[2,000,000] Units, each Unit Consisting of
One (1) Share of Common Stock
One (1) Redeemable Class A Common Stock Purchase Warrant
and One (1) Redeemable Class B Common Stock
Purchase Warrant ("Class B Warrants")
of
BIODELIVERY SCIENCES INTERNATIONAL, INC.
FORM OF
UNDERWRITING AGREEMENT
New York, New York
____________, 2001
Roan/Xxxxxx Associates, L.P.,
as Representative of the
several Underwriters named in
Schedule I
x/x 00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
BioDelivery Sciences International, Inc.,, a Delaware corporation (the
"Company"), proposes to sell 2,000,000 units (the "Units"), each Unit comprised
of: one (1) share ("Share") of the Company's common stock, par value $.01 per
share (the "Common Stock"); one (1) Redeemable Class A Common Stock Purchase
Warrant (the "Class A Warrants"); and one (1) Redeemable Class B Common Stock
Purchase Warrant (the "Class B Warrants"). The aforesaid 2,000,000 Units,
Shares, Class A Warrants and Class B Warrants (together, referred to as the
"Firm Securities") and together with all or any part of the up to 300,000
additional Units subject to the overallotment option described in Section 2(b)
hereof (the "Overallotment Securities") are hereinafter collectively referred to
as the "Securities." This agreement confirms the agreement by the Underwriters
named in Schedule I to purchase the Firm Securities from the Company upon the
terms and conditions contained herein. Roan/Xxxxxx Associates, L.P. shall act as
representative (the "Representative") of the several Underwriters.
The Company also proposes to issue and sell to the Underwriters, an option
(the "Underwriters' Purchase Option") pursuant to the Underwriters' Purchase
Option Agreement (the "Underwriters' Purchase Option Agreement") for the
purchase of an aggregate of 10% of the number of Units being sold (the
"Underwriter's Option Units"), as provided in Section 3(d) hereof. The
Securities, the Underwriter's Purchase Option Agreement and Underwriter's Option
Units are more fully described in the Registration Statement (as defined in
Subsection 1(a) hereof) and the Prospectus (as defined in Subsection 1(a)
hereof) referred to below. Unless the context otherwise requires, all references
to the "Company" shall include all presently existing subsidiaries and any
entities acquired by the Company on or prior to the Closing Date (defined in
1
Subsection 2(c) hereof). All representations, warranties and opinions of counsel
required hereunder shall cover any such subsidiaries and acquired entities.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters as of the date
hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2 (SEC File
No. 333-______) including any related preliminary prospectus (each a
"Preliminary Prospectus"), for the registration of the offer and sale of
Securities under the Securities Act of 1933, as amended (the "Act"), which
registration statement and any amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. The Registration Statement with
respect to the Securities, including any Preliminary Prospectus, copies of which
have heretofore been delivered to the Representatives, has been carefully
prepared by the Company in conformity with the requirements of the Securities
Act and the rules and regulations thereunder. Following execution of this
Agreement, the Company will promptly file (i) if the Registration Statement has
been declared effective by the Commission, (A) a Term Sheet (as defined in the
Rules and Regulations (as hereinafter defined)) pursuant to Rule 434 under the
Act or (B) a Prospectus under Rules 430A and/or 424(b) under the Act, in either
case in form satisfactory to the Underwriters or (ii) in the event the
registration statement has not been declared effective, a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not, before the registration statement becomes effective, file any
other amendment thereto unless the Underwriter shall have consented thereto
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations)(as hereinafter defined), is hereinafter called the "Registration
Statement" and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed in all
material respects with the requirements of the Act and the Rules and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
nor the Prospectus at the time of filing thereof contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus.
2
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Overallotment Closing
Date (as hereinafter defined) and during such longer period as the Prospectus
may be required to be delivered in connection with sales by the Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all material
statements which are required to be stated therein in compliance with the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Overallotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriter expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly incorporated and is now, and at the
Closing Date and any Overallotment Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of its properties or the
character of its operations require such qualification to do business, except
where the failure to so qualify would not have a material adverse effect on the
Company. The Company has all requisite corporate power and authority, and has
obtained any and all necessary applications, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations except where the failure to comply would not
have a material adverse effect upon the Company; and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures, if any, in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein. The Company is not a party to or bound by any
3
instrument, agreement or other arrangement providing for the Company to issue
any capital stock, rights, warrants, options or other securities, except for
this Agreement, the Underwriter's Purchase Option and as otherwise described in
the Prospectus under the Section, "Description of Capital Stock." The
Securities, the Underwriter's Purchase Option and the Underwriter's Option Units
and all other securities issued or issuable by the Company conform or, when
issued and paid for, will conform in all respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company, or similar contractual rights granted by the Company to subscribe for
or purchase securities. The Securities, the Underwriter's Purchase Option and
the Underwriter's Option Units to be issued and sold by the Company hereunder,
and upon payment therefor, are not and will not be subject to any preemptive or
other similar rights of any stockholder to subscribe for or purchase securities,
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof and thereof, will be validly issued, fully paid and
non-assessable and will conform to the descriptions thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issuance and sale of the Securities, the Underwriter's Purchase Option and the
Underwriter's Option Units has been duly and validly taken; and the
certificates, if any, representing the Securities and the Underwriter's Option
Units will be in due and proper form. Upon the issuance and delivery pursuant to
the terms hereof of the Securities to be sold to the Underwriter by the Company
hereunder, the Underwriter will acquire good and marketable title to such
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(g) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4
(h) Xxxxx Xxxxxxxx LLP, and Xxxxx Xxxxxx & Associates LLC. whose
reports are filed with the Commission as a part of the Registration Statement,
are each independent certified public accountant as required by the Act and the
Rules and Regulations.
(i) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, payroll
withholding taxes and taxes payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), (ii) has furnished all tax and information
returns it is required to furnish pursuant to the Code, and has established
adequate reserves for such taxes which are not due and payable, and (iii) does
not have knowledge of any tax deficiency or claims outstanding, proposed or
assessed against it.
(j) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business ( but in no event less than $1,000,000 per occurrence
and $3,000,000 in the aggregate), including, but not limited to, personal injury
and product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(k) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give rise to the same),
or involving the properties or business of the Company which: (i) questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects); or (iii) might materially
affect the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(l) The Company has full legal right, power and authority to enter
into this Agreement, the Underwriters' Purchase Option Agreement, the Warrant
Agreement, and the Consulting Agreement (as described in Section 4(w) hereof)
and to consummate the transactions provided for in such agreements; and this
Agreement, the Underwriters' Purchase Option Agreement and the Consulting
Agreement have each been duly authorized, executed and delivered by the Company.
Each of this Agreement, the Underwriters' Purchase Option Agreement and the
Consulting Agreement, constitutes a legally valid and binding agreement of the
Company, subject to due authorization, execution and delivery by the
Underwriter, enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). Neither the
Company's execution or delivery of this Agreement, the Warrant Agreement, the
Underwriters' Purchase Option Agreement, or the Consulting Agreement, its
performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any
material lien, charge, claim, encumbrance, pledge, security interest defect or
other restriction or equity of any kind whatsoever upon, any property or assets
(tangible or
5
intangible) of the Company pursuant to the terms of: (i) the Certificate of
Incorporation or By-Laws of the Company; (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of its
properties or assets (tangible or intangible) is or may be subject; or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(m) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Firm Securities and Overallotment Securities to be sold by the Company
hereunder; or (ii) the issuance and delivery of the Underwriters' Purchase
Option or the Underwriters' Option Units.
(n) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms, except to the
extent there is no material adverse effect upon the Company. The descriptions
contained in the Registration Statement of material contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts, government grants,
collaborative relationships, or other documents which are required by the Act or
the Rules and Regulations to be described in the Registration Statement or filed
as exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct copies
of the documents of which they purport to be copies.
(o) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business; or
(v) made any material changes in or affecting the general affairs, management,
financial operations, stockholders equity or results of operations of the
Company.
(p) No default exists in the due performance and observance of any
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible)
6
of the Company is subject or affected except where such default does not, and
will not, have a material adverse effect upon the Company.
(q) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(r) Since January 1, 1993, the Company has not incurred any
liability arising under or as a result of the application of the provisions of
the Act or the Exchange Act.
(s) The Company does not presently maintain, sponsor or contribute
to, and never has maintained, sponsored or contributed to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan " or a "multiemployer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37) respectively of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") ("ERISA Plans"). Except as disclosed in the
Prospectus, the Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA.
(t) The Company is not in violation in any material respect of any
domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(u) Except for registration rights for securities which are
disclosed in all material respects in the Prospectus under the section entitled
"Description of Capital Stock", and all of which have been waived by the holders
thereof, no holders of any securities of the Company or of any options, warrants
or other convertible or exchangeable securities of the Company exercisable for
or convertible or exchangeable for securities of the Company have the right to
include any securities issued by the Company in the Registration Statement or
any registration statement to be filed by the Company or to require the Company
to file a registration statement under the Act.
(v) Neither the Company, nor, to the Company's best knowledge
after due inquiry, any of its employees, directors, stockholders or affiliates
(within the meaning of the Rules and Regulations) has taken, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
(w) None of the patents, patent applications, trademarks, service
marks, trade names and copyrights, or licenses and rights to the foregoing
presently owned or held by the Company are in dispute or are in any conflict
with the right of any other person or entity within the Company's current area
of operations nor has the Company received notice of any of the foregoing. The
Company: (i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other restrictions
or equities of any kind whatsoever, all patents, trademarks, service marks,
trade names and copyrights, technology and licenses and rights with respect to
the foregoing, used in the conduct of its business as now conducted or proposed
to be conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing; and (ii) except as set forth in the Prospectus,
is not obligated or under any liability whatsoever to make any payments by way
of royalties, fees or otherwise to any owner or
7
licensee of, or other claimant to, any patent, trademark, service xxxx trade
name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(x) The Company owns and has the unrestricted right to use all
material trade secrets, trade-marks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), patents, patent applications, inventions, designs, processes,
works of authorship, computer programs and technical data and information
(collectively herein "Intellectual Property") required for or incident to the
development, manufacture, operation and sale of all products and services sold
or proposed to be sold by the Company, free and clear of and without violating
any right, lien, or claim of others, including without limitation, former
employers of its employees; provided, however, that the possibility exists that
other persons or entities, completely independently of the Company, or employees
or agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(y) The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all the Intellectual Property material
to its operations.
(z) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than liens for taxes or assessments not yet due and
payable.
(aa) On or before the effective date of the Registration Statement,
the Company shall cause to be duly executed legally binding and enforceable
agreements pursuant to which (i) each of the Company's stockholders holding in
excess of _____ shares of the Company's Common Stock (including persons holding
securities convertible into Common Stock under Section 13(d) of the Exchange
Act), has agreed not to, directly or indirectly, offer to sell, sell, grant any
option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber any of their shares of Common Stock or other securities (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of
any beneficial interest therein for a period commencing on the Effective Date
and ending on the last day of the 180th day after the closing date of the
Offering without the prior written consent of the Underwriter, and (ii) The
holders of options to purchase shares of the Company's Common Stock have agreed
not to, directly or indirectly, offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber any of
their shares of Common Stock underlying such options (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period commencing on the Effective Date and ending on the
last day of the 180th day after the closing date of the Offering without the
prior written consent of the Underwriter. The Company will cause the Transfer
Agent, as defined below, to xxxx an appropriate legend on the face of stock
certificates representing all of such shares of Common Stock.
(bb) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
8
adversely affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(cc) The Firm Securities have been approved for quotation on [the
Nasdaq National Stock Market, Inc.] subject to official notice of issuance.
(dd) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
and (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, except with respect to the beneficial ownership of not more
than 1% of the outstanding shares of capital stock of any publicly-held entity;
or (ii) a beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions", there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or principal stockholder of the Company, or any affiliate
or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has entered into an employment agreement with
____________ and _____________ as described in the Prospectus. The Company has
obtained key person life insurance with an insurer rated at least AA or better
in the most recent addition of "Best's Life Reports" in the amount of $2,000,000
on the lives of ___________ and ___________. Such insurance shall be maintained
in full force and effect for a period of three years. The Company shall be the
sole beneficiary of such policy.
(hh) No securities of the Company have been sold by the Company in
the last three fiscal years, except as disclosed in Part II of the Registration
Statement.
9
(ii) The minute books of the Company have been made available to
Underwriters' Counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since its date of
formation. The stock ledgers of the Company are correct and accurate and reflect
the record ownership of all owners of the Company's capital stock. All persons
who are owners of 5% or more of the Common Stock of the Company as set forth in
the section of the Prospectus entitled "Principal Stockholders" are properly
included therein and all transactions between "promoters" of the Company and the
Company have been properly described in accordance with SEC Rules and
Regulations.
(jj) Except as disclosed in writing to the Underwriters no officer,
or director or stockholder of the Company has any affiliation or association
with any member of the NASD.
(kk) Effective November ___, 2001, BioDelivery Sciences
International, Inc., and Bio Delivery Sciences, Inc., a Delaware corporation
("BDS") completed a merger (the "Merger"), the effect of which was that BDS was
merged with and into BioDelivery Sciences International, Inc., and BDS no longer
has any separate corporate existence. The Merger was duly authorized under the
laws of the states of Indiana and Delaware, respectfully, and approved by all
necessary corporate action on the part of each of BDS and BioDelivery Sciences
International, Inc., including without limitation, all necessary shareholder
consents. No shareholders of BDS have exercised appraisal rights under the laws
of the state of Delaware. Additionally, effective November ____, 2001, the
Company completed a reincorporation under the laws of the state of Delaware in
compliance with the laws of the states of Indiana and Delaware.
2. Purchase, Sale and Delivery of the Securities and Agreement to Issue
Underwriters' Purchase Option
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to Underwriters and each Underwriter agrees,
severally and not jointly, to purchase from the Company the respective number of
firm securities set forth in Schedule A hereto opposite its name, subject to
Section ____ hereof at the price per Unit set forth below in Section 2(c).
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase severally and not jointly, up to an additional
[300,000] Units. The option granted hereby will expire 45 days after the date of
this Agreement, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Firm Securities upon notice by the
Underwriters through the Representative to the Company, setting forth the number
of Overallotment Securities as to which the Underwriter is then exercising the
option and the time and date of payment and delivery for such Overallotment
Securities. Any such time and date of delivery shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the Underwriter and
the Company. In the event such option is exercised, the Underwriter shall
purchase such number of Overallotment Securities then being purchased which
shall have been allocated to the Underwriter, and which such shall have agreed
to purchase, subject in each case to such adjustments as the Underwriter in its
discretion shall make to eliminate any sales or purchases of fractional
Securities. Nothing herein contained shall obligate the Underwriter to
10
make any over-allotments. No Overallotment Securities shall be delivered unless
the Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, (Xxxx-Xxxxxx Associates, L.P., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other place as shall be designated by the
Representative for the respective accounts of the several Underwriters. Such
delivery and payment shall be made at 10:00 a.m. New York City time on _____ __,
[2001] or at such other time and date as shall be designated by the
Representative, but not more than three (3) business days after the Effective
Date of the Registration Statement (such time and date of payment and delivery
being hereafter called "Closing Date"). In addition, in the event that any or
all of the Overallotment Securities are purchased by the Underwriter, payment of
the purchase price for, and delivery of certificates for such Overallotment
Securities shall be made at the above-mentioned office or at such other place
and at such time (such time and date of payment and delivery being hereinafter
called "Overallotment Closing Date") as shall be agreed upon by the Underwriter
and the Company on each Overallotment Closing Date as specified in the notice
from the Underwriter to the Company. Delivery of the certificates for the Firm
Securities and the Overallotment Securities, if any, shall be made to the
Underwriter against payment by the Underwriter of the purchase price for the
Firm Securities and the Overallotment Securities, if any, to the order of the
Company as the case may be by certified check in New York Clearing House funds,
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to
Closing Date or the relevant Overallotment Closing Date, as the case may be. The
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made available to the Underwriters at the above-mentioned office or
such other place as the Underwriter may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Overallotment Closing Date, as the case may be.
The purchase price of the Securities to be paid by the Underwriter
to the Company for the Securities purchased under clauses (a) and (b) above will
be [____] per Unit (which price is net of the Underwriters' discount and
commissions). The Company shall not be obligated to sell any Securities
hereunder unless all Firm Securities to be sold by the Company are purchased
hereunder. The Company agrees to issue and sell the Securities to the
Underwriter in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriters, the Underwriters' Purchase Option at a purchase price of $[200.00]
which Underwriters' Purchase Option shall entitle the holders thereof to
purchase an aggregate of 200,000 Units. The Underwriters' Purchase Option shall
not be exercisable for one year after the Effective Date and will expire five
years after such date at an initial exercise price equal to ________________
percent (___%) of the initial public offering price of the Units. The
Underwriters' Purchase Option Agreement and form of Purchase Option Certificate
shall be substantially in the form filed as an Exhibit to the Registration
Statement. The Warrant to be received by the Underwriter upon exercise of the
Underwriters' Purchase Option shall be substantially the same as delivered to
the public in the Offering. Payment for the Underwriters' Purchase Option shall
be made on the Closing Date. The Company has reserved and shall
11
continue to reserve a sufficient number of Units, Shares and Warrants for
issuance upon exercise of the Underwriters' Purchase Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriter deems advisable, but in no
event more than three (3) business days after such Effective Date, the
Underwriter shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus and otherwise in compliance with the Rules and
Regulations. The Underwriter may allow such concessions and discounts upon sales
to other dealers as set forth in the Prospectus. The Underwriter may from time
to time increase or decrease the public offering price after distribution of the
Securities has been completed to such extent as the Underwriter, in its sole
discretion, deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act: (i) before termination of the offering of the Securities
by the Underwriter which the Underwriter shall not previously have been advised
and furnished with a copy; or (ii) to which the Underwriter shall have objected;
or (iii) which is not in compliance with the Act, the Exchange Act or the Rules
and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm by notice in
writing: (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
12
(d) The Company will give the Underwriter notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriter in connection with the offering of the Securities which differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Underwriter or Xxxxxxxxx
& XxXxxxx, LLP ("Underwriters' Counsel"), shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriter, and Underwriters' Counsel, at or prior to the time the Registration
Statement becomes effective, in endeavoring to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as the
Underwriter may reasonably designate, and shall cooperate with the Underwriter
and Underwriters' Counsel in the making of such applications, and filing such
documents and shall furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Underwriter agree that such action is not at the
time necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriter a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited
13
unless required by the Act, covering a period of at least 12 consecutive months
after the effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Underwriter:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the Nasdaq Stock
Market or any securities exchange;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective businesses which the
Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
During such four-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports with
the Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and Warrant Agent, which may be the same entity, and, if
necessary under the same jurisdiction of incorporation as the Company, as well
as a Registrar (which may be the same entity as the Transfer and Warrant Agent)
for its Common Stock.
(j) The Company will furnish to the Underwriter or pursuant to the
Underwriters' direction, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (one of which copies will
be manually executed and will include all financial statements and exhibits),
the Prospectus, and all amendments and supplements thereto, including any
prospectus prepared after the effective date of the Registration Statement, in
each case as soon as available and in such quantities as the Underwriter may
reasonably request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any
14
action designed to, or which might in the future reasonably be expected to cause
or result in, stabilization or manipulation of the price of any securities of
the Company.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities previously issued by
the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as stated
in their letters to be furnished pursuant to Section 6(k) hereof.
(o) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Underwriters' request; (ii) a list of holders of Securities upon the
Underwriters' request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Underwriters' request.
(p) Until a date which is two (2) years from the Closing Date, the
Underwriter shall be entitled to appoint an individual who shall be permitted to
attend all meetings of the Board and to receive all notices and other
correspondence and communications sent by the Company to members of the Board,
and copies of all minutes thereof. The Company shall reimburse the Underwriters'
designee for his or her out-of-pocket expenses reasonably incurred and
authorized in advance by the Company in connection with his or her attendance of
the Board meetings.
(q) For a period equal to the lesser of (i) five (5) years from
the date hereof, or (ii) the sale to the public of the Underwriters' Option
Units, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Form S-1 or, if applicable, Form S-3 (or other
appropriate form) for the registration under the Act of the Underwriters' Option
Units and underlying warrants and shares of Common Stock.
(r) For a period of five (5) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the Securities
on the Nasdaq National Stock Market.
(s) Following the Effective Date of the Registration Statement and
for a period of two (2) years thereafter, the Company shall, at its sole cost
and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation with
the Company in order to provide for the resale of the Securities and the
Underwriters' Unit Option and underlying Securities, and on the Underwriters'
request,
15
furnish the Underwriters with an opinion of counsel with respect to the
secondary sale of the Securities under the blue sky laws of the various states
prepared by securities counsel to the Company.
(t) The Company shall not amend or alter any term of any written
employment agreement between the Company and any executive officer, or alter or
amend the amount of compensation payable to such employee during the term of
such written employment agreement, in a manner more favorable to such employee,
without the express written consent of the Underwriters.
(u) Until the completion of the distribution of the Securities and
the termination of the Overallotment Option period, the Company shall not
without the prior written consent of the Underwriter, which consent shall not be
unreasonably withheld, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(v) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of six (6) years from
the Closing Date.
(w) On the Closing Date, the Company and Roan/Xxxxxx Associates,
L.P. shall enter into a financial consulting agreement (the "Financial
Consulting Agreement"), in the form filed as an Exhibit to the Registration
Statement, pursuant to which the Underwriter will provide financial consulting
services to the Company on the following terms: (i) the Company shall agree to
employ Roan/Xxxxxx Associates, L.P. as its Investment Banker and Financial
Consultant 24 months without any fee payable to Roan/Xxxxxx Associates, L.P.;
(ii) for a period of five years, the Underwriter will be paid a fee equal to
five percent of the amount up to $5 million and two and one half percent of the
excess, if any, over $5 million of the consideration involved in any transaction
(including mergers, acquisitions, joint ventures and other business
transactions) consummated by the Company with a party introduced to the Company
by Roan/Xxxxxx Associates, L.P., which introductions shall be pre-approved by
the Company and with which party the Underwriter had substantial contact on
behalf of the Company.
(x) For a period of 13 months commencing on the Closing Date,
except with the written consent of the Representative, the Company will not
issue or sell, directly or indirectly, any shares of its capital stock, or sell
or grant options, or warrants or rights to purchase any shares of its capital
stock, except pursuant to (i) this Agreement, (ii) the Underwriters' Purchase
Option, (iii) the exercise of warrants and options of the Company heretofore
issued and described in the Prospectus, and (iv) the grant of options and the
issuance of shares issued upon exercise of options issued or to be issued under
the Company's stock option plan as described in the Prospectus ("Stock Option
Plan"). Except as discussed in the Prospectus, prior to the Closing Date, the
Company will not issue any options or warrants without the prior written consent
of the Representative. The Company shall not, for a period of 13 months from the
Closing Date offer or sell any securities pursuant to Regulation S or similar
regulation.
(y) 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,
16
during the 13 months following the Closing Date without the Representative's
prior written consent.
(z) Subsequent to the dates as of which information is given in
the Registration Statement and Prospectus and prior to the Closing Dates, except
as disclosed in or contemplated by the Registration Statement and Prospectus,
(i) the Company will not have incurred any liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary
course of business; (ii) there shall not have been any change in the capital
stock, funded debt (other than regular repayments of principal and interest on
existing indebtedness) or other securities of the Company, any material adverse
change in the condition (financial or other), business, operations, income, net
worth or properties, including any material loss or damage to the properties of
the Company (whether or not such loss is insured against), which could
materially adversely affect the condition (financial or other), business,
operations, income, net worth or properties of the Company; and (iii) the
Company shall not pay or declare any dividend or other distribution on its
Common Stock or its other securities or redeem or repurchase any of its Common
Stock or other securities.
(aa) Except as disclosed in or contemplated by the Registration
Statement and Prospectus, the Company, for a period of 12 months following the
Closing Date, shall not redeem any of its securities, and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived after
the Closing Date without obtaining the Representative's prior written consent,
which consent shall not be unreasonably withheld. The Representative shall
either approve or disapprove such contemplated redemption of securities or
dividend payment or distribution within ten (10) business days from the date the
Representative receives written notice of the Company's proposal with respect
thereto; a failure of the Representative to respond within the ten (10) business
day period shall be deemed approval of the transaction.
(bb) In connection with the redemption of the Class A warrants
and/or Class B warrants the Representative shall be entitled to a fee of a fee
of 5% of the exercise price for each Class A or Class B Warrant exercised;
provided, however, that the Representative will not be entitled to receive such
compensation in warrant exercise transactions in which (i) the market price of
Common Stock at the time of exercise is lower than the exercise price of the
warrants; (ii) the warrants are held in any discretionary account; (iii)
disclosure of compensation arrangements is not made, in addition to the
disclosure provided in this Prospectus, in documents provided to holders of
warrants at the time of exercise; (iv) the holder of the warrants has not
confirmed in writing that the Representative solicited such exercise; or (v) the
solicitation of exercise of the warrants was in violation of Regulation M
promulgated under the Securities Act. The Company hereby covenants and agrees
that it not employee, retain or hire any other person or broker dealer in
connection with the redemption of the Class A warrants or Class B warrants,
without the prior written consent of the Representative. The covenants and
agreements contained in this clause 4 (bb) shall survive termination of this
Agreement.
(cc) The Company maintains and will continue to maintain a system
of internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the
17
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date and
the Overallotment Closing Date (to the extent not paid at the Closing Date) all
its expenses and fees (other than fees of Underwriters' counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation: (i) the fees and
expenses of accountants and counsel for the Company; (ii) all costs and expenses
incurred in connection with the preparation, duplication, mailing, printing and
filing of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement,
the Selected Dealer Agreements, Agreement Between Underwriters, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriters in quantities as hereinabove stated; (iii)
the printing, engraving, issuance and delivery of the Securities and
Underwriters' Option Units including any transfer or other taxes payable
thereon; (iv) disbursements and fees of Underwriters' Counsel in connection with
the qualification of the Securities under state or foreign securities or "Blue
Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriters' Counsel fees (exclusive of
filing fees and disbursements) shall equal $25,000 and of which $15,000 has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with one information meeting held in
New York, New York, one tombstone advertisement, at least four bound volumes of
the Offering documents for the Underwriter and its counsel and prospectus
memorabilia; (vi) fees and expenses of the transfer agent; (vii) the fees
payable to the NASD; and (viii) the fees and expenses incurred in connection
with the listing of the Securities on the Nasdaq Stock Market. All fees and
expenses payable to the Underwriters hereunder shall be payable at the Closing
Date or Overallotment Closing Date, as applicable; provided, however, the
Company shall pay such fees and costs in advance of the Closing Date if
requested by the Underwriter. The Underwriters shall be responsible for all of
its own costs of counsel.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(e) or Section 11, the
Company shall reimburse and indemnify the Underwriter for up to $150,000
out-of-pocket actual expenses reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriter of which the Underwriter acknowledges $[75,000] has been
paid prior to the date hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Underwriter a non-accountable expense allowance equal to [_____ percent (__%)]
of the gross proceeds received by the Company from the sale of the Firm
Securities, $[75,000] of which has been paid to date to the Underwriter. The
Company will pay the remainder of the non-accountable expense allowance on the
Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
In the event the Underwriter elects to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriter on the Overallotment Closing Date (by certified or bank
18
cashier's check or, at the Underwriters' election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to [three
percent (3%)] of the gross proceeds received by the Company from the sale of the
Overallotment Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Overallotment Closing Date, if any, as if they had been made on and as of
the Closing Date or each Overallotment Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Overallotment Closing Date, if any, of
the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Overallotment Closing Date, if any, of each of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have be declared effective by
the Commission not later than 5:30 P.M., New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Underwriter, and, at Closing Date and each Overallotment Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated to the knowledge of the Company by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Underwriters' Counsel. If the Company has elected to rely upon Rule 430A of the
Rules and Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Underwriter of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriters' opinion, and the opinion of its counsel is
material or omits to state a fact which, in the Underwriters' opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Underwriters'
reasonable opinion, or the opinion of its counsel is material, or omits to state
a fact which, in the Underwriters' reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) The Company's registration statement pursuant to the Exchange
Act on Form 8-A has been declared effective by the Commission.
(d) At the Closing Date and the Overallotment Closing Date, the
Underwriter shall have received the favorable opinion of Ellenoff, Grossman,
Schole & Cyruli, LLP, counsel to the Company, dated the Closing Date, or
Overallotment Closing Date, as the case may be, addressed to the Underwriter and
in form and substance satisfactory to Underwriters' Counsel, to the effect that:
19
(i) The Company: (A) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect upon the
Company; and (C) to the best of counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation or modification of
any such license or qualification which revocation or modification would have a
material adverse effect upon the Company.
(ii) The Registration Statement, each Preliminary Prospectus
that has been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules and other
financial and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and Regulations and the conditions for use of a registration statement
on Form SB-2 have been satisfied by the Company.
(iii) To the best of such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest of a character
required to be disclosed in the Registration Statement in any corporation,
partnership, joint venture, trust or other business entity;
(iv) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus as of the date
indicated therein, under the caption "Capitalization". The Securities,
Underwriters' Purchase Option and the Underwriters' Option Units conform or upon
issuance will conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and all shares of capital stock are fully paid and non-assessable; the
holders thereof are not, except by reason of their own conduct or acts, subject
to personal liability by reason of being such holders, and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company. The Securities to be sold by the Company hereunder,
the Underwriters' Purchase Option to be sold by the Company under the
Underwriters' Purchase Option Agreement and Underwriters' Option Units have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and conform
or upon issuance will conform to the description thereof contained in the
Prospectus; are not subject to any preemptive or other similar rights of any
stockholder of the Company; that, to such counsel's knowledge, the holders of
the Securities and Underwriters' Option Units shall not be personally liable for
the payment of the Company's debts solely by reason of being such holders except
as they may be liable by reason of their own conduct or acts; and that the
certificates representing the Units, Underwriters' Purchase Option and
Underwriters' Option Units are in due and proper legal form. Upon delivery of
the Units to the Underwriter against payment therefor as provided for in this
Agreement, the Underwriter (assuming they are bona fide purchasers within the
meaning of the Uniform Commercial Code) will acquire good title to the Units,
free and clear of all liens, encumbrances, equities, security interests and
claims.
(v) Each of the Registration Statements and the Exchange Act
Registration Statement has been declared effective under the Act, and, if
applicable, filing of all
20
pricing information has been timely made in the appropriate form under Rule
430A, and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and to the best of
such counsel's knowledge, no proceedings for that purpose have been instituted
or are pending or threatened or contemplated under the Act;
(vi) To the best of such counsel's knowledge, (A) there are
no material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations;
(vii) This Agreement, the Underwriters' Purchase Option
Agreement, the Warrant Agreement between the Company, the Warrant Agent and
Representative and the Financial Consulting Agreement have each been duly and
validly authorized, executed and delivered by the Company, and assuming that
each is a valid and binding agreement of the Underwriter, as the case may be,
constitutes a legally valid and binding agreement of the Company, enforceable as
against the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the Company of
this Agreement, the Underwriters' Purchase Option Agreement, the Warrant
Agreement or the Financial Consulting Agreement, nor its performance hereunder
or thereunder, nor its consummation of the transactions contemplated herein or
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, nor the
issuance of the Securities pursuant to this Agreement, conflicts with or will
conflict with or results or will result in any material breach or violation of
any of the terms or provisions of, or constitutes or will constitute a material
default under, or result in the creation imposition of any material lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company except to the extent such event will not
have a material adverse effect upon the Company pursuant to the terms of, (A)
the Certificate of Incorporation or By-Laws of the Company, (B) to the best
knowledge of such counsel, any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument that is material to the Company to which the Company is
a party or by which it is bound or to which its properties or assets (tangible
or intangible) are subject, or any indebtedness, or (C) to the best knowledge of
such counsel, and except to the extent it would not have a material adverse
effect on the Company, any statute, judgment, decree, order, rule or regulation
applicable to the Company or any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, having jurisdiction
over the Company or any of its respective activities or properties.
(ix) No consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body (other
than such as may be
21
required under state securities laws, as to which no opinion need be rendered)
is required in connection with the issuance by the Company of the Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Underwriters' Option Agreement for Units and the Financial
Consulting Agreement by the Company, and the taking of any action by the Company
contemplated hereby or thereby, which has not been obtained;
(x) Except as described in the Prospectus, to the best
knowledge of such counsel, the Company is not in breach of, or in default under,
any material term or provision of any indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and the Company is not in violation of any
material term or provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit, judgment, decree, order,
statute, rule or regulation material to the Company business;
(xi) The statements in the Prospectus under the captions "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xii) To the best of such counsel's knowledge, except as
described in the Prospectus, no person, corporation, trust, partnership,
association or other entity holding securities of the Company has the
contractual right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement;
(xiii) the Securities are eligible for listing on the Nasdaq
Stock Market.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other Underwriters of the Company, Underwriters
of the independent public accountants for the Company and Underwriters of the
Underwriter at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus and made no independent check or verification thereof, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto
at the time such Registration Statement or amendment became effective or the
Prospectus as of the date of such opinion contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Registration Statement or
Prospectus or with respect to statements or omissions made therein in reliance
upon information furnished in writing to the Company on behalf of any
Underwriter expressly for use in the Registration Statement or the Prospectus).
22
In rendering such opinion, such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably
acceptable to Underwriters' Counsel, familiar with the applicable laws of such
other jurisdictions, (B) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers of the Company
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company; provided, that copies of any such
statements or certificates shall be delivered to Underwriters' Counsel if
requested, and (c) upon the opinion of ____________, as patent counsel to the
Company, for the opinions set forth on Exhibit A annexed hereto. The opinion of
such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriter and they are justified in relying thereon.
(d) At each Overallotment Closing Date, if any, the Underwriter
shall have received the favorable opinion of counsel to the Company, each dated
the Overallotment Closing Date, addressed to the Underwriter and in form and
substance satisfactory to Underwriters' Counsel confirming as of the
Overallotment Closing Date the statements made by such firm, in their opinion,
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Overallotment
Closing Date, Underwriters' Counsel shall have been furnished such documents,
certificates and other legal opinions (including, without limitation, legal
opinions related to patent, trademark or Food and Drug matters) as they may
reasonably require and request for the purpose of enabling them to review or
pass upon the matters referred to in subsection (c) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(f) Prior to the Closing Date and each Overallotment Closing Date,
if any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or the business activities of the Company, whether or not in the
ordinary course of business, from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus; (ii) there shall have
been no transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness for
money borrowed, except as described in the Prospectus; (iv) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall have been pending or to its knowledge
threatened against the Company, or affecting any of its properties or businesses
before or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
23
(g) At the Closing Date and each Overallotment Closing Date, if
any, the Underwriter shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Overallotment Closing Date, as
the case may be, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are, in all material respects, true and correct, as if made on
and as of the Closing Date or the Overallotment Closing Date, as the case may
be, and the Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Overallotment Closing Date, as the
case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
any such material fact may be corrected in the Final Prospectus; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment Closing Date, as the case may
be, other than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (B) the Company has not paid or declared
any dividends or other distributions on its capital stock; (C) the Company has
not entered into any material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of the
Company; (E) the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; (F) there is no litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Units.
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
24
(h) By the Closing Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Underwriters, from Xxxxx Xxxxxxxx, LP.
(i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) stating that it is their opinion that the combined
financial statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of Xxxxx Xxxxxxxx,
LP, with respect to the financial statements and supporting schedules included
in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim combined financial
statements of the Company (with an indication of the date of the latest
available unaudited interim combined financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention that would lead them to believe that (A) the unaudited
combined financial statements and supporting schedules of the Company included
in the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited combined financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five (5) days
prior to the Effective Date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company, or any decrease in
the stockholders' equity or net current assets or net assets of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from
___________, ___, to a specified date not more than five (5) days prior to the
Effective Date of the Registration Statement, there was any decrease in net
revenues, net earnings or increase in net earnings per common share of the
Company, in each case as compared with the corresponding period beginning
___________, ____ other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the Effective Date of the Registration Statement, the amount of
liabilities of the Company (including a breakdown of commercial paper and notes
payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of Securities, percentages of revenues and earnings, statements and
other financial information
25
pertaining to the Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(vi) stating that they have not during the immediately
preceding five (5) year period brought to the attention of the Company's
management any "weakness", as defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,
" in the Company's internal controls;
(vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration Statement and
the Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the applicable
accounting requirements of Rule ll-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of that information; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably request.
(j) At the Closing Date and each Overallotment Closing Date, the
Underwriter shall have received from Xxxxx Xxxxxxxx, LP, a letter, dated as of
the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause
(iii) of subsection (i) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriter and deemed
to be a part of the Registration Statement pursuant to Rule 430A(b) and have
found such amounts, percentages and financial information to be in agreement
with the records specified in such clause (iii).
(k) On each of Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriter for their accounts
the appropriate number of Securities against payment therefore.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the Overallotment
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
26
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters, including specifically each person who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all losses, claims, damages, expenses
or liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriters or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus (except that the indemnification contained in this
paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriters or to the benefit of any person controlling the
Underwriter on account of any loss, claim, damage, liability or expense arising
from the sale of the Firm Securities by the Underwriter to any person if a copy
of the Prospectus, as amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included Securities of the Company issued
or issuable upon exercise of the Underwriters' Unit Purchase Option; or (iii) in
any application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless in any case above such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter, through its Counsel, directly or through the Representative,
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) The Underwriters, severally but not jointly, to indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the Registration Statement, and each other person, if any, who controls
the Company within the meaning of the Act to the same extent as the foregoing
indemnity from the Company to the Underwriter but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Underwriter by such Underwriter expressly for use in such Preliminary
27
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, or in any such application, directly related to the
transactions effected by the Underwriters in connection with this Offering;
provided that such written information or omissions only pertain to disclosures
in the Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any such application, provided,
further, that the liability of each Underwriter to the Company shall be limited
to the product of the Underwriters' discount or commission for the Units
multiplied by the number of Units sold by the Underwriters hereunder. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities set forth under the heading "Underwriting" and the
stabilization legend and the last paragraph of the cover page in the Prospectus
have been furnished by the Underwriter expressly for use therein and any
information furnished by or on behalf of the Underwriter filed in any
jurisdiction in order to qualify the Securities under State Securities laws or
filed with the Commission, the NASD or any securities exchange constitute the
only information furnished in writing by or on behalf of the Underwriter for
inclusion in the Prospectus and the Underwriters hereby confirm that such
statements and information are true and correct and shall be on each Closing
Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them that are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
28
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriter are the indemnified party the
relative benefits received by the Company on the one hand, and the Underwriter,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts and commissions received by the Underwriter
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subdivision (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
29
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Overallotment Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters, the Company, or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriters.
9. Effective Date
This Agreement shall become effective at _____ a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Underwriters, in their discretion, shall release the Securities for the sale to
the public, provided, however that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination
(a) The Representative shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material adverse change in the
conditions or prospects of the Company, involving a change not contemplated by
the Registration Statement, or (viii) if there shall have been such material
adverse general market conditions as in the Underwriters' reasonable judgment
would make it inadvisable to proceed with the offering, sale or delivery of the
Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
(c) Substitution of Underwriters. If any Underwriter or
Underwriters shall default in its or their obligations to purchase Units
hereunder and the aggregate numbers of Units which
30
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of shares underwritten, the
other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Units which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters shall so default and the aggregate number of Units with respect to
which such default or defaults occur is more than ten percent (10%) of the total
number of Units underwritten and arrangements satisfactory to the Underwriters
and the Company for the purchase of such Units by other persons are not made
within forty-eight (48) hours after such default, this Agreement shall
terminate.
If the remaining Underwriters or substituted Underwriters are
required hereby or agree to take up all or part of the Units of a defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
number of Units to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 10 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant to Section 5 and except for the provisions of Section 7.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Overallotment Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Overallotment Closing Date, the
Underwriter may at the Underwriters' option, by notice from the Underwriter to
the Company, terminate the Underwriters' obligations to purchase Securities from
the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5 and Section 7 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Representative at Roan/Xxxxxx Associates, L.P., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxxxx, with a copy to Xxxxxxxxx &
XxXxxxx, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
X. Xxxxxxxx, Esq. Notices to the Company shall be directed to the Company at
___________ _____________, Attention: _________________, with a copy to
Ellenoff, Grossman, Schole & Cyruli, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxxxx Xxxxxxxx, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the several Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be
31
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
14. Governing Law/Construction/Jurisdiction
(a) This Agreement shall be construed in accordance with the laws
of the State of New York, without giving effect to conflict of laws.
(b) The Company (a) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (b) waives
any objection which the Company may have now or hereafter to the venue of any
such suit, action or proceeding, and (c) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or procedure. Each of the Company and the Underwriter further
agrees to accept and acknowledge service of any and all process which may be
served in any suit, action or proceeding in the New York State Supreme Court for
the Southern District of New York, and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the company in any such suit,
action or proceeding. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. Waiver. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
17. Assignment. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
18. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
19. Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
20. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding agreement among us.
32
Very truly yours,
BIODELIVERY SCIENCES INTERNATIONAL, INC.
By:___________________________________
Name: Xx. Xxxxxxx X. X'Xxxxxxx
Title: Chief Executive Officer
Confirmed and accepted as of the date first above written
XXXX-XXXXXX ASSOCIATES, L.P.
General Partner
By:_____________________________
Name: Xxxxx Xxxxxx
Title: President
33
SCHEDULE I
Underwriters
Roan/Xxxxxx Associates, L.P.
SCHEDULE II
Warrant Agent
American Stock Transfer and Trust Company
EXHIBIT A
Patent Counsel Opinion
[Form of Opinion of Issuer's Patent Counsel]
[Date]
Xxxx Xxxxxx Associates LP
As representative of the several
Underwriters named in Schedule A
x/x 00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: BioDelivery Sciences Incorporated
Gentlemen:
We have acted as patent counsel for BioDelivery Sciences, Inc., a
Delaware corporation (the "Company"), in connection with the sale by the Company
and purchase of [2,000,000] units, of the Company (the "Units") by the several
Underwriters listed in Schedule A to the Underwriting Agreement, dated
____________, among the Company and Xxxx Xxxxxx Associates LP, as representative
of the several Underwriters named therein (the "Underwriting Agreement"). The
opinion is being furnished pursuant to Section ____ of the Underwriting
Agreement. All defined terms not defined herein shall have the meanings ascribed
to them in the Underwriting Agreement.
Specifically, we have represented the Company with respect to patents and
patent applications as set forth in Registration Statement. All opinions
expressed herein are based solely on the present actual knowledge of the persons
in this firm who have devoted substantive attention to the representation of the
Company.
It should be recognized that opinions of patent counsel of the type
referred to below rely on determinations of factual issues and determinations of
complex issues of law and technology in an area where many issues have yet to be
resolved. By statute, inventions are patentable in the United States unless
patentability is precluded by facts or circumstances such as the prior work and
prior publications of others, among other things. Hence, opinions regarding the
issues of novelty and nonobviousness underlying patentability require literature
searches and other investigations of the state of the relevant art and involve
subjective judgments as to whether, in view of the level of skill possessed by
those working in the art, the invention claimed in the patent would have been
obvious to one having ordinary skill in that art at the time of the invention.
We have undertaken no such searches or analyses for the specific purpose of
rendering the following opinions.
We are of the opinion that:
1. To the best of our knowledge, the statements in the Registration
Statement and the Prospectus under the captions "Risk Factors
___________________________ and "Business - Licenses, Patents and Proprietary
Information" (collectively, the "Intellectual Property Sections") are accurate
and fair summaries of the legal matters referred to therein.
2. The Company owns all patents, trademarks, trademark registrations,
service marks, service xxxx registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Prospectus as being owned
by them.
3. To the best of our knowledge, there are no pending or threatened
actions, suits or proceedings against or affecting any patents, patent licenses,
trademarks, service marks, trade names, copyrights, mask works, technology,
know-how or other proprietary intellectual property rights ("Intellectual
Property") owned or used by the Company or necessary to conduct the business now
or proposed to be conducted by it as described in the Prospectus, to which the
Company is a party or to which any of the properties of the Company is subject,
except as disclosed in the Registration Statement and Prospectus.
4. To the best of our knowledge, the Company has not received any
notice of infringement or alleged infringement of the Company or conflict with
asserted rights of others with respect to any Intellectual Property, except as
disclosed in the Registration Statement.
5. To the best of our knowledge, the pending patent applications
referred to in the Prospectus have been duly and properly filed with the U.S.
Patent and Trademark Office.
6. Nothing has come to our attention that causes us to believe that the
Intellectual Property Sections in the (a) Registration Statement or any
amendment thereof, at the time the Registration became effective, contained any
untrue statement of material fact or omitted to state any material fact required
to be stated therein to make the statements therein not misleading, or (b) the
Prospectus, as amended or supplemented as of its date and as of the date hereof,
included any untrue statement of material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
With respect to patents and patent applications discussed in the
Registration Statement and filed and prosecuted by our firm, we have relied on
information provided to us by or on behalf of the named inventors concerning
matters such as their knowledge of prior art, the disclosure required to enable
others to make and use the respective inventions, and the best mode contemplated
by the named inventors for carrying out their respective inventions. We have
endeavored to notify the named inventors of their duty of candor toward the U.S.
Patent and Trademark Office, but we have not made, nor are we in a position to
make, an independent investigation of such technical information provided to us
by the inventors. In only a few instances was a preliminary patentability search
performed at or around the time the invention was first disclosed to this firm,
and those cases where such a search was performed, it was only a limited search.
We make no representations as to the completeness of these searches. No further
search for prior art references has been conducted at this time in connection
with the rendering of the present opinion. Relevant prior art references may
exist which could affect the patentability of the patents and patent
applications described in the Registration Statement. There is no assurance that
patents will ultimately be granted from these applications or that, if patents
are granted, they will ultimately be upheld in litigation if challenged or that
they will have commercially significant scope.
The information provided in this letter is current as of the present date.
We assume no obligation to provide you with information that may hereafter be
brought to our attention, whether or not deemed material.
Very truly yours,
__________________________________
