EXHIBIT 1
2,000,000 SHARES
LIFE MEDICAL SCIENCES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
May 2, 1996
WEDBUSH XXXXXX SECURITIES INC.
As Representative of the several Underwriters
c/o Wedbush Xxxxxx Securities Inc.
0000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
Life Medical Sciences, Inc., a Delaware corporation ("Company") proposes to
issue and sell to you and the other firms and corporations named in Schedule A
attached hereto ("Underwriters," which term shall also include any underwriter
substituted as provided in Section 9 hereof), for which you are acting as
representative ("Representative"), 2,000,000 shares of the Company's Common
Stock, $.001 par value per share ("Primary Shares"). In addition, the Company
proposes to grant to the Underwriters an option to purchase, for the purpose of
covering over-allotments, up to an additional 300,000 shares of the Company's
Common Stock, $.001 par value per share ("Over-Allotment Shares"). The Primary
Shares and the Over-Allotment Shares are collectively referred to below as the
"Shares".
You have advised the Company that the Underwriters purpose to make a public
offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
(hereinafter defined) has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representative, acting on behalf of the
several Underwriters, shall enter into an agreement substantially in the form of
Exhibit A hereto ("Pricing Agreement"). The Pricing Agreement may take the form
of an exchange of any standard form of written telecommunication between the
Company and the Representative and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Shares will be governed by
this Agreement, as supplemented by the Pricing Agreement. From and after the
date of the execution and delivery of the Pricing Agreement, this Agreement
shall be deemed to incorporate the Pricing Agreement.
The Company agrees with the several Underwriters as set forth below.
1. Representations, Warranties and Covenants of the Company. The Company
represents and warrants to, and the Company also covenants and agrees with, each
of the Underwriters as follows:
(a) The Company has filed with the Securities and Exchange Commission
("Commission") a registration statement on Form S-1 (No. 333-2588), including a
preliminary prospectus, relating to the Shares and such amendments to the
registration statement and supplements to the prospectus included therein as may
have been required to the date hereof. The Company will file with the Commission
either: (i) prior to effectiveness of such registration statement, a further
amendment thereto, including a form of prospectus, and if required after
effectiveness of such registration statement, a final prospectus in accordance
with Rule 424(b) of the rules and regulations ("Rules and Regulations") under
the Securities Act of 1933, as amended ("Securities Acts"), or (ii) after
effectiveness of such registration statement, a final prospectus in accordance
with Rules 430A and 424(b) of the Rules and Regulations. Such registration
statement (as amended, if applicable) and the prospectus constituting a part
thereof (including, in each case, financial statements, exhibits and all
documents incorporated or deemed to be incorporated by reference therein and the
information, if any, deemed to be part thereof pursuant to Rule 430A(b) of the
Rules and Regulations) are hereinafter referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if the prospectus
filed by the Company pursuant to Rule 424(b) differs from the prospectus on file
at the time the Registration Statement becomes effective, the term "Prospectus"
shall refer to the Rule 424(b) prospectus and the term "preliminary prospectus"
shall refer to any predecessor prospectus.
(b) To the best of the Company's knowledge, the Commission has not issued
an order preventing or suspending the use of any preliminary prospectus. Each
such preliminary prospectus has conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations and has not
included any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. At the date of this Agreement, when the Registration Statement
becomes effective and at the Closing Date (as defined below) (i) the
Registration Statement and Prospectus, and any amendments or supplements
thereto, will contain all statements that are required to be stated therein by
the Securities Act and the Rules and Regulations and will in all material
respects conform to the requirements of the Securities Act and the Rules and
Regulations, (ii) the Registration Statement will not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, and (iii) the Prospectus will not include any untrue statement of a
material fact and will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that the Company makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
finished to the Company by the Underwriters expressly for use therein, it being
understood that the only information supplied by the Underwriters in writing for
use in the Registration Statement, the preliminary prospectus or the Prospectus
are set forth in the last paragraph on the cover of the Prospectus, the
paragraphs under the table under the heading "Underwriting," the paragraphs
under the headings "Underwriting--Over-Allotment Option" and
"Underwriting--Warrants", and the second paragraph under the
"Underwriting--Lock-Up Agreements" in the Prospectus and that no information has
been omitted from the Registration Statement in reliance on information supplied
by the Underwriters in writing.
(c) The financial statements of the Company set forth in the Registration
Statement and Prospectus present fairly, in an material respects, the financial
condition of the Company as of the dates indicated and the results of operations
and cash flows of the Company for the periods therein specified in conformity
with generally accepted accounting principles consistently applied throughout
the periods
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involved (except as otherwise stated therein). No other financial statements of
the Company are required by Form S-1 or otherwise to be included in the
Registration Statement or Prospectus.
(d) Xxxxxxx X. Xxxxxx & Company, the accountants who have expressed their
opinion with respect to certain of the financial statements included in the
Registration Statement, ("Company Accountants") are independent accountants as
required by the Securities Act and the Rules and Regulations.
(e) The Company has been duly organized and is validly existing in good
standing under the laws of its jurisdiction of incorporation. The Company has
all requisite power and authority to own, lease and operate its properties and
to conduct its business as is described in the Prospectus. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is required, except where the
failure to so qualify will not have a material adverse effect on the Company.
(f) The authorized, issued and outstanding capital stock of the Company is
as set forth under the caption "Capitalization" in the Prospectus and the issued
and outstanding shares of Common Stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable, were issued in
compliance in all material respects with all applicable federal and state
securities laws, and were not issued in violation of or subject to any
preemptive rights, rights of first refusal or similar rights. The sale of the
Shares has been duly authorized and after issuance of and payment for the Shares
in accordance with this Agreement, the Shares will be validly issued, fully paid
and nonassessable and conform to the description thereof contained in the
Prospectus. The Underwriters will acquire good and marketable title to the
Shares, free and clear of any adverse claims whatsoever. Except as disclosed in
the Prospectus, the Company does not make outstanding any options or warrants to
purchase, any preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into shares of its capital stock, or
any contracts or commitments to issue or sell such shares, or any such options,
warrants, rights, convertible securities or obligations.
(g) The Company has filed an application to list the Shares on the Nasdaq
National Market ("Nasdaq National Market") and has received notification that
the listing has been approved, subject to notice of issuance of the Shares.
(h) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary course of
business, which is material to the business of the Company, and there has not
been any change in the capital stock of, or any incurrence of short-term or
long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company.
(i) Except as set forth in the Prospectus, there is not pending or, to the
best knowledge of the Company, threatened, any action, suit or proceeding to
which the Company is a party, before or by any court, governmental agency or
body or arbitration body, that could reasonably be expected to result in any
material adverse change in the financial condition, business, properties,
prospects, or results of operations of the Company, or might materially and
adversely affect the properties or assets thereof.
(j) There are no contracts or documents that are required to be filed as
exhibits to the Registration Statement by the Securities Act or by the Rules and
Regulations that have not been so filed. Any contract, agreement, instrument,
lease or license required to be described in the Registration Statement or the
Prospectus has been properly described therein in all material respects.
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(k) Except as set forth in the Prospectus, the Company owns or has valid
leasehold interests in all material properties and assets required for the
operation of its business as now conducted or as proposed to be conducted as set
forth in the Registration Statement and prospectus. The Company has good and
marketable title to all properties and assets owned by it material to its
business subject, except as set forth in the Prospectus, to no lien, mortgage,
pledge, charge or encumbrance. All leases to which the Company is a party are
valid, subsisting and enforceable and no material default by the Company has
occurred and is continuing thereunder, and the Company enjoys peaceful and
undisturbed possession under an such leases to which it is a party as lessee.
(l) The Company has full right, power and authority to enter into this
Agreement and the Pricing Agreement and to perform all of its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the Pricing Agreement by the Company does not and will not
violate, breach or conflict with (i) the Certificate of Incorporation or Bylaws
of the Company or (ii) any agreement to which the Company is a party or by which
the Company or any of its properties is bound, excluding any violation, breach
or conflict which would not have a material and adverse effect on the Company or
its properties, business, prospects or financial condition or on the
consummation of the transactions contemplated hereby; or (iii) any statute or
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties. No consent, approval,
authorization or order of, or filing with, any court or governmental agency or
body is required in connection with the transactions contemplated hereby except
as may be required under the Securities Act or state securities or "Blue Sky"
laws. This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms; and when executed
and delivered by the Company, the Pricing Agreement will constitute a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
(m) The Company has an necessary consents, approvals, authorizations,
orders, registrations, qualifications, licenses and permits ("Governmental
Authorizations") of and from all public, regulatory or governmental agencies and
bodies, to own, lease and operate its properties and conduct its business as now
being conducted and as described in the Registration Statement and the
Prospectus, excluding any Governmental Authorization where the failure to have
obtained such Governmental Authorization would not have a material and adverse
effect on the Company or its properties, business, prospects or financial
condition or on the consummation of the transactions contemplated hereby, and no
such consent, approval authorization, order, registration, qualification,
license or permit contains a materially burdensome restriction not adequately
disclosed in the Registration Statement and the Prospectus. The Company is in
compliance in all material respects with all local state and Federal laws, rules
and regulations including, but not limited to, environmental laws and
regulations governing the use, storage, discharge, handling, emission,
generation, manufacture and disposal of toxic substances, hazardous materials,
waste and other substances or products used in or resulting from the buses of
the Company.
(n) Except as provided for in this Agreement, the Company has not taken and
will not take, directly or indirectly, any action designed to cause or result
in, or which constitutes or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of shares of the Common Stock of
the Company to facilitate the sale or resale of the Shares.
(o) Except as set forth in the Prospectus, the Company owns or possesses
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights, technology and know-how necessary to conduct the
businesses as now conducted by the Company as described in the Prospectus, and,
except as disclosed in the Prospectus, the Company has not received any notice
of infringement of or conflict with (or knows of such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which,
individually or in the aggregate, could reasonably be expected to result in any
material adverse effect upon the financial condition, business, properties,
prospects, or results of operations of the
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Company, and, except as disclosed in the Prospectus and to the knowledge of the
Company, the Company does not in the conduct of its business as now conducted as
described in the Prospectus, infringe or conflict with any right or patent of
any third party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the Company,
where such infringement or conflict could reasonably be expected to result in
any material adverse effect upon the financial condition, business, properties,
prospects or results of operations of the Company.
(p) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (1) transactions are executed
in accordance with management's general or specific authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(q) Neither the Company nor, to the Company's knowledge, any other party is
in violation or breach of, or in default with the passage time, with respect to
complying with any material provision of any contract, agreement, instrument,
lease, license, arrangement, or understanding which is material to the Company
and each such contract, agreement, instrument, lease, license, arrangement, and
understanding is in full force and is the legal, valid, and binding obligation
of the Company, and, to the Company's best knowledge, the other parties thereto
and is enforceable against the Company, as applicable, and, to the Company's
best knowledge, against the other parties thereto in accordance with its terms.
The Company is not a party to or bound by any contract, agreement, instrument,
lease, license, arrangement, or understanding, or subject to any charter or
other restriction, which has had or is reasonably expected in the future to have
a material adverse effect on the financial condition, business, properties,
prospects, or results of operations, of the Company. The Company is not in
violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation or Bylaws.
(r) Except as described in the Prospectus, the Company does not own any
shares of capital stock or any other securities of any corporation or have any
equity interest in any firm, partnership, association or other entity or
subsidiary.
(s) Except as described in the Prospectus, no holder of securities of the
Company has any rights to the registration of securities of the Company because
of the filing of the Registration Statement or otherwise in connection with the
sale of the Shares contemplated hereby.
(t) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
(u) The Company has filed all necessary federal, and all material state and
foreign income and franchise tax returns and has paid all taxes shown thereon as
due, and the Company has no knowledge of any tax deficiency which has been or
might be asserted against the Company which would materially and adversely
affect the business or properties of the Company, taken as a whole; to the
Company's knowledge, all tax liabilities are adequately provided for on the
books of the Company.
(v) The Company has obtained from each of its stockholders listed on
Schedule B hereto a written agreement in the form of Exhibit C attached hereto
("Lockup Agreement") to the effect, subject to certain permitted transfers set
forth in the Lockup Agreement, that they will not offer to sell, sell assign or
otherwise transfer or dispose of any shares of Common Stock or securities
convertible into or exchangeable for, or any rights to purchase or acquire,
Common Stock, for a period of 180 days after the effective date of the
Registration Statement, without the prior written consent of the Representative.
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(w) The Company has not, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution in violation of law or (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(x) The Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering. No person holds a right of first refusal or other similar right to act
as underwriter or agent in connection with the offering of the Shares.
(y) Except as previously disclosed in writing by the Company to the
Representative, no officer, director or principal stockholder (including,
without limitation, any stockholder holding five percent or more of the
Company's outstanding Common Stock on a fully diluted basis) of the Company has
any National Association of Securities Inc. ("NASD") affiliation.
(z) The Warrant Agreement in the form of Exhibit B ("Warrant Agreement")
has been duty authorized and, when issued and delivered pursuant to this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with its terms. The execution, delivery and performance of the
Warrant Agreement by the Company will not violate, breach or conflict with the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which the Company or any of its properties is bound
or any statute or order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its properties; and no
consent, approval, authorization or order of, or filing with, any court or
governmental agency or body is required in connection with the transactions
contemplated hereby except as may be required under the Securities Act or state
securities or "Blue Sky" laws. The shares of Common Stock issuable upon exercise
of the Warrants have been reserved for issuance upon the exercise of the
Warrants and when issued in accordance with the terms of the Warrant Agreement,
will be duly and validly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
2. Sale and Purchase of the Shares.
(a) The Company hereby agrees to sell the Primary Shares to the several
Underwriters as set forth in Schedule A attached hereto, and the several
Underwriters, in reliance upon the representations, warranties and agreements
herein contained, but subject to the conditions hereinafter stated, agree,
severally and not jointly, to purchase from the Company at the place and the
time specified below, the respective aggregate numbers of Primary Shares set
forth in Schedule A opposite their respective names plus any additional Shares
which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 2(b) hereof, at a price set forth in the Pricing
Agreement.
(b) In addition, on the basis of the representations and warranties herein
contained, upon not less than five days' written notice from the Representative
to the Company, the Company agrees to sell to the Underwriters (but only for the
purpose of covering over-allotments in the sale of the Primary Shares), all or
any portion of the Over-Allotment Shares, as specified by the Representative in
such notice, at the purchase price set forth in the Pricing Agreement. The
Over-Allotment Shares may be purchased on the Closing Date or at any time or
times thereafter so long as the notice to purchase is given within a period of
45 days following the effective date of the Registration Statement.
Over-Allotment Shares shall be purchased by each Underwriter in the proportion
which the number of Primary Shares set opposite the name of each Underwriter in
Schedule A hereto bears to the total number of Primary Shares. No Over-Allotment
Shares shall be delivered to or for the accounts of the Underwriters unless the
Primary Shares
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shall be simultaneously delivered and paid for or shall theretofore have been
delivered and paid for as herein provided.
(c) The respective purchase obligation of each Underwriter shall be subject
to such adjustments as the Representative may in its absolute discretion make.
3. Terms of Offering and Authority to Use Prospectus. The terms of the
public offering by the Underwriters of the Shares to be purchased by them shall
be as set forth in the Registration Statement and the Prospectus. The Company
authorized the Representative to use preliminary prospectuses and to make them
available for use by prospective Underwriters and dealers and authorize the
Underwriters and all dealers acquiring Shares from an Underwriter to use the
Prospectus (as amended or supplemented, if the Company shall have furnished any
amendments or supplements thereto) in connection with the sale of the Shares
until the earlier of completion of the public offering or the 90th day following
effectiveness of the Registration Statement.
4. Payment and Delivery.
(a) Payment for the Primary Shares which the Underwriters agree to purchase
hereunder shall be made to the Company by bank cashier's check or checks payable
in Los Angeles Clearing House funds at the offices of Xxxxxx, Xxxx & Xxxxxxxx,
Jamboree Center, 0 Xxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000, against delivery to the
Representative for the respective accounts of the several Underwriters of the
Primary Shares in the form of certificates for the securities comprising the
Primary Shares. The date and time of such delivery and payment shall take place
at 7:00 am., Los Angeles time on the following applicable date (unless postponed
in accordance with the provisions of Section 9 hereof): (i) if the Company has
not elected to rely on Rule 430A, on May 8, 1996; (ii) if the Company has
elected to rely on Rule 430A, the third business day after the date on which the
Pricing Agreement is executed and delivered by the Company or (iii) at the
place, time, date (not later than the third or fourth business day after the
date under clause (i) or (ii), as applicable (as permitted under Rule 15c6-1
under the Securities Exchange Act of 1934, as amended ("Exchange Act") agreed
upon by the Representative and the Company. The date and time of this payment
and delivery (which may be postponed as provided in Section 9 hereof) are
sometimes referred to below as the "First Closing Date".
(b) Payment for the Over-Allotment Shares which the Underwriters have the
right to purchase hereunder shall be made to the Company by bank cashiers check
or checks payable in Los Angeles Clearing House funds at the office specified in
the immediately preceding paragraph at the time or times and on the date or
dates specified in the written notice or notices delivered by the Representative
against delivery for the respective accounts of the several Underwriters of the
Over-Allotment Shares in the form of certificates for the securities comprising
the Over-Allotment Shares. The dates and times of these payments and deliveries
are herein singularly or collectively sometimes referred to as the "Second
Closing Date." The term "Closing Date" refers to both the First Closing Date and
the Second Closing Date.
(c) You, individually and not as Representative of the Underwriters, may
(but shall not be obligated to) make payment to the Company for Shares to be
purchased by any Underwriter whose check shall not have been received by you at
the date of payment therefor for the account of that Underwriter. Any payment by
you shall not relieve that Underwriter from any of its obligations hereunder.
(d) The certificates for the Shares shall be registered in the name or
names and shall be in the denominations you, as Representative, at least three
fun business days prior to the First Closing Date, in the case of the Primary
Shares, and at least three full business days prior to the Second Closing Date,
in the case of the Over-Allotment Shares, may request. The Company agrees to
cause certificates for the Shares to be delivered pursuant to this Agreement at
your offices, at the offices of The Depository Trust Company, New York, New
York, or at such other places as may be designated by you as Representative, and
to be made available for checking and packaging at one of the above offices or
such other places as may be designated by you as the Representative at least one
full business day prior to the First Closing
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Date in the case of the Primary Shares, and at least one full day prior to the
Second Closing Date, in the case of the Over-Allotment Shares.
5. Conditions of the Underwriters' Obligations. The several obligations of
the Underwriters hereunder are subject to the following conditions:
(a) The Registration Statement shall have become effective under the
Securities Act not later than (i) 2:00 p.m., Los Angeles time, on the day
following the date of this Agreement or (ii) such other time and date, but not
later than 2:00 p.m., Los Angeles time, on the second day following the date of
this Agreement, as may be approved by you as Representative; and, at the Closing
Date, no stop order suspending the effectiveness of the Registration Statement
or the qualifications of the Shares shall have been issued and no proceedings
for that purpose shall be pending before the Commission or any state securities
or "Blue Sky" commissioner or authority. If the Company has elected not to rely
on Rule 430A, the initial public offering price per share for the Shares and the
purchase price per share for the Shares to be paid by the several Underwriters
shall be agreed upon and set forth in the Pricing Agreement, which shall be
dated the date hereof, and an amendment to the Registration Statement (as
hereinafter defined) containing such per share price information shall be filed
before the Registration Statement becomes effective. If the Company has elected
to rely upon Rule 430A, the information concerning the initial public offering
price of the Shares and price-related information shall have been agreed upon
and set forth in the Pricing Agreement and transmitted to the Commission for
filing pursuant to Rule 424(b) within the prescribed period and the Company will
provide evidence satisfactory to the Representative of such timely filing (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rules 430A and
424(b)).
(b) At each Closing Date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct with the same
effect as if made on and as of such Closing Date and the Company shall have
performed all of the obligations and complied with all of the conditions
hereunder on its part to be performed or complied with on or prior to such
Closing Date; (ii) there shall have been, since the respective dates as of which
information is given, no material adverse change in the financial condition,
properties, prospect, results of operations, capital stock, long term debt or
general affairs of the Company from that set forth in the Registration Statement
and the Prospectus, except such changes which the Registration Statement
indicates might occur after the effective date of the Registration Statement,
and the Company shall not have incurred any material liabilities or material
obligations, direct or contingent, or entered into any material transaction,
contract or agreement not in the ordinary course of business other than as
referred to or contemplated in the Registration Statement; and, (iii) except as
set forth in the Prospectus, no action, suit or proceeding shall be pending or
threatened against the Company which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board or administrative agency
in the United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the financial condition, business,
properties, prospects or results of operations of the Company, and you shall
have received at each Closing Date, a certificate of the principal executive
officer and the principal financial or accounting officer of the Company, dated
as of such Closing Date, evidencing compliance with the provisions of this
subsection (b), and confirming the accuracy of the representations and
warranties of the Company set forth in Section 1 hereof and confirming that all
conditions set forth herein have been met as of such date.
(c) No Underwriter shall have discovered and disclosed to the Company prior
to either Closing Date that the Registration Statement or the Prospectus or any
amendment or supplement thereto, contains an untrue statement of a fact that in
the reasonable opinion of the Representative is material or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, not misleading.
(d) On each Closing Date you shall have received a signed opinion, dated as
of such date, of Xxxxxx, Xxxx & Xxxxxxxx, counsel to the several Underwriters
("Underwriters' Counsel"), with respect to
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the sufficiency of all corporate proceedings and other legal matters relating to
this Agreement and the transactions contemplated hereby, and the Company shall
have furnished to such counsel such documents as they may have reasonably
requested for the purpose of enabling them to pass upon such matters.
(e) (i) On each Closing Date you shall have received the signed opinion,
dated as of such date, of Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx, counsel to the
Company ("Company Counsel"), in form and substance satisfactory to counsel for
the several Underwriters, together with signed or photostatic copies thereof for
each of the other Underwriters substantially to the effect set forth on Exhibit
D attached hereto.
(ii) On each Closing Date you shall have received the signed opinion,
dated as of such date, of Shiboleth, Yisraeli, Roberts, Yerushalmi, Xxxxxx
& Holender, special Israeli counsel to the Company ("Company Israeli
Counsel"), in form and substance satisfactory to Underwriters Counsel as to
such matters as such counsel may reasonably request, together with signed
or photostatic copies thereof for each of the other Underwriters.
(iii) On each Closing Date you shall have received the signed opinion,
dated as of such date, of Hymen Xxxxxx & XxXxxxxx, P.C., special regulatory
counsel to the Company ("Company Regulatory Counsel"), in form and
substance satisfactory to the Underwriters Counsel as to such matters as
such counsel may reasonably request, together with signed or photostatic
copies thereof for each of the other Underwriters.
(iv) On each Closing Date you shall have received the signed opinion,
dated as of such date, of XxXxxxx Xxxxxxx Xxxxxx Xxxxxxxx & Xxxx LLP,
patent counsel to the Company ("Company Patent Counsel"), in form
reasonably satisfactory to the Underwriters Counsel as to such matters as
such counsel may reasonably request, together with signed or photostatic
copies thereof for each of the other Underwriters.
(f) At the time of the signing of this Agreement, on each Closing Date and,
if the Company elects to rely on Rule 430A, on the date of the Prospectus, you
shall have received a signed letter, dated, respectively, as of each such date,
from the Company Accountants, in form and substance satisfactory to you as to
such matters as you may reasonably request, together with, in each case, signed
or photostatic copies thereof for each of the other Underwriters. There shall
not be any changes (increases or decreases) specified in the letters referred to
in this subparagraph which, in the reasonable judgment of the Representative,
are materially adverse with respect to the financial position or results of
operations of the Company and shall be deemed to constitute a failure of the
Company to comply with the conditions to the obligations of the Underwriters
hereunder.
(g) On or prior to the effective date of the Registration Statement, the
Shares shall have been duly authorized for inclusion in the Nasdaq National
Market.
(h) On or prior to the First Closing Date, the Company shall execute and
deliver to the Representative the Pricing Agreement.
(i) If, at the time of effectiveness of the Registration Statement, any
information shall have been omitted therefrom in reliance upon Rule 430A then
immediately following the execution and delivery of the Pricing Agreement, the
Company will prepare, and file or transmit for filing with the Commission in
accordance with such Rule 430A and Rule 424(b), copies of an amended prospectus,
or, if required by such Rule 430A, a post-effective amendment to the
Registration Statement (including an amended prospectus), containing all
information so omitted.
(j) The Company shall have executed and delivered to the Representative the
Warrant Agreement at the First Closing Date.
9
(k) All proceedings taken at or prior to each Closing Date in connection
with the sale of the Shares shall be reasonably satisfactory in form and
substance to you and the Underwriters Counsel, and at the time of signing this
Agreement and on the Closing Date, you and such counsel shall have received each
and every additional document, letter, opinion, certificate or other item dated
and executed in a manner reasonably satisfactory to you and such counsel, as you
or such counsel may reasonably request in connection with the Prospectus, the
Registration Statement, the offer and sale of the Shares hereunder, or
proceedings at the Closing Date.
If any of the conditions herein provided for in this Section 5 shall not
have been fulfilled as of the date indicated, all obligations of the several
Underwriters under this Agreement may be cancelled by the Representative by
notifying the Company of such cancellation on or prior to the applicable Closing
Date.
6. Covenants of the Company.
6.1 The Company covenants and agrees as follows:
(a) To use its best efforts to bring about the effectiveness of the
Registration Statement and not, at any time, whether before or after the
effective date, file any amendment to the Registration Statement or
Prospectus or supplement thereto of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel
reasonably shall have objected or which is not in compliance with the
Securities Act and the Rules and Regulations, and as soon as the Company is
advised thereto, to advise the Representative and confirm this advice in
writing (i) when the Registration Statement has become effective and (ii)
of the issuance by the Commission or any state securities or "blue sky"
commissioner or authority of any order suspending the effectiveness of the
Registration Statement or any qualification of the Shares or prohibiting
the sale of the Shares or the initiation or threatening of any proceedings
for any such purpose.
(b) To deliver, on or before the effective date of the Registration
Statement and from time to time thereafter, for such period as in the
opinion of the Underwriters Counsel a prospectus is required by the
Securities Act to be delivered in connection with sales of Shares by the
Underwriter or dealer, without charge, to the Representative and to send to
the several Underwriters, at such office or offices as the Representative
may designate, as many copies of the preliminary prospectus and Prospectus
as the Representative may reasonably request.
(c) To furnish the Representative, without charge, one executed copy
of the Registration Statement (including exhibits) and of any amendments
thereto and to furnish the Representative, without charge, a reasonable
number of conformed copies of the Registration Statement (excluding
exhibits) and of any amendments thereto.
(d) To furnish the Representative with a copy of each proposed
amendment or supplement before amending or supplementing the Registration
Statement or the Prospectus.
(e) If during the period specified in Section 6.1(b) above, any event
shall occur as a result of which it shall be necessary to amend or
supplement the Prospectus in order to make the statements therein, in light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, forthwith to prepare and furnish, at its own expense, to the
Underwriters and to dealers (whose names
10
and addresses the Representative will furnish to the Company) to whom
Shares may have been sold by the Representative and to any other dealers
upon request, either amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented, will not,
in light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading.
(f) To make generally available to the Company's security holders, as
soon as practicable, but not later than fifteen months after the end of the
Company's current fiscal quarter, an earnings statement (which need not be
audited) covering a period of twelve months beginning after the effective
date of the Registration Statement, which earnings statement shall satisfy
the provisions of the last paragraph of Section 1l(a) of the Securities
Act.
(g) For a period of three years following the date of this Agreement,
to supply to the Representative, and to each other Underwriter who may so
request in writing, copies of such financial statements and other periodic
and special reports as the Company may from time to time furnish generally
to holders of any class of its securities, and to file with the Commission
on each report required under the Exchange Act, and to furnish to the
Representative a copy of each such report which it files with the
Commission.
(h) To cooperate with the Representative in an endeavor to qualify the
Shares for offer and sale under the "Blue Sky" laws of such jurisdictions
of the United States as the Representative may request, and to pay, or
reimburse if paid by the Representative, fees and disbursements of
Underwriters Counsel and all other expenses and filing fees in connection
therewith; provided, however, that the Company shall not be required to
file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation as doing business in any
jurisdiction.
(i) For a period of three years following the date of this Agreement,
to comply to the best of its ability with the Securities Act, the Rules and
Regulations and the Exchange Act, and the rules and regulations thereunder
so as to permit the continuance of sales and dealings in the Common Stock
of the Company; provided, however, that the foregoing obligation shall no
longer be applicable if the Company ceases to exist or becomes a
wholly-owned subsidiary of another entity by reason of an acquisition of
all of the Company's outstanding securities by an unaffiliated entity
pursuant to any merger, exchange or tender offer or other purchase,
transfer or reorganization ("Change of Control").
(j) To apply the net proceeds from the sale of the Shares in
accordance with the statement made under "Use of Proceeds" in the
Prospectus and, if applicable, to comply with Rule 463 under the Securities
Act
(k) To supply the Representative with copies of all correspondence to
and from and all documents issued to and by the Commission in connection
with the registration of the Shares under the Securities Act.
(1) The Company will use its best efforts to maintain such listing of
the Company's Common Stock on the Nasdaq National Market for at least three
years from the date of this Agreement; provided, however, that the
foregoing obligation shall no longer be applicable upon the occurrence of a
Change of Control.
11
(m) For a period of three years from the effective date of the
Registration Statement the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to review (but
not audit) the Company's financial statements for each of the first three
(3) fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's 10-Q quarterly report and the
mailing of quarterly financial information to stockholders; provided,
however, that the foregoing obligation shall no longer be applicable upon
the occurrence of a Change of Control.
6.2 The Company covenants and agrees to pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, all costs and expenses incident to
the entry into and performance under this Agreement by the Company, and without
limiting the generality of the foregoing, all costs and expenses incident to (a)
the issuance, purchase, sale and delivery of the Shares to the Underwriters, (b)
the registration of the Shares and preparing, printing and shipping the
Registration Statement and the underwriting documents, (c) the filing fees of
the Commission, the National Association of Securities Dealers, Inc. (including
fees for Nasdaq National Market) and state securities and "blue sky"
commissioners and authorities in connection with the Registration Statement and
this Agreement, and the reasonable fees, disbursements and expenses of counsel
in connection with state securities or "blue sky" matters, (d) the fees and
disbursements of counsel and accountants for the Company, (e) the furnishing to
the Representative and the other Underwriters of copies of the Registration
Statement, any preliminary prospectus, the Prospectus, this Agreement, the Blue
Sky Survey (preliminary and final), and of the documents required by paragraphs
(b), (c), (d) and (e) of Section 6.1, to be so furnished, including costs of
preparing, printing and shipment, (f) the preparation, printing, binding,
mailing, delivery, filing and distribution by the Company of all supplements and
amendments to the Prospectus required by paragraph (e) of Section 6.1, (g) the
furnishing to the Representative and the other Underwriters of all reports and
financial statements required by paragraphs (f) and (g) of Section 6.1, and (h)
the holding of informational meetings related to the offer and sale of the
Shares, other than the Underwriters' expenses for air transportation and hotel
accommodations. Additionally, the Company agrees to pay to the Representative a
non-accountable expense allowance equal to $150,000, of which $50,000 has
previously been paid and the remaining $100,000 to be paid at the closing of the
purchase of the Primary Shares by the Underwriters. The Representative will pay
the fees and costs of its counsel (except as otherwise set forth above) and the
costs of "tombstone" advertisements to be published in financial newspapers. If
the sale of any of the Shares to the several Underwriters pursuant to this
Agreement is not consummated because the offering is abandoned by the Company
for any reason, or by the Underwriters (a) if there is a material adverse change
in the Company's business, financial condition, results of operations or
prospectus, (b) if there is an adverse change in securities market conditions,
or (c) if the Underwriters discover, in the course of their due diligence of the
Company, material facts or circumstances with respect to the Company that render
the offering impracticable, then the Company will reimburse the several
Underwriters for all of their out-of-pocket expenses (including reasonable fees
and expenses of counsel) incurred by the Underwriters in connection with this
Agreement or in investigating, preparing to market or marketing the Shares.
6.3 The Company covenants and agrees that it will not offer to sell, sell
or otherwise dispose of any shares of Common Stock of the Company, or securities
convertible or exchangeable for, any rights to purchase or acquire, Common
Stock, other than as provided in this Agreement, as contemplated by the
Registration Statement, pursuant to any employee benefit plans approved by the
Company's Board of Directors or in connection with any acquisition of or
business combination with an unaffiliated entity so long as the fair value of
such securities issued by the Company is not less than the greater of the
initial public offering price of the Shares sold by the Underwriters and the
fair market of the Company's Common Stock on the date of such transaction, for a
period of 180 days after the effective date of the Registration Statement,
without the prior written consent of the Representative. The Company also will,
at or prior to the first Closing Date, furnish you with the Lockup Agreements of
the stockholders listed on Schedule B hereto.
12
7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Underwriter
(including specifically each person who may be substituted for an Underwriter as
provided in Section 9 hereof) and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Act or any other statute or at common law or otherwise, and except as provided
below, will reimburse each of the Underwriters and each such controlling person,
if any, for any legal or other expenses incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, in
any preliminary prospectus or in the Prospectus or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus or the omission or alleged omission to
state therein a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, unless
the untrue statement or omission or alleged untrue statement or omission was
made in such Registration Statement, preliminary prospectus or Prospectus in
reliance upon and in conformity with information furnished in writing to the
Company by you or any Underwriter through you expressly for use therein. The
foregoing indemnity with respect to any untrue statement contained in or
omission from a preliminary prospectus shall not inure to the benefit of the
Underwriter from whom the person asserting any such loss, liabilities, claims,
damages or expenses purchased shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented, if
the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of the Underwriters to such person, if such is
required by law, at or prior to the written confirmation of the sale of such
Shares to such person and the untrue statement contained in or omission from
such preliminary prospectus was corrected in the Prospectus (or the Prospectus
as amended or supplemented). This indemnity will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter will severally, and not jointly, indemnify and hold
harmless the Company, each of its directors, each of its of officers who have
signed the Registration Statement, each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act from and against any and
all losses, claims, damages, expenses or liabilities, joint or several, to which
they or any of them may become subject under the Securities Act or any other
statute or at common law or otherwise, and, except as provided below, will
reimburse the Company and each such director, officer or controlling person for
any legal or other expenses incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, in
any preliminary prospectus or in the Prospectus or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, but only insofar as any such untrue statement or omission or
alleged untrue statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company by you or any Underwriter
through you expressly for use therein. This indemnity will be in addition to any
liability which the Underwriters may otherwise have.
(c) Any party that proposes to assert the right to be indemnified under
this Section 7 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the
13
omission so to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions of this Section 7 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnifying party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assuring the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld), but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of each indemnified party, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters contemplated by
this Section 7 (whether or not any indemnified party is a party thereto), unless
such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding.
(d) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any 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 Securities Act may be required on the
part of any indemnified party, then the Company and any such Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
so that all such Underwriters are responsible in the aggregate for that portion
of such losses, claims, damages or liabilities as is determined by multiplying
the total amount of such loses, claims, damages or liabilities times the
difference between the public offering price and the purchase price to the
Underwriter and dividing the product thereof by the public offering price, and
the Company shall be responsible for the portion of such losses, claims, damages
or liabilities as determined by multiplying the total amount of such losses,
claims, damages or liabilities times the purchase price to the Underwriters and
dividing the product thereof by the public
14
offering price; provided, however, that the contribution of each contributing
Underwriter shall not be in excess of its proportionate share (based on the
ratio of the number of Shares purchased by such Underwriter to the number of
Shares purchased by all contributing Underwriters) of the portion of such
losses, claims, damages or liabilities for which the Underwriters are
responsible and the contribution of the Company shall not be in excess of their
proportionate share (based on the ratio of the number of Shares sold by the
Company to the total number of Shares sold) of the portion of such losses,
claims, damages or liabilities for which the Company are responsible. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 1l(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any person
having liability under Section 11 of the Securities Act other than the Company
and the Underwriters. If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Company and any Underwriter, as the
case may be, shall be entitled to contribution from the Company and/or the
Underwriters, as the case may be, to the full extent permitted by law.
(e) It is agreed that the only information supplied by the Underwriters in
writing for use in the Registration Statement, the preliminary prospectus or the
Prospectus are set forth in the last paragraph on the cover of the Prospectus,
the paragraphs under the table under the heading "Underwriting", the paragraphs
under the headings "Underwriting--Over-Allotment Option" and "Underwriting-
Warrants," and the second paragraph under the "Underwriting--Lock-Up Agreements"
in the Prospectus and that no information has been omitted from the Registration
Statement in reliance on information supplied by the Underwriters in writing.
8. Effective Date and Termination.
(a) This Agreement shall become effective at 10:00 am., Los Angeles time,
on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering of any
of the Shares by the Underwriters after the Registration Statement becomes
effective, whichever time shall first occur. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement, which is subsequently published, relating to the
Shares, or the time at which the Shares are first generally offered by the
Underwriters to dealers by letter or telegram, whichever shall first occur. You
may prevent this Agreement from becoming effective without liability of any
party to any other party, except as otherwise provided in Sections 8(b) and (c),
by giving notice as indicated below in Section 8(b) prior to the time when this
Agreement would otherwise become effective as herein provided.
(b) This Agreement, except for Sections 6.2, 7, 1O, 11 and 12, may be
terminated by the Representative by notifying the Company at any time at or
prior to the First Closing Date, and the option referred to in Section 2(b)
hereof, if exercised, may be cancelled at any time prior to the Second Closing
Date, if, in the Representative's judgment, payment for and delivery of the
Shares is rendered impracticable or inadvisable by reason of (i) the Company
having sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree, (ii) trading in securities on the
New York Stock Exchange, the American Stock Exchange or Nasdaq National Market
having been suspended or limited, (iii) material governmental restrictions
having been imposed on trading in securities generally, (iv) a banking
moratorium having been declared by Federal or California or New York state
authorities, (v) an outbreak of major international hostilities or other
national or international calamity having occurred, (vi) the passage by the
Congress of the United States or by any state legislative body, of any act or
measure, or the adoption or proposed adoption of any orders, rules, legislation
or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is believed likely by
the Representative to have a material adverse impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered hereby, (vii) any material adverse change having occurred,
since the respective dates as of which information is given in the Prospectus,
in the financial condition, business, properties, prospects or results of
operations of the Company, whether or
15
not arising in the ordinary course of business which, in your judgment, makes it
impracticable or inadvisable to offer or deliver the Shares on the terms
contemplated by the Prospectus, or (viii) any of the conditions specified in
Section 5 hereof not having been fulfilled or waived in writing by the
Representative, at or prior to the Closing Date, when and as required by this
Agreement to be fulfilled.
(c) If this Agreement shall be terminated pursuant to any of the provisions
hereof, except as provided in Sections 6.2 and 7, the Company shall not be under
any liability to any Underwriter nor shall any Underwriter be under any
liability to the Company, except that no Underwriter which shall have failed or
refused to purchase the Shares agreed to be purchased by it hereunder, without
some reason sufficient hereunder to justify its cancellation or termination of
its obligations hereunder, shall be relieved of liability to the Company or to
the other Underwriters for damages occasioned by its default.
9. Default of Underwriters. If one or more of the Underwriters shall fail
or refuse (other than for a reason sufficient to justify the termination of this
Agreement) to purchase on the First Closing Date or the Second Closing Date the
aggregate number of Primary Shares or Over-Allotment Shares agreed to be
purchased by such Underwriter or Underwriters and the aggregate number of
Primary Shares or Over-Allotment Shares agreed to be purchased by the
Underwriter or Underwriters shall not exceed 10% of the total number of Primary
Shares or Over-Allotment Shares (as the case may be) to be sold hereunder to the
Underwriters, then each of the non-defaulting Underwriters shall be obligated to
purchase these Primary Shares or Over-Allotment Shares on the terms herein set
forth in proportion to their respective obligations hereunder. In that case, the
Representative and the Company shall have the right to postpone the First
Closing Date or the Second Closing Date (as the case may be) for a period of not
more than seven days in order that necessary changes and arrangements may be
effected.
If one or more of the Underwriters shall fall or refuse (other than for a
reason sufficient to justify the termination of this Agreement) to purchase on
the First Closing Date or the Second Closing Date the aggregate number of
Primary Shares or Over-Allotment Shares agreed to be purchased by such
Underwriter or Underwriters and the aggregate number of Primary Shares or
Over-Allotment Shares agreed to be purchased by such Underwriter or Underwriters
shall exceed 10% of the total number of Primary Shares or Over-Allotment Shares
(as the case may be) to be sold hereunder to the Underwriters, then the non-
defaulting Underwriters shall have the right to purchase, or procure one or more
Underwriters reasonably acceptable to the Company, to purchase, in such
proportions as they may agree upon and upon the terms herein set forth, the
Primary Shares or Over-Allotment Shares which such defaulting Underwriter or
Underwriters agreed to purchase, and this Agreement shall be carried out
accordingly. If such other Underwriters do not exercise this right within
twenty-four hours after receiving notice of the default, then the Company shall
be entitled to an additional period of twenty-four hours within which to procure
another party or parties satisfactory to the Representative to purchase or agree
to purchase these Primary Shares or Over-Allotment Shares on the terms herein
set forth. In any such case, the Representative and the Company shall have the
right to postpone the First Closing Date or the Second Closing Date (as the case
may be) for a period of not more than seven days in order that necessary changes
and arrangements may be effected. If this paragraph becomes applicable and
neither the non-defaulting Underwriters nor the Company shall make arrangements
within the period stated for the purchase of the Primary Shares or
Over-Allotment Shares which the defaulting Underwriter or Underwriters agreed to
purchase, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter to the Company and without liability on the part of
the Company except as provided in Sections 6.2 and 7. The provisions of this
Section 9 shall not in any way affect the liability of any defaulting
Underwriter to the Company arising out of the default.
10. Representations and Agreement to Remain in Effect. The expense,
reimbursement and indemnification agreements contained in Sections 6, 7 and 8
shall survive any termination of this Agreement; and the representations,
warranties and covenants of the Company set forth in this Agreement shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of any of the Underwriters, the Company, any controlling person,
director or officer of the Company or the Underwriters, and (ii) delivery,
acceptance of and payment for the Shares under this Agreement.
11. Parties in Interest. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and their respective successors and
assigns, to the extent expressed herein, for the
16
benefit of persons controlling any of the Company, or any of the Underwriters,
directors and officers of the Company and their respective successors and
assigns, and no other person, partnership, association or corporation shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of Shares from any
Underwriter merely because of such purchase.
12. Notices, Headings, Applicable Law. Except as otherwise provided in this
Agreement, all statements, requests, notices and other communications hereunder
shall be in writing and shall be mailed, delivered, telegraphed or sent by
facsimile transmission and confirmed to the Representative at the address set
forth above, attention: Investment Banking Division (facsimile number: (213)
688-6642); and if to the Company to Xx. Xxxxxxx Xxxxxxxxx, Chairman of the
Board of Directors, Life Medical Sciences, Inc., 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx,
Xxx Xxxxxx 00000 (facsimile number: (000) 000-0000). Any party may change the
address at which it is to receive communications hereunder upon notice to the
other parties as provided above. The headings in this Agreement have been
inserted as a matter of convenience and reference and are not a part of this
Agreement. The Agreement shall be construed in accordance with the internal
laws, and not the laws pertaining to choice or conflict of laws, of the State of
California.
17
Please confirm that the foregoing correctly sets forth the agreement among
us.
Sincerely yours,
LIFE MEDICAL SCIENCES, INC.
By:/s/Xxxxxxx Xxxxxxxxx
-------------------------------
Xx. Xxxxxxx Xxxxxxxxx
Chairman of the Board of Directors
Confirmed and Accepted as of the
date first above written.
WEDBUSH XXXXXX SECURITIES INC.
For itself and as Representative
of the several Underwriters.
By:/s/Xxxxx X. Xxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxx
Managing Director
18
SCHEDULE A
UNDERWRITERS
Number of
Underwriter Shares
Wedbush Xxxxxx Securities Inc. .............................. 1,300,000
Xxxxxxxxx & Xxxxx LLC ....................................... 50,000
Advest, Inc. ................................................ 30,000
Cruttenden Xxxx Incorporated ................................ 30,000
Everen Securities, Inc. ..................................... 30,000
Fechtor, Xxxxxxxx & Co., Inc. ............................... 30,000
Xxxxxxx Xxxxxx Inc. ......................................... 30,000
J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc. ........................... 30,000
Xxxxxx Xxxxxxxxxx Xxxxx Inc. ................................ 30,000
Josepthal Lyon & Xxxx Incorporated .......................... 30,000
Xxxxxx Xxxxxx & Company, Inc. ............................... 30,000
Xxxxxxx & Company, Inc. ..................................... 30,000
Xxxxxx/Hunter Incorporated .................................. 30,000
Pennsylvania Merchant Group Ltd. ............................ 30,000
Sands Brothers & Co. Ltd. ................................... 30,000
Xxxxx & Xxxxxxxxxxxx Inc. ................................... 30,000
The Xxxxxxx Companies Incorporated .......................... 30,000
Xxxxxx, Xxxxxxxx & Company Incorporated ..................... 30,000
Sutro & Co. Incorporated .................................... 30,000
Xxxxxx Xxxxxxx Incorporated ................................. 30,000
Xxx Xxxxxx & Co. ............................................ 30,000
Brookstreet Securities Corporation .......................... 10,000
First Wall Street Corporation ............................... 10,000
GBS Financial Corp. ......................................... 10,000
Xxxxx Xxxxxxxxx, Inc. ....................................... 10,000
XX Xxxxxxxx & Co., Inc. ..................................... 10,000
X.X. Xxxxxx & Co., Inc. ..................................... 10,000
Xxxxxx Xxxxxx Capital Group, LLC ............................ 10,000
Triquest Financial Inc. ..................................... 10,000
Total .................................................... 2,000,000
19
SCHEDULE B
LIST OF SHAREHOLDERS
================================================================================
NAME NUMBER OF SHARES BENEFICIALLY OWNED
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxxx 363,636
--------------------------------------------------------------------------------
Gold, Xxxxxx 109,919
--------------------------------------------------------------------------------
Magar, Inc. 857,500
--------------------------------------------------------------------------------
Marathon Investments 545,455
--------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx 1,397,627
--------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxx 975,825
--------------------------------------------------------------------------------
Xxxxxx, Xxxxxx 30,000
--------------------------------------------------------------------------------
Pines, Eli 45,000
--------------------------------------------------------------------------------
Gold, Xxxx 50,000
--------------------------------------------------------------------------------
Xxxxxx, Xxx 50,000
--------------------------------------------------------------------------------
Xxxx Xxxxxx A. 1,000
--------------------------------------------------------------------------------
Xxxxx, Xxxxxx 300
--------------------------------------------------------------------------------
Xxxxx, X. Xxxxxx 26,850
--------------------------------------------------------------------------------
Xxxx, Xxxxxxx 1,000
--------------------------------------------------------------------------------
Xxxxx, Xxxxx 200
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx 500
--------------------------------------------------------------------------------
Renov, Kalman 26,850
--------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx 500
--------------------------------------------------------------------------------
Xxxxxxx, Xxxx 26,850
--------------------------------------------------------------------------------
Xxxx, Xxxxxx 2,000
--------------------------------------------------------------------------------
Xxxxxxxx, Xxx 5,000
--------------------------------------------------------------------------------
X.X Xxxxx Investment Banking Corp. 8,950
--------------------------------------------------------------------------------
20
EXHIBIT A
2,000,000 SHARES
LIFE MEDICAL SCIENCES, INC.
Common Stock
PRICING AGREEMENT
May 2, 1996
Wedbush Xxxxxx Securities Inc.
as Representative of the Several
Underwriters
c/o Wedbush Xxxxxx Securities Inc.
0000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated May 2, 1996
("Underwriting Agreement") relating to the sale by the Company and the purchase
by the several Underwriters for whom Wedbush Xxxxxx Securities Inc. is acting as
representative ("Representative"), of the above Shares. All terms herein shall
have the definitions contained in the Underwriting Agreement except as otherwise
defined herein.
Pursuant to Section 2 of the Underwriting Agreement, the Company agrees
with the Representative as follows:
1. The initial public offering price per share for the Shares
determined as provided in said Section 2 shall be $6.625.
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $6.625, being an amount equal to the initial
public offering price set forth above less $.46 per share.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms.
Very truly yours,
LIFE MEDICAL SCIENCES,INC.
-----------------------------------
Xx. Xxxxxxx Xxxxxxxxx
Chairman of the Board of Directors
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Wedbush Xxxxxx Securities Inc.
For itself and as Representative
of the several Underwriters
By:
------------------------------
Xxxxx X Xxxxxxxx
Managing Director
EXHIBIT B
[FORM OF REPRESENTATIVE WARRANT]
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THIS SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
UNTIL THE COMMENCEMENT DATE (AS HEREINAFTER DEFINED) THIS WARRANT IS SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AS DESCRIBED IN SECTION 9 HEREOF.
May 8, 1996
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
LIFE MEDICAL SCIENCES, INC.
VOID AFTER 5:00 P.M.. LOS ANGELES TIME, ON MAY 8, 2001,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.
LOS ANGELES TIME, ON THE IMMEDIATELY PRECEDING BUSINESS DAY
No. W-1
THIS CERTIFIES that, for and in consideration of $2,000, WEDBUSH XXXXXX
SECURITIES INC., or its registered assigns (Wedbush Xxxxxx Securities, Inc. or
any such registered assign being referred to herein as to the "Warrantholder"),
is entitled to subscribe for and purchase from Life Medical Sciences, Inc., a
Delaware corporation (hereinafter called the "Company"), at the price of $7.95
per share (such price, as from time to time to be adjusted as hereinafter
provided, being hereinafter called the "Warrant Price"), at any time and from
time to time but not earlier than the Commencement Date (as defined below) or
later than the Expiration Date (as defined below), up to 200,000 fully paid,
nonassessable shares of Common Stock, par value $.001 per share, of the Company
("Common Stock"), subject, however, to the provisions and upon the terms and
conditions hereinafter set forth, including without limitation the provisions of
Section 3 hereof. "Commencement Date" shall mean the first anniversary of the
date hereof. "Expiration Date" shall mean 5:00 P.M., Los Angeles time, on the
fifth anniversary of the date hereof, or if not a Business Day, as defined
herein, at 5:00 P.M., Los Angeles time, on the immediately preceding business
day. "Business Day" shall mean a day other than a Saturday, Sunday or other day
on which banks in the State of California are authorized by law to remain
closed.
SECTION 1. EXERCISE OF WARRANT
(A) EXERCISE PROCEDURES
This Warrant may be exercised, at any time and from time to time but not
earlier than the Commencement Date or later than the Expiration Date, by the
Warrantholder, in whole or in part (but not as to a fractional share of Common
Stock and in no event for less than 100 shares (unless Less than an aggregate of
100
1
shares are then purchasable under all outstanding Warrants held by a
Warrantholder)), by the completion of the subscription form attached hereto and
by the surrender of this Warrant (properly endorsed) at the Company's principal
offices at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 (or at such other
location in the United States as it may designate by notice in writing to the
Warrantholder at the address of the Warrantholder appearing on the books of the
Company). In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the total number of whole shares of
Common Stock so purchased, registered in the name of the Warrantholder, shall be
delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates from the date on which this Warrant was surrendered and if exercise
is pursuant to a cash exercise, payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
(B) CASH OR NET EXERCISE
The Warrantholder may elect to exercise this Warrant by cash exercise or a
net exercise as described below.
(i) In the case of a cash exercise, the subscription form delivered
under this Section l(a) shall be accompanied by payment to the Company of
the Warrant Price, in cash or by certified or official bank check, for each
share being purchased.
(ii) In the case of a net exercise, the Warrantholder may elect to
exercise this Warrant and receive shares on a "net exercise" basis in an
amount equal to the value of this Warrant by delivery of the subscription
form attached hereto and surrender of this Warrant at the principal office
of the Company, in which event the Company shall issue to Holder a number
of shares computed using the following formula:
X = (P)(Y)(A-B)
A
Where: X = the number of shares of Common Stock to be issued to Holder.
P = the percentage of the Warrant being exercised.
Y = the number of shares of Common Stock issuable upon exercise
of this Warrant.
A = the Current Market Price (as determined pursuant to Section
3) of one share of Common Stock.
B = Warrant Price.
2
(C) CONTINGENT EXERCISE
At the election of the Warrantholder, an exercise may be made contingent
upon the closing of the sale of the shares issuable upon such exercise in a
public offering pursuant to a registration statement filed or to be filed by the
Company which registers such shares pursuant to the Securities Act of 1933, as
amended
(D) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant as herein provided such number of shares of Common Stock as shall
then be issuable upon the exercise of this Warrant. The Company covenants that
all shares of Common Stock which shall be so issued, upon full payment of the
Warrant Price therefor or as otherwise set forth herein, shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens,
charges and other adverse interests. Without limiting the generality of the
foregoing, the Company covenants that it will from time to time take all such
action as may be requited to ensure that the par value per share, if any, of the
Common Stock is at all times equal to or less than the effective Warrant Price.
The Company will take all such action as may be necessary to ensure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange or
automated quotation system upon which the Common Stock of the Company may be
listed. The Company will not take any action which results in any adjustment of
the Warrant Price if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed the total
number of shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of first
refusal with respect to shares issuable upon exercise of this Warrant, and there
are no preemptive rights associated with such shares.
(E) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise of
any Warrant shall be made without a charge to the Warrantholder for any issuance
tax in respect thereof, provided that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than that of the Warrantholder.
(F) CLOSING OF BOOKS
The Company will at no time close its transfer books against the transfer
of the shares of Common Stock issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
(G) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.001, of the
Company as authorized on the date hereof, or shares of any class or classes
resulting from any recapitalization or reclassification thereof which are not
limited to any fixed sum or percentage and are not subject to redemption by the
Company and in case at any time there shall be more than one such resulting
class, the shares of each class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
(H) NO FRACTIONAL SHARES
No fractional shares shall be issued upon exercise of this Warrant and no
payment or adjustment shall be made upon any exercise on account of any cash
dividends on the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the provisions of this
Section 1, be delivered upon
3
any such exercise, the Company, in lieu of delivering the fractional share
thereof, shall to the Warrantholder an amount in cash equal to the Current
Market Price of such fractional interest, as determined pursuant to Section 3.
(I) LISTING
Prior to the issuance of any shares of Common Stock upon exercise of this
Warrant, the Company shall secure the listing of such shares of Common Stock
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if and
so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
SECTION 2. ADJUSTMENTS OF NUMBER OF SHARES AND WARRANT PRICE
(a) ADJUSTMENTS
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2. Upon each adjustment of the Warrant Price
for any stock dividend or distribution or any subdivision or combination of the
outstanding shares of the Common Stock as provided in this Section 2, the
Warrantholder shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares (calculated to the nearest
tenth of a share) obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Warrant Price resulting from such adjustment.
(1) If at any time prior to the exercise of this Warrant in full, the
Company shall (A) declare a dividend or make a distribution on the Common Stock
payable in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class); (B) subdivide, reclassify or recapitalize its
outstanding Common Stock into a greater number of shares; (C) combine,
reclassify or recapitalize its outstanding Common Stock into a smaller number of
shares; or (D) issue any shares of its capital stock by reclassification of its
Common Stock (excluding any such reclassification in connection with a
consolidation or a merger), the Warrant Price in effect at the time of the
record date of such dividend, distribution, subdivision, combination,
reclassification or recapitalization shall be adjusted so that the Warrantholder
shall be entitled to receive the aggregate number and kind of shares which, if
this Warrant had been exercised in full immediately prior to such event, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination reclassification or
recapitalization. Any adjustment required by this Section 2 (a)(l) shall be made
successively immediately after the record date, in the case of a dividend or
distribution, or the effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such aggregate
number and kind of shares.
(2) If at any time prior to the exercise of this Warrant in full, the
Company shall make a distribution to all holders of the Common Stock of stock of
a subsidiary or securities convertible into or exercisable for such stock, then
in lieu of an adjustment in the Warrant Price or the number of shares of Common
Stock purchasable upon the exercise of this Warrant, each Warrantholder, upon
the exercise hereof at any time after such distribution, shall be entitled to
receive from the Company, such subsidiary or both, as the Company shall
determine, the stock or other securities to which such Warrantholder would have
been entitled if such Warrantholder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 2, and
the Company shall reserve, for the life of the Warrant, such securities of such
subsidiary or other corporation; provided, however that no adjustment in respect
of dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
4
(3) If at any time prior to the expiration of this Warrant in full, the
Company shall issue rights or Warrants to all holders of Common Stock as such
entitling them (for a period expiring within sixty days after the record date of
the determination of stockholders entitled to receive the same), to subscribe
for or purchase Common Stock at a price per share less than the current market
price per share (as defined in Section 3) on such record date, then, in each
such case the number of shares subject to this Warrant thereafter purchasable
upon the exercise of this Warrant shall be determined by multiplying the number
of shares of Common Stock therefore purchasable upon exercise of each Warrant by
a fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or Warrants, plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or Warrants plus the number
of shares that the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at such current market price. For
purposes of this Section 2(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in full, the
Company shall distribute to all holders of its Common Stock evidence of
indebtedness of the Company or assets of the Company (excluding cash dividends
or distributions out of earned surplus) or rights or Warrants to subscribe for
securities of the Company (excluding those referred to in Sections 2(a)(2) or
(3) above), then in each case the Warrant Price shall be adjusted to a price
determined by multiplying the Warrant Price in effect immediately prior to such
distribution by a fraction, of which the numerator shall be the then Current
Market Price per share of Common Stock on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value (as
determined by the Board of Directors of the Company in good faith) of the
portion of the assets or evidences of indebtedness so distributed or of such
subscription rights or Warrants which are applicable to one share of Common
Stock, and of which the denominator shall be the Market Price per share of
Common Stock; provided, however, that if the then Current Market Price per share
of Common Stock on the record date for determination of stockholders entitled to
receive such distribution is less than the then fair value of the portion of the
assets or evidence of indebtedness so distributed or of such subscription rights
or Warrants which are applicable to one share of Common Stock, the foregoing
adjustment of the Warrant Price shall not be made and in lieu thereof the number
of shares purchasable upon exercise of each Warrant immediately prior to such
distribution shall be adjusted so that the holder of such Warrant shall be
entitled to receive upon exercise of such Warrant the kind and number of assets,
evidence of indebtedness, subscription rights and Warrants (or, in the event of
the redemption of such evidence of indebtedness, subscription rights or
Warrants, any cash paid in respect of such redemption) that such Warrantholder
would have owned or have been entitled to receive after the happening in such
distribution had such Warrant been exercised immediacy prior to the record date
of such distribution.
(5) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($.05)
in such price; provided, however, that any adjustments which by reason of this
Section 2(a)(5) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
2(a) shall be made to the nearest cent or to the nearest one hundredth of a
share, as the case may be. Notwithstanding anything in this Section 2(a) to the
contrary, the Warrant Price shall not be reduced to less than the then existing
par value of the Common Stock as a result of any adjustment made hereunder.
(6) In the event that at any time, as the result of any adjustment made
pursuant to this Section 2(a), the Warrantholder thereafter shall become
entitled to receive any securities other than Common Stock, thereafter the
number of such other securities so receivable upon exercise of any Warrant shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Section 2(a).
(7) For purposes of any computation under this Section 2(a), the Current
Market Price and Market Price per share of Common Stock on any date shall be
deemed calculated as provided in Section 3.
5
(b) NO ADJUSTMENT FOR CASH DIVIDENDS
Except as provided in Section 2(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than a subdivision or combination of
the outstanding Common Stock and other than a change in the par value of the
Common Stock) or in case of any consolidation or merger of the Company with or
into another corporation or other entity (other than a merger with a subsidiary
in which the Company is the continuing corporation and that does not result in
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the class issuable upon exercise of this Warrant) or
in the case of any sale, lease, transfer or conveyance to another corporation or
entity of the property and assets of the Company as an entirety or substantially
as an entirety, the Company shall as a condition precedent to such transaction
cause such successor or purchasing corporation or other entity, as the case may
be, to execute with the Warrantholder an agreement granting the Warrantholder
the right thereafter, upon payment of the Warrant Price in effect immediately
prior to such action, to receive upon exercise of this Warrant the kind and
amount of shares and other securities and property which the Warrantholder would
have owned or have been entitled to receive after the happening of such
reclassification, change, consolidation, merger, sale, or conveyance had this
Warrant been exercised immediately prior to such action. In the event that in
connection with any such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for, or of, a security of Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 2. The provisions of this Section 2(c) shall similarly apply to
successive reclassifications, capital reorganizations, consolidations, mergers,
sales or conveyances.
(d) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any adjustments in
the Warrant Price of the number or kind of the shares purchasable pursuant to
this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued; provided, however, that the Company may, at any
time in its reasonable discretion make any change in the form of Warrant
certificate that it may deem appropriate and that does not affect the substance
thereof. Any Warrant certificate thereafter issued, whether upon registration of
transfer of, or in exchange or substitution for, an outstanding Warrant
certificate may be in the form so changed.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case the
Company shall give written notice thereof, by first-class mail postage prepaid,
addressed to each Warrantholder at the address of such holder as shown on the
books of the Company, which notice shall state the Warrant Price resulting from
such adjustment, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
SECTION 3. CURRENT MARKET PRICE
For any computation of Current Market Price or Market Price under this
Warrant, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily market price per share for the 30
consecutive Trading Days commencing 35 Trading Days before the date in question.
"Market Price" is defined as (i) the closing sale price (or, if no closing sale
price is reported, the closing bid price) of the Common Stock in the
over-the-counter market, and reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or, if the Common Stock is not
quoted on Nasdaq, as reported by the National Quotation Bureau Incorporated;
(ii) in the event that the Common Stock is hereafter listed for trading on one
or more United States national or regional securities exchanges, market price
shall be the closing price on the
6
exchange or system designated by the Board of Directors of the Company as the
principal United States market in which the Common Stock is traded; (iii) if the
Warrantholder elects a net exercise in connection with and contingent upon a
public offering of the shares issuable upon exercise of this Warrant, and if the
Company's registration statement relating to such public offering has been
declared effective by the Securities and Exchange Commission, then market price
shall be the initial "Price to Public" specified in the final prospectus for
such offering, or (iv) if market price cannot be established as described above,
market price shall be the fair market value of the Common Stock as determined by
mutual agreement of the Warrantholder and the Company, and if the Warrantholder
and the Company are unable to agree, at the Company's sole expense, by an
investment banker of national reputation selected by the Company and reasonably
acceptable to the Warrantholder. The term "Trading Day" shall mean a day on
which Nasdaq or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.
SECTION 4 REGISTRATION RIGHTS
(a) DEFINITIONS
As used in this Section 4, the following capitalized terms shall have the
following respective meanings:
"Demand Registration" means a registration of Registration Securities
under Section 4(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Included Registrable Securities" means Registrable Securities
included in a Registration Statement filed under this Section 4.
"Initiating Holders" means any Registration Rights Holder or Holders who
holds or has the right to acquire not less than 25% of the aggregate of (i) all
Warrant Securities issuable under an Warrants outstanding at the time a Demand
Registration is requested and (ii) all Warrant Securities outstanding at such
time.
"Participating Holders" means holders of Included Registrable
Securities.
"Person" means any individual, partnership, joint venture, trust,
corporation, limited liability company or partnership, unincorporated
organization or government or any department or agency thereof.
"Piggyback Registrations" means a registration of Registrable
Securities under Section 4(c).
"Prospectus" means any prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments
and supplements to the Prospectus, including post-effective amendments and
all materials incorporated by reference in such Prospectus.
"Registrable Securities" means any Warrant Securities; provided,
however, that as to any particular security contained in Registrable
Securities, such securities shall cease to be Registrable Securities when
(1) a Registration Statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities
shall have been disposed of in accordance with such Registration Statement;
or (2) they shall have been sold to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act without any restrictions or
limitation on such resale.
"Registration Expenses" means any and all expenses incurred in
connection with any registration or action incident to performance of or
compliance by the Company with Article 6, including, without limitation (1)
all SEC, national securities exchange and NASD registration and filing
fees; all listing fees and all transfer agent fees; (2) all fees and
expenses of complying with state securities or blue sky laws (including the
fees and disbursements of counsel of the underwriters in connection with
blue sky qualification of the Registrable Securities); (3) all printing,
mailing, messenger and delivery expenses; (4) all fees and disbursements of
counsel
7
for the Company and of its accountants, including the expenses of any
special audits and/or "cold comfort" letters required by or incident to
such performance and compliance; and (5) any disbursements of underwriters
customarily paid by issuers or sellers of securities including the
reasonable fees and expenses of special experts retained by the
underwriters in connection with the requested registration.
"Registration Rights Holders" means the holders of any Warrant or
Warrant Securities.
"Registration Statement" means any Registration Statement of the
Company filed or to be filed with the SEC which covers any of the
Registrable Securities pursuant to the provisions of this Section 4,
including all amendments (including post-effective amendments) and
supplements thereto, all exhibits thereto and all material incorporated
therein by reference.
"Representative" means Wedbush Xxxxxx Securities, Inc.
"SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means underwriting discounts and commissions,
brokerage fees and transfer taxes, if any, and fees of counsel or
accountants retained by the holders of Included Registrable Securities to
advise them in their capacity as holders of Included Registrable
Securities.
"Underwriting Agreement" means that certain Underwriting Agreement
dated as of May 2, 1996 by and among the Company and the Representative, as
Representative of the several Underwriters named therein.
"Warrants" means this Warrant and all other Warrants issued to the
Representative pursuant to the Underwriting Agreement, including all
Warrants issued in substitution or exchange thereof.
"Warrant Securities" means any Common Stock or other securities
issuable upon exercise of Warrants.
(b) DEMAND REGISTRATION
(i) If, at any time prior to the Expiration Date, Initiating Holders
request that the Company file a Registration Statement covering Registrable
Securities, as soon as practicable thereafter the Company shall use its best
efforts to file a Registration Statement with respect to all Registrable
Securities that it has been requested to register by any Registration Rights
Holder and obtain the effectiveness of such Registration Statement. The Company
shall also take all other action necessary under federal or state law or
regulation to permit the sale or other disposition pursuant to such Registration
Statement of all Registrable Securities requested to be registered and the
Company shall maintain such compliance with each such federal and state law and
regulation for the period necessary for the Participating Holders to effect the
proposed sale or other disposition of Registrable Securities pursuant to such
Registration Statement. Notwithstanding the foregoing, the Company shall be
entitled to defer a Demand Registration for a period of up to 90 days if and to
the extent that the Company's Board of Directors determines, in good faith, that
such registration would substantially interfere with a pending corporate
transaction.
(ii) Upon receipt of a request for registration from Initiating Holders,
the Company shall promptly give written notice to all other Registration Rights
Holders of its intention to effect a Demand Registration and shall include in
such registration all Registrable Securities held by other Registration Rights
Holders who request such registration within 20 Business Days after such notice
has been given by the Company.
(iii) Any request for a Demand Registration shall specify the aggregate
number of Registrable Securities proposed to be sold by a Registration Rights
Holder and the intended method of disposition.
8
(iv) If any Demand Registration is requested to be in the form of an
underwritten offering, the managing underwriter shall be selected and obtained
by the holders of a majority of the Included Registrable Securities. Such
selection shall be subject to the Company's consent, which consent shall not be
unreasonably withheld.
(v) The Company shall be required to effect a only one registration
pursuant to this Section 4(b). If any Registration Statement fails to be
declared effective by the SEC by reason of a decision by Participating Holders
or the underwriters to withdraw said Registration Statement, or if the
Registration Statement fails to be declared effective or, after being declared
effective, is stop-ordered by the SEC, in either case, for reasons attributable
to a Participating Holder, such Demand Registration shall count for purposes of
the limitation set forth in this Section 4(b)(v). If any Registration Statement
(1) fails to be declared effective by the SEC for any reason (except (a) by
reason of a decision by Participating Holders or underwriters to withdraw said
Registration Statement, or (B) for reasons attributable to any Participating
Holder), or (2) is stop-ordered by the SEC after being declared effective (other
than for reasons attributable to any Participating Holder) such requested
registration shall not count for purposes of the limitation set forth in this
Section 4(b)(v).
(c) PIGGYBACK REGISTRATION
(i) If, at any time or from time to time prior to the second anniversary of
the Expiration Date, the Company proposes to register any of its securities
under the Securities Act on any form for the registration of securities under
the Securities Act, whether or not for its own account (other than a
Registration Statement filed pursuant to Section 4(b) or a registration
statement filed for registration of securities issuable under the Company's
employee benefit plans or in connection with any merger or acquisition), the
Company shall as expeditiously as possible give written notice to all
Registration Rights Holders of the Company's intention to do so and of such
Registration Rights Holders' rights under this Section 4(c). Upon the written
request of any Registration Rights Holder made within 20 Business Days after the
giving of any such notice (which request shall specify the amount of Registrable
Securities intended to be disposed of by such Registration Rights Holder in such
registration), the Company shall include in such Registration Statement the
Registrable Securities which the Company has been so requested to register and
obtain the effectiveness of such Registration Statement. The Company shall keep
such Registration Statement in effect and maintain compliance with each federal
and state law or regulation for the period necessary for Participating Holders
to effect the proposed sale or other disposition of the Included Registrable
Securities.
(ii) If a Piggyback Registration involves an offering by or through
underwriters, then (1) all Participating Holders must sell their Included
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to other selling shareholders and (2) any
Participating Holder may elect in writing, not later than 3 Business Days prior
to the effectiveness of the Registration Statement filed in connection with such
registration, to withdraw such holders Registrable Securities from such
registration.
(iii) If a Piggyback Registration involves an offering by or through
underwriters, the Company, except as otherwise provided herein, shall not be
required to include Registrable Shares therein if and to the extent the managing
underwriters the offering reasonably believes in good faith and advises each
Registration Rights Holder requesting to have Registrable Securities included in
the Company's Registration Statement that such inclusion would materially
adversely affect such offering, provided that (1) if other selling shareholders
without contractual registration rights or with contractual registration rights
subordinate to the rights of the Registration Rights Holders have requested
registration of securities in the proposed offering, the Company will reduce or
eliminate such securities held by such selling shareholders before any reduction
or elimination of Registrable Securities; and (2) any such reduction or
elimination (after taking into account the effect or clause (1)) shall be pro
rata (based on the number of securities sought to be registered) with all other
selling shareholders with contractual registration rights which are not
subordinate to the rights of Registration Rights Holders. After the date hereof,
the Company shall not grant any registration rights with respect to any Company
securities which are not subordinate to the rights of the Registration Rights
Holders without the prior written consent of the holders of a majority of the
Warrant Securities outstanding at the time.
9
(d) REGISTRATION
If and whenever the Company is required to use its best efforts to take
action pursuant to any federal or state law or regulation to permit the sale or
other disposition of any Registrable Securities Warrants in order to effect or
cause the registration of any Registrable Securities under the Securities Act as
provided in this Section 4, the Company shall, as expeditiously as practicable:
(i) prepare and file with the SEC, as soon as practicable within 90 days
after the end of the period within which requests for registration may be given
to the Company (but subject to the provisions for deferral contained in Section
4(b)(i) hereof) a Registration Statement or Registration Statements relating to
the registration on any appropriate form under the Securities Act, which form
shall be available for the sale of the Registrable Securities in accordance with
the intended method or methods of distribution thereof, and use its best efforts
to cause such Registration Statements to become effective; provided that before
filing a Registration Statement or Prospectus or any amendment or supplements
thereto, including documents incorporated by reference after the initial filing
of any Registration Statement, the Company will furnish to the Participating
Holders and the underwriters, if any, copies of all such documents proposed to
be filed, which documents will be subject to the review of the Participating
Holders and the underwriters.
(ii) Prepare and file with the SEC such amendments and post-effective
amendments to a Registration Statement as may be necessary to keep such
Registration Statement effective for a reasonable period not to exceed 180 days;
cause the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Participating Holders as set forth in such Registration
Statement or supplement to such Prospectus.
(iii) Notify the Participating Holders and the managing underwriters, if
any, promptly, and (if requested by any such person) confirm such advice in
writing, (1) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (2) of any request
by the SEC for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (3) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (4) if at any time the
representations and warranties of the Company contemplated by subsection (xiii)
below ceases to be true and correct in all material respects; (5) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; and (6) of
the happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus or any document incorporated therein
by reference untrue or which requires the making of any changes in the
Registration Statement or Prospectus so that they will not contain any untrue
statement or a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(iv) Use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement at the earliest possible moment.
(v) If reasonably requested by the managing underwriters, immediately
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters believe (on advice of counsel) should
be included therein as required by applicable law relating to such sale of
Registrable Securities, including, without limitation, information with respect
to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or "best
efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(vi) Furnish to each Participating Holder and each managing underwriter,
without charge, at least one copy of the Registration Statement and any
post-effective amendment therein, including financial statements
10
and schedules, an documents incorporated therein by reference and all exhibits
(including those incorporated by reference), which copies, in the case of the
managing underwriters, shall be manually signed.
(vii) Deliver to each Participating Holder and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses (including each
preliminary Prospectus) any amendment or supplement thereto as such persons may
reasonably request, and the Company consents to the use of such Prospectus or
any amendment or supplement thereto by each of the Participating Holders and the
underwriters, if any, in connection with the offering and sale of the Included
Registrable Securities covered by such Prospectus or any amendment or supplement
thereto.
(viii) Prior to any public offering of Registrable Securities, cooperate
with the Participating Holders, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Participating Holder or
underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Included
Registrable Securities, provided that the Company will not be required to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action which would subject the Company to general service of process
in any jurisdiction where it is not at the time so subject.
(ix) Cooperate with the holders of Included Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities
to the underwriters.
(x) Use its best efforts to cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities.
(xi) Upon the occurrence of any event contemplated by Section 4(c)(iii)(b)
above, prepare a supplement or post-effective amendment to the applicable
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
(xii) With respect to each issue or class of Registrable Securities, use
its best efforts to cause ad Registrable Securities covered by the Registration
Statements to be listed on each securities exchange or automated quotation
system, if any, on which similar securities issued by the Company are then
listed.
(xiii) Enter into such agreements (including an underwriting agreement) and
take all such other action reasonably required in connection therewith in order
to expedite or facilitate the disposition of such Registrable Securities and in
such connection, if the registration is in connection with an underwritten
offering (1) make such representations and warranties to the underwriters in
such form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested; (2) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions in form, scope and substance shall be reasonably
satisfactory to the underwriters) addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such underwriters; (3)
obtain "cold comfort" letters and updates thereof from the Company's accountants
addressed to the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters by
underwriters in connection with underwritten offerings; (4) set forth in full in
any underwriting agreement entered into the indemnification provisions and
procedures of Section 4(e) hereof with respect to all
11
parties to be indemnified pursuant to said section; and (5) deliver such
documents and certificates as may be reasonably requested by the underwriters to
evidence compliance with clause (1) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company; the above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required hereunder.
(xiv) Make available for inspection by one or more representatives of the
Participating Holders, any underwriter participating in any disposition pursuant
to such registration, and any attorney or accountant retained by such
Participating Holders or underwriter, all financial and other record, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representatives.
(xv) Otherwise use its best efforts to comply with all applicable federal
and state regulations; and take such other action as may be reasonably necessary
to or advisable to enable each Participating Holder and each underwriter to
consummate the sale or disposition in such jurisdiction or jurisdiction in which
any such Participating Holder or underwriter shall have requested that the
Included Registrable Securities be sold.
(xvi) The Company may require each Participating Holder to furnish to the
Company such information regarding the distribution of such securities and such
other information as may otherwise be required by the Securities Act to be
included in such Registration Statement.
(d) FEES AND EXPENSES
The Company shall pay all Registration Expenses and the Participating
Holders shall pay (severally and not jointly and pro rata based upon the number
of Included Registrable Securities held by each Participating Holder) all
Selling Expenses incurred in connection with any registration of Registrable
Securities under this Section 4.
(e) INDEMNIFICATION
(i) In connection with each Registration Statement relating to disposition
of Registrable Securities, the Company shall indemnify and hold harmless each
Participating Holder and each underwriter of Included Registrable Securities and
each Person, if any, who controls such Participating Holder or underwriter
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) against any and all losses, claims, damages and liabilities, joint
or several (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Securities Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided, however, that such indemnity shall not inure to the
benefit of any Participating Holder or underwriter (or any person controlling
such Participating Holder or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) on account of any losses,
claims, damages or liabilities arising from the sale of the Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission was made in such Registration Statement Prospectus or preliminary
prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by such Participating
Holder or underwriter specifically for use therein. The Company shall also
indemnify selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Participating Holders.
This indemnify agreement shall be in addition to any liability which the Company
may otherwise have.
12
(ii) In connection with each Registration Statement, each Participating
Holder shall indemnify, to the same extent as the indemnification provided by
the Company in Section 4(e)(i), the Company, its directors and each officer who
signs the Registration Statement and each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) by only insofar as such losses, claims, damages and liabilities
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which was made in the Registration Statement, the
Prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, in reliance upon and in conformity with information furnished in
writing by such Participating Holder to the Company specifically for use
therein. In no event shall the liability of any Participating Holder hereunder
be greater in amount than the dollar amount of the net proceeds received by such
Participating Holder upon the sale of such Participating Holder's Included
Registrable Securities giving rise to such indemnification obligation.
(iii) Any party that proposes to assert the right to be indemnified
hereunder will, promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 4(e), notify each
such indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 4(e)(i) or 4(e)(ii) shall be available to any party who shall fail to
give notice as provided in this Section 4(e)(iii) if the party to whom notice
was not given was unaware of the proceeding to which such notice related and was
prejudiced by the failure to receive such notice, but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
the indemnifying party from any liability that it may otherwise have to any
indemnified party. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and to the extent that it shall wish, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (1) the employment of counsel by
such indemnified party has been authorized in writing by the indemnifying
parties, (2) the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (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 (3) the indemnifying parties shall
not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnified party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
(iv) In connection with each Registration Statement relating to the
disposition of Registrable Securities, if the indemnification provided for in
subsection 4(e)(i) or 4(e)(ii) hereof is unavailable to an indemnified party
thereunder in respect to any losses, claims damages or liabilities referred to
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of losses, claims, damages or
liabilities referred to in subsection (i) or (ii) of this Section 4(e) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 1l(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any person
having liability under Section 11 of the Securities Act other than the
13
Company and the Participating Holders. If the full amount of the contribution
specified in this paragraph is not permitted by law, then the Company and any
Participating Holder, as the case may be, shall be entitled to contribution from
the Company and/or the Participating Holders, as the case may be, to the full
extent permitted by law.
(v) The indemnity and contribution agreements contained in this Section
4(e) shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Participating Holders, (ii) sale of
any of Registrable Securities or (iii) any expiration of this Warrant.
(vi) Notwithstanding the foregoing provisions of the Section 4(e), to the
extent that the provisions on indemnification and contribution contained in any
underwriting agreement entered into in connection with the underwritten public
offering of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
(f) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934
With a view to making available to the holders of Warrants or Warrant
Securities the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(i) Make and keep available adequate current public information with
respect to the Company.
(ii) File with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act.
(iii) Furnish to any holder of Registrable Securities, forthwith upon
request (i) a written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act,
or that it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), and (in) a copy of the most recent
annual or quarterly report of the Company and such other reports filed under any
rule or regulation of the SEC.
(g) COMPUTATIONS OF CONSENT
Whenever the consent or approval of Registration Rights Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (other than any
Warrantholder deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Registration Rights Holders of such
required percentage.
(h) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES
The Company will not take any action outside the ordinary course of
business, or permit any change within its control to occur outside the ordinary
course of business, with respect to the Registrable Securities which is without
a bona fide business purpose, and which is intended to interfere with the
ability of the Registration Rights Holders to include such Registrable
Securities in a registration undertaken pursuant to this Section 4.
SECTION 5. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the propose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than
regular cash dividends paid out of earned surplus), or any
14
right to subscribe for, purchase or otherwise acquire shares of stock
of any class or any other securities or property, or to receive any
right to sell shares of stock of any class or any other right, or;
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer
of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other
corporation or entity, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act or to a favorable vote of
stockholders, if either is required. Failure to mail or receive such notice or
any defect therein shall not affect the validity of any action with respect
thereto.
SECTION 6. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant Shall not entitle the Warrantholder to any voting rights or
other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall at the request of the
Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest.
SECTION 8. NOTICES
All notices, requests and other communications required or permitted to be
given or delivered hereunder shall be in writing, and shall be delivered, or
shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile. Notices, requests and other
communications to the Warrantholder shall be sent to the Warrantholder at 0000
Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Investment
Banking, facsimile number (000) 000-0000 or to such other address or facsimile
number as shall have been furnished to the Company by notice from such
Warrantholder, and if to the Company, at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxx
Xxxxxx 00000; Attention: President, facsimile number (000) 000-0000, or at such
other address or facsimile number as shall have been furnished to the
Warrantholder by notice from the Company.
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SECTION 9. TRANSFER, ASSIGNMENT EXCHANGE OF WARRANT AND RESTRICTIONS ON TRANSFER
(a) RESTRICTIONS ON TRANSFER
(i) Until the Commencement Date, this Warrant and the underlying shares of
Common Stock which may be acquired upon exercise hereof may not be sold,
transferred, assigned, pledged or hypothecated to any other person or entity
except to any Underwriter that participated in the public offering of shares of
Common Stock of the Company pursuant to the Underwriting Agreement (as defined
in Section 4(a)), and the any bona fide officers or partners thereof. Until the
Commencement Date, any shares of Common Stock acquired upon exercise of this
Warrant shall bear a legend setting forth the foregoing restriction. After the
Commencement Date, this Warrant may be freely transferred or assigned by the
Warrantholder, provided that the Warrant is exercised immediately upon such
transfer, and if not so exercised upon such a transfer, this Warrant shall
lapse. Assignment of this Warrant shall be effected by delivery of the
assignment form attached hereto to the Company at its principal offices.
(ii) Except as otherwise permitted by this Section 9(a)(ii), each Warrant
shall (and each Warrant issued upon transfer or in substitution for any Warrant
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION SUCH ACT."
Except as otherwise permitted by this Section 9(a)(ii), each certificate
for securities issued upon the exercise of any Warrant and each certificate
issued upon transfer of any such security shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or certificate for securities, without a legend, if (1) the
issuance of such securities has been registered under the Securities Act, (2)
such Warrant or such securities, as the case may be, have been registered for
resale under the Securities Act or sold pursuant to Rule 144 under the
Securities Act, or (3) the Warrantholder has received an opinion of counsel (who
may be house counsel for such Warrantholder) reasonably satisfactory to the
Company that such registration is not required with respect to such Warrant or
such securities, as the case may be.
(b) EXCHANGE OF WARRANT
This Warrant may be split-up, combined or exchanged for another Warrant or
Warrants containing the same terms to purchase a like aggregate number of
securities. If the Warrantholder desires to split-up, combine or exchange this
Warrant, the Warrantholder shall make such request in writing delivered to the
Company at its principal office and shall surrender to the Company this Warrant
and any other Warrants to be so split-up, combined or exchanged. Upon any such
surrender for a split-up, combination or exchange, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Warrantholder to purchase upon exercise a fraction of a share of Common
Stock or a fractional Warrant.
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(c) TREATMENT WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant, the
Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
an purposes and shall not be affected by any notice to the contrary.
SECTION 10. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
SECTION 11. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 12. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the State
of California without regard to conflict of law principles.
SECTION 13. HEADINGS
The headings in this Warrant are for purposes of reference only and shall
not limit or otherwise affect any of the terms hereof.
SECTION 14. BINDING EFFECT
This Warrant shall insure to the benefit of and shall be binding upon the
Company and the Warrantholder and their respective heirs, legal representatives,
successors and assigns.
SECTION 15. NO INCONSISTENT AGREEMENTS
The Company will not on or after the date of this Warrant enter into any
agreement with respect to its securities which is inconsistent with the rights
granted to the Warrantholder in this Warrant or otherwise conflicts with the
provisions hereof. The rights granted to the Warrantholder hereunder do not in
any way conflict with and are not inconsistent with the rights granted to
holders of the Company's securities under any other agreements.
SECTION 16. ENTIRE AGREEMENT
This Warrant is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein This Warrant supersedes all prior agreements and understandings
between the parties with respect to such subject matter (other than warrants
previously issued by the Company to the Warrantholder).
SECTION 17. ATTORNEYS' FEES
In any action or proceeding brought to enforce any provisions of this
Warrant, or where any provisions hereof is validly assumed as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees and
disbursements in addition to its costs and expenses and any other available
remedy.
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IN WITNESS WHEREOF, the Company and the Warrantholder have executed this
Warrant on and as of the day and year first above written.
Life Medical Sciences, Inc.,
a Delaware corporation
By:__________________________________________
Xx. Xxxxxxx Xxxxxxxxx
Chairman of the Board of Directors
Attest:
_____________________
(Corporate Secretary)
Wedbush Xxxxxx Securities Inc.
By:___________________________________
___________________________________
(Printed Name and Title)
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