found
such purchasers for such Offered Shares by such second postponed Closing
Date, then this Agreement will automatically terminate, and neither the
Company nor the remaining Underwriters will be under any obligation under
this Agreement (except that the Company and the Underwriters will remain
liable to the extent provided in Sections 7 and 8 hereof and the Company will
also remain liable to the extent provided in Section 5(j) hereof). As used
in this Agreement, the term "Underwriter" includes any person substituted for
an Underwriter under this Section 10(b). Nothing in Section 11 hereof will
relieve a defaulting Underwriter from the liability for its default and
nothing in this Section 10(b) will obligate any Underwriter to purchase or
find purchasers for any Offered Shares in excess of those agreed to be
purchased by such Underwriter under the terms of Section 2 hereof.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Representative, or the Representative, by written or telegraphic notice to
the Company, may terminate this Agreement prior to the earlier of (i) 10:00
A.M., New York City time, on the first full business day after the Effective
Date; or (ii) the time when the Underwriters, after the Registration
Statement becomes effective, release the Offered Shares for public offering.
The time when the Underwriters "release the Offered Shares for public
offering" for the purposes of this Section 11 means the time when the
Underwriters release for publication the first newspaper advertisement, which
is subsequently published, relating to the Offered Shares, or the time when
the Underwriters release for delivery to members of a selling group copies of
the Prospectus and an offering letter or an offering telegram relating to the
Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Shares and the obligation to purchase the Optional
Shares after exercise of the option referred to in Section 3 hereof, are
subject to termination in the absolute discretion of the Underwriters, by
notice given to the Company prior to delivery of and payment for all the
Offered Shares or the Optional Shares, 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 AMEX will have been suspended; (iv) limited or minimum prices
will have been established on either such Exchange; (v) a banking moratorium
will
38
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 Shares or the Optional Shares, 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
Representative, 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 Representative, it
will be impracticable to offer for sale, or to enforce contracts made by the
Underwriters for the resale of, the Offered Shares or the Optional Shares, as
the case may be.
(c) If this Agreement is terminated pursuant to Section 6
hereof or this Section 11 or if the purchases provided for herein are not
consummated because any condition of the Underwriters' 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 any of the Underwriters 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.
12. Information Furnished by the Underwriters 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 Underwriters 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 statement appearing in the last
paragraph on page ___ with respect to stabilizing the market price of Shares,
the information in the _____ paragraph of the "Underwriting" Section
commencing on page ___ with respect to concessions and reallowances, the
table on page ___ regarding the offering syndicate, and the information in
the _____, ______, and ______, full paragraphs on page ___ with respect to
discretionary accounts, the determination of the public offering price,
stabilizing the market price of the Shares and the Representative,
39
respectively, as such information appears in any Preliminary Prospectus and
in the Prospectus.
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 telecopied to, the
following addresses: if to the Representative, or the Underwriters, to XX
Xxxxxxxx & Co., Inc. 0 Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Facsimile
No. (000) 000-0000, with a copy to Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx
X. Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Facsimile
No. (000) 000-0000; if to the Company at 0000 X. Xxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxx, Xxxxxxxxxx 00000, Attention: President, Facsimile No. (000) 000-0000
with a copy to Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx, Attention: Xxxxx X.
Xxxxxxxxx, Esq., 00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Facsimile No. (000) 000-0000.
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 several Underwriters, the Company and, to the extent
expressed, any person controlling the Company or the Underwriters, each
officer, director, partner, employee and agent of the Underwriters, 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 Shares from any of the Underwriters, as such purchaser.
40
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
Underwriters in accordance with its terms.
Very truly yours,
AYURCORE, INC.
By:
--------------------------------
Name:
Title:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
XX XXXXXXXX & CO., INC.
By:
---------------------------
Name:
Title:
Acting on behalf of itself
as the Representative of the
several Underwriters named in
Schedule A hereto.
41
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
Underwriter Number of Shares
------------- ----------------------
XX Xxxxxxxx & Co., Inc. . . . . . . .
Total . . . . . . . . . . . . 1,250,000
----------
----------
42
