EXHIBIT 1.1
2,200,000 Shares of Common Stock
DISCOVERY LABORATORIES, INC.
UNDERWRITING AGREEMENT
March 29, 2004
BEAR, XXXXXXX & CO. INC.
As Representative of the
several Underwriters named in
Schedule I attached hereto (the "Representative")
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies/Gentlemen:
Discovery Laboratories, Inc., a corporation organized and existing under
the laws of Delaware (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 2,200,000 shares (the
"Shares") of its common stock, par value $.001 per share (the "Common Stock").
The Shares are more fully described in the Registration Statement and Prospectus
referred to below. Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") is acting as lead
manager (the "Lead Manager"). In connection with the offering and sale of the
Shares contemplated herein (the "Offering") the Company hereby agrees with the
Underwriters as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-111360), and amendments thereto, and related preliminary prospectuses for
the registration promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), of the Shares which registration statement, as so amended
(including post-effective amendments, if any), has been declared effective by
the Commission and copies of which have heretofore been delivered to the
Underwriters. The registration statement, as amended at the time it became
effective, including the prospectus, financial statements, schedules, exhibits
and other information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A or Rule 434(d) promulgated
under the Securities Act, is hereinafter referred to as the "Registration
Statement." If the Company has filed or is required pursuant to the terms hereof
to file a registration statement pursuant to Rule 462(b) promulgated under the
Securities Act registering additional shares of Common Stock (a "Rule 462(b)
Registration Statement"), then, unless otherwise specified, any reference herein
to the term "Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement. Other than documents incorporated by reference therein
and a Rule 462(b) Registration Statement, which, if filed, becomes effective
upon filing, no other document with respect to the Registration Statement has
heretofore been filed with the Commission. All of the Shares have been
registered under the Securities Act pursuant to the Registration Statement or,
if any Rule 462(b) Registration Statement is filed, will be duly registered
under the Securities Act with the filing of such Rule 462(b) Registration
Statement. No stop order suspending the effectiveness of either the Registration
Statement or the Rule 462(b) Registration Statement, if any, has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission. The Company, if required by the Securities Act and the rules and
regulations promulgated under the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") by the Commission (the "Rules and
Regulations"), proposes to file a prospectus with the Commission pursuant to
Rule 424(b) promulgated under the Securities Act ("Rule 424(b)"). The
prospectus, in the form in which it is to be filed with the Commission pursuant
to Rule 424(b), or, if the prospectus is not to be filed with the Commission
pursuant to Rule 424(b), the prospectus in the form included as part of the
Registration Statement at the time the Registration Statement became effective,
is hereinafter referred to as the "Prospectus," except that if any revised
prospectus or prospectus supplement shall be provided to the Underwriters by the
Company for use in connection with the Offering which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b)), the term
"Prospectus" shall also refer to such revised prospectus or prospectus
supplement, as the case may be, from and after the time it is first provided to
the Underwriters for such use. Any preliminary prospectus or prospectus subject
to completion included in the Registration Statement or filed with the
Commission pursuant to Rule 424 promulgated under the Securities Act is
hereafter called a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus, or to any
information disclosed or described therein, shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Exchange Act, on or before the effective
date of the Registration Statement, the date of such Preliminary Prospectus or
the date of the Prospectus, as the case may be, and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the Registration
Statement, any Preliminary Prospectus or the Prospectus, or to any information
disclosed or described therein, shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the effective date of the
Registration Statement, the date of such Preliminary Prospectus or the date of
the Prospectus, as the case may be, which is incorporated therein by reference
and (ii) any such document so filed. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a Preliminary
Prospectus and the Prospectus, or any amendments or supplements to any of the
foregoing shall be deemed to include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("XXXXX").
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(b) At the time of the effectiveness of the Registration Statement
or any Rule 462(b) Registration Statement or the effectiveness of any
post-effective amendment to the Registration Statement, when the Prospectus is
first filed with the Commission pursuant to Rule 424(b) or Rule 434 promulgated
under the Securities Act ("Rule 434"), when any supplement to or amendment of
the Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date (as hereinafter defined),
the Registration Statement and the Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the Rules and
Regulations and did not and will not contain an untrue statement of a material
fact and did not and will not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein (i) in the
case of the Registration Statement, not misleading and (ii) in the case of the
Prospectus or any related Preliminary Prospectus in light of the circumstances
under which they were made, not misleading. When any Preliminary Prospectus was
first filed with the Commission (whether filed as part of the registration
statement for the registration of the Shares or any amendment thereto or
pursuant to Rule 424(a) promulgated under the Securities Act) and when any
amendment thereof or supplement thereto was first filed with the Commission,
such Preliminary Prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the Rules and Regulations and did not
contain an untrue statement of a material fact and did 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. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially different,"
as such term is used in Rule 434, from the Prospectus included in the
Registration Statement at the time it became effective. No representation and
warranty is made in this subsection (b), however, with respect to any
information contained in or omitted from the Registration Statement or the
Prospectus or any related Preliminary Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through the Lead
Manager specifically for use therein. The parties acknowledge and agree that
such information provided by or on behalf of the Underwriters consists solely of
the material included in the second and tenth paragraphs under the caption
"Underwriting" in the Prospectus.
(c) Ernst & Young LLP, who has certified the financial statements
that are included or incorporated by reference in the Registration Statement, is
an independent public accountant as required by the Securities Act, the Exchange
Act and the Rules and Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as disclosed in
the Registration Statement and the Prospectus, the Company has not declared,
paid or made any dividends or other distributions of any kind on or in respect
of its capital stock and there has been no material adverse change or any
development involving a prospective material adverse change, whether or not
arising from transactions in the ordinary course of business, in or affecting
(i) the business, condition (financial or otherwise), results of operations, or
stockholders' equity, properties of the Company and Acute Therapeutics, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company (the
"Subsidiary"), taken as a whole; (ii) the long-term debt or capital stock of the
Company and the Subsidiary taken as a whole; or (iii) the Offering or
consummation of any of the other transactions contemplated by this Agreement,
the Registration Statement or the Prospectus (each, a "Material Adverse
Change"). Since the date of the latest balance sheet presented, or incorporated
by reference, in the Registration Statement and the Prospectus, neither the
Company nor the Subsidiary has incurred or undertaken any liabilities or
obligations, whether direct or indirect, liquidated or contingent, matured or
unmatured, or entered into any transactions, including any acquisition or
disposition of any business or asset, which are material to the Company and the
Subsidiary taken as a whole, except for liabilities, obligations and
transactions which are disclosed in the Registration Statement and the
Prospectus.
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(e) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column headed "Actual" under
the caption "Capitalization" and, after giving effect to the Offering and the
other transactions contemplated by this Agreement, the Registration Statement
and the Prospectus, will be as set forth in the column headed "As Adjusted"
under the caption "Capitalization". All of the issued and outstanding shares of
capital stock of the Company are fully paid and non-assessable and have been
duly and validly authorized and issued, in compliance with all applicable state,
federal and foreign securities laws and not in violation of or subject to any
preemptive or similar right that does or will entitle any person, upon the
issuance or sale of any security, to acquire from the Company or the Subsidiary
any Common Stock or other security of the Company or the Subsidiary or any
security convertible into, or exercisable or exchangeable for, Common Stock or
any other such security (any "Relevant Security"), except for such rights as may
have been fully satisfied or waived.
(f) The Shares have been duly and validly authorized and, when
delivered in accordance with this Agreement, will be duly and validly issued,
fully paid and non-assessable, will have been issued in compliance with all
applicable state, federal and foreign securities laws and will not have been
issued in violation of or subject to any preemptive or similar right that does
or will entitle any person to acquire any Relevant Security from the Company or
the Subsidiary upon issuance or sale of Shares in the Offering. The Common Stock
and the Shares conform to the descriptions thereof contained in the Registration
Statement and the Prospectus. Except as disclosed in the Registration Statement
and the Prospectus, neither the Company nor the Subsidiary has outstanding
warrants, options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, or any contracts or commitments to issue or sell,
any Relevant Security.
(g) The Subsidiary is the only subsidiary of the Company within the
meaning of Rule 405 promulgated under the Securities Act. Except for the
Subsidiary and as otherwise disclosed in the Registration Statement and the
Prospectus, the Company holds no ownership or other interest, nominal or
beneficial, direct or indirect, in any corporation, partnership, joint venture
or other business entity. All of the issued shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and are fully paid
and non-assessable and are owned directly or indirectly by the Company free and
clear of any lien, charge, mortgage, pledge, security interest, claim, equity,
trust or other encumbrance, preferential arrangement, defect or restriction of
any kind whatsoever (any "Lien").
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(h) Each of the Company and the Subsidiary has been duly organized
and validly exists as a corporation in good standing under the laws of the State
of Delaware. Each of the Company and the Subsidiary has all requisite corporate
power and authority to carry on its business as it is currently being conducted
and as described in the Registration Statement or the Prospectus, and to own,
lease and operate its respective properties. Each of the Company and the
Subsidiary is duly qualified to do business and is in good standing as a foreign
corporation, partnership or limited liability company in each jurisdiction in
which the character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which (individually
and in the aggregate) could not reasonably be expected to have a material
adverse effect on: (i) the business, condition (financial or otherwise), results
of operations, or stockholders' equity, properties of the Company and the
Subsidiary taken as a whole; (ii) the long-term debt or capital stock of the
Company or the Subsidiary; or (iii) the Offering or consummation of any of the
other transactions contemplated by this Agreement, the Registration Statement or
the Prospectus (any such effect being a "Material Adverse Effect").
(i) Each of the Company and the Subsidiary has all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses, filings and permits of, with and from all judicial, regulatory and
other legal or governmental agencies and bodies and all third parties, foreign
and domestic (collectively, the "Consents"), to own, lease and operate its
respective properties and conduct its business as it is now being conducted and
as disclosed in the Registration Statement and the Prospectus, and each such
Consent is valid and in full force and effect, and except for such proceedings
as could not reasonably be expected to have a Material Adverse Effect, neither
the Company nor the Subsidiary has received notice of any investigation or
proceedings which results in or, if decided adversely to the Company or the
Subsidiary, could reasonably be expected to result in, the revocation of, or
imposition of a materially burdensome restriction on, any Consent. Each of the
Company and the Subsidiary is in compliance with all applicable laws, rules,
regulations, ordinances, directives, judgments, decrees and orders, foreign and
domestic, except where failure to be in compliance could not reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the
Registration Statement and the Prospectus, no Consent contains a restriction on
the Company or the Subsidiary that could reasonably be expected to have a
Material Adverse Effect.
(j) The Company has full right, power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement, the Registration Statement and
the Prospectus. This Agreement and the transactions contemplated by this
Agreement, the Registration Statement and the Prospectus have been duly and
validly authorized by the Company. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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(k) The execution, delivery and performance of this Agreement and
consummation of the transactions contemplated by this Agreement, the
Registration Statement and the Prospectus do not and will not (i) conflict with,
require consent under or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
the Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement, instrument, franchise, license or permit to which
the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or their respective properties, operations or assets may be bound or
(ii) violate or conflict with any provision of the applicable certificate of
incorporation, by-laws, certificate of formation, limited liability company
agreement, partnership agreement or other organizational documents of the
Company or the Subsidiary, or (iii) violate or conflict with any law, rule,
regulation, ordinance, directive, judgment, decree or order of any judicial,
regulatory or other legal or governmental agency or body, domestic or foreign,
except (in the case of clauses (i) and (iii) above) as could not reasonably be
expected to have a Material Adverse Effect.
(l) No Consent of, with or from any judicial, regulatory or other
legal or governmental agency or body or any third party, foreign or domestic, is
required for the execution, delivery and performance of this Agreement or
consummation of the transactions contemplated by this Agreement, the
Registration Statement and the Prospectus, including the issuance, sale and
delivery of the Shares to be issued, sold and delivered hereunder, except the
registration under the Securities Act of the Shares, which has become effective,
and such Consents as may be required under state securities or blue sky laws or
the by-laws and rules of the National Association of Securities Dealers, Inc.
(the "NASD"), or NASD Regulation, Inc. ("NASDR"), in connection with the
purchase and distribution of the Shares by the Underwriter, each of which has
been obtained and is in full force and effect, other than as of the date hereof,
the approval of the NASDAQ Notification Form for the Additional Listing of
Shares by NASDAQ.
(m) Except as disclosed in the Registration Statement and the
Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company or the Subsidiary is a party or of which any
property, operations or assets of the Company or the Subsidiary is the subject
which, individually or in the aggregate, if determined adversely to the Company
or the Subsidiary, could reasonably be expected to have a Material Adverse
Effect; to the best of the Company's knowledge, no such proceeding, litigation
or arbitration is threatened or contemplated; and the defense of all such
proceedings, litigation and arbitration against or involving the Company or the
Subsidiary could not reasonably be expected to have a Material Adverse Effect.
(n) The financial statements, including the notes thereto, and the
supporting schedules included or incorporated by reference in the Registration
Statement and the Prospectus present fairly in all material respects the
financial position as of the dates indicated and the cash flows and results of
operations for the periods specified of the Company and its consolidated
subsidiary, except as otherwise stated in the Registration Statement and the
Prospectus, said financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis throughout the periods involved; and the supporting schedules included or
incorporated by reference in the Registration Statement and the Prospectus
present fairly in all material respects the information required to be stated
therein. No other financial statements or supporting schedules are required to
be included in the Registration Statement. The other financial and statistical
information included or incorporated by reference in the Registration Statement
and the Prospectus present fairly in all material respects the information
included therein and have been prepared on a basis consistent with that of the
financial statements that are included or incorporated by reference in the
Registration Statement and the Prospectus and the books and records of the
respective entities presented therein.
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(o) There are no pro forma or as adjusted financial statements which
are required to be included or incorporated by reference in the Registration
Statement and the Prospectus in accordance with Regulation S-X which have not
been included as so required.
(p) The statistical, industry-related and market-related data
included in the Registration Statement and the Prospectus are based on or
derived from sources which the Company reasonably and in good faith believes are
reliable and accurate, and such data agree with the sources from which they are
derived.
(q) The Company is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act and files reports with the Commission on XXXXX.
The Common Stock is registered pursuant to Section 12(g) of the Exchange Act and
the outstanding shares of Common Stock (other than the Shares) are listed on the
NASDAQ SmallCap Market (the "SmallCap Market"), and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the Common
Stock from the SmallCap Market, nor has the Company received any notification
that the Commission or the SmallCap Market is contemplating terminating such
registration or listing.
(r) The Company and the Subsidiary maintain a system of internal
accounting and other controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accounting for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(s) Neither the Company nor any of its affiliates (within the
meaning of Rule 144 promulgated under the Securities Act) has taken, directly or
indirectly, any action which constitutes or is designed to cause or result in,
or which could reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Shares in violation of Regulation M under the Exchange
Act.
(t) Neither the Company nor any of its affiliates has, prior to the
date hereof, made any offer or sale of any securities which could be
"integrated" for purposes of the Securities Act or the Rules and Regulations
with the offer and sale of the Shares pursuant to the Registration Statement.
Except as disclosed in the Registration Statement and the Prospectus, neither
the Company nor any of such affiliates has sold or issued any Relevant Security
during the six-month period preceding the date of the Prospectus, including but
not limited to any sales pursuant to Rule 144A or Regulation D or S promulgated
under the Securities Act, other than shares of Common Stock issued pursuant to
employee benefit plans, qualified stock option plans or the employee
compensation plans or pursuant to outstanding options, rights or warrants as
described in the Registration Statement and the Prospectus.
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(u) Except as disclosed in the Registration Statement and the
Prospectus, no holder of any Relevant Security has any rights to require
registration of any Relevant Security as part or on account of, or otherwise in
connection with, the offer and sale of the Shares contemplated hereby, and any
such rights so disclosed have either been fully complied with by the Company or
effectively waived by the holders thereof, and any such waivers remain in full
force and effect.
(v) The conditions for use of Form S-3 to register the Offering
under the Securities Act, as set forth in the General Instructions to such Form,
have been satisfied.
(w) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement and the Prospectus, at the time they
were or hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the Securities Act, the Exchange Act
and the Rules and Regulations, and, when read together with the other
information in the Registration Statement and the Prospectus, do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) The Company is not and, at all times up to and including
consummation of the transactions contemplated by this Agreement, the
Registration Statement and the Prospectus, and after giving effect to
application of the net proceeds of the Offering, will not be, subject to
registration as an "investment company" under the Investment Company Act of
1940, as amended, and is not and will not be an entity "controlled" by an
"investment company" within the meaning of such act.
(y) There are no contracts or other documents (including, without
limitation, any voting agreement), which are required to be described in the
Registration Statement and the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act, the Exchange Act or the Rules and
Regulations and which have not been so described or filed.
(z) No relationship, direct or indirect, exists between or among any
of the Company or any affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company or any
affiliate of the Company, on the other hand, which is required by the Securities
Act, the Exchange Act or the Rules and Regulations to be described in the
Registration Statement or the Prospectus which is not so described and described
as required. There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement and the Prospectus. The Company has not,
in violation of the Xxxxxxxx-Xxxxx Act of 2002, directly or indirectly,
including through the Subsidiary, extended or maintained credit, arranged for
the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the Company.
(aa) Except as disclosed in the Registration Statement and the
Prospectus, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated by this Agreement, the
Registration Statement and the Prospectus or, to the Company's knowledge, any
arrangements, agreements, understandings, payments or issuance with respect to
the Company or any of its officers, directors, shareholders, partners,
employees, Subsidiary or affiliates that may affect the Underwriters'
compensation as determined by the NASD.
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(bb) The Company and the Subsidiary has enforceable leases for all
properties described in the Prospectus as leased by them, in each case free and
clear of all Liens except such as do not (individually or in the aggregate)
materially affect the value of such property or materially interfere with the
use made or proposed to be made of such property by the Company and the
Subsidiary; and any real property and buildings held under lease or sublease by
the Company and the Subsidiary are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material to, and do not
materially interfere with, the use made and proposed to be made of such property
and buildings by the Company and the Subsidiary or those that could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
(cc) The Company and each Subsidiary (i) owns or possesses adequate
right to use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service xxxx registrations, copyrights,
licenses, formulae, customer lists, and know-how and other intellectual property
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, "Intellectual Property")
reasonably necessary to conduct their respective businesses as described in the
Registration Statement and Prospectus and (ii) have no reason to believe that
the conduct of their respective businesses does or will conflict with, and have
not received any notice of any claim of conflict with, any such right of others.
To the best of the Company's knowledge, all material technical information
developed by and belonging to the Company or any Subsidiary which has not been
patented has been kept confidential. To the Company's knowledge: (i) there is no
infringement by third parties of any such Intellectual Property; (ii) there is
no pending or, to the Company's knowledge, threatened, action, suit, proceeding
or claim by others challenging the Company's or any Subsidiary's rights in or to
any such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; and (iii) there is no pending
or, to the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company or any Subsidiary infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of
others.
(dd) The Company and the Subsidiary maintain insurance in such
amounts and covering such risks as the Company reasonably considers adequate for
the conduct of its business and the value of its properties, all of which
insurance is in full force and effect, except where the failure to maintain such
insurance could not reasonably be expected to have a Material Adverse Effect.
There are no material claims by the Company or the Subsidiary under any such
policy or instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause. The Company reasonably believes
that it will be able to renew its existing insurance as and when such coverage
expires or will be able to obtain replacement insurance adequate for the conduct
of the business and the value of its properties at a cost that could not
reasonably be expected to have a Material Adverse Effect.
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(ee) The Company has in effect insurance covering the Company, its
directors and officers for liabilities or losses arising in connection with this
Offering, including, without limitation, liabilities or losses arising under the
Securities Act, the Exchange Act, the Rules and Regulations and applicable
foreign securities laws.
(ff) Each of the Company and the Subsidiary has prepared accurately
and timely filed all federal, state, foreign and other tax returns that are
required to be filed by it and has paid or made provision for the payment of all
taxes, assessments, governmental or other similar charges, including without
limitation, all sales and use taxes and all taxes which the Company or the
Subsidiary is obligated to withhold from amounts owing to employees, creditors
and third parties, with respect to the periods covered by such tax returns
(whether or not such amounts are shown as due on any tax return) except for any
assessments fines or penalties that are currently being contested in good faith
or where such failure to pay or withhold could not reasonably be expected to
have a Material Adverse Effect. No material deficiency assessment with respect
to a proposed adjustment of the Company's or the Subsidiary' federal, state,
local or foreign taxes is pending or, to the best of the Company's knowledge,
threatened. The accruals and reserves on the books and records of the Company
and the Subsidiary in respect of tax liabilities for any taxable period not
finally determined are adequate to meet any assessments and related liabilities
for any such period and, since December 31, 2003, the Company and the Subsidiary
have not incurred any liability for taxes other than in the ordinary course of
its business. There is no tax lien, whether imposed by any federal, state,
foreign or other taxing authority, outstanding against the assets, properties or
business of the Company or the Subsidiary.
(gg) No labor disturbance by the employees of the Company or the
Subsidiary exists or, to the Company's knowledge, is imminent.
(hh) No "prohibited transaction" (as defined in either Section 406
of the Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA") or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time (the
"Code")), "accumulated funding deficiency" (as defined in Section 302 of ERISA)
or other event of the kind described in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived) has occurred with respect to any employee benefit plan
for which the Company or the Subsidiary would have any liability; which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; each employee benefit plan for which the Company or the
Subsidiary would have any liability is in compliance in all material respects
with applicable law, including (without limitation) ERISA and the Code except
for any failure so to comply that could not reasonably be expected to result in
a Material Adverse Effect; the Company has not incurred and does not expect to
incur material liability under Title IV of ERISA with respect to the termination
of, or withdrawal from any "pension plan"; and each plan for which the Company
would have any liability that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or by
failure to act, which could cause the loss of such qualification.
(ii) To the Company's knowledge, there has been no storage,
generation, transportation, handling, treatment, disposal, discharge, emission
or other release of any kind of toxic or other wastes or other hazardous
substances by the Company or the Subsidiary (or any other entity for whose acts
or omissions the Company is or may be liable) upon any other property now or
previously owned or leased by the Company or the Subsidiary, or upon any other
property, which would be a violation of or give rise to any liability under any
applicable law, rule, regulation, order, judgment, decree or permit relating to
pollution or protection of human health and the environment ("Environmental
Law") except for violations and liabilities, which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There has been no disposal, discharge, emission or other release of any kind
onto such property or into the environment surrounding such property of any
toxic or other wastes or other hazardous substances with respect to which the
Company or the Subsidiary has knowledge except as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Except
as set forth in the Registration Statement or the Prospectus, neither the
Company nor the Subsidiary has agreed to assume, undertake or provide
indemnification for any liability of any other person under any Environmental
Law, including any obligation for cleanup or remedial action except as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There is no pending or, to the best of the Company's knowledge,
threatened, administrative, regulatory or judicial action, claim or notice of
noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or the Subsidiary.
10
(jj) Neither the Company, the Subsidiary nor, to the Company's
knowledge, any of its executive officers and directors has at any time during
the last five years (i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States of
any jurisdiction thereof.
(kk) Neither the Company nor the Subsidiary (i) is in violation of
its certificate or articles of incorporation, by-laws, certificate of formation,
limited liability company agreement, partnership agreement or other
organizational documents, (ii) is in default under, and no event has occurred
which, with notice or lapse of time or both, would constitute a default under or
result in the creation or imposition of any lien, charge or encumbrance upon any
of its property or assets pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its property or assets is subject or (iii)
is in violation in any respect of any law, rule, regulation, ordinance,
directive, judgment, decree or order of any judicial, regulatory or other legal
or governmental agency or body, foreign or domestic, except (in the case of
clauses (ii) and (iii) above) violations or defaults that could not
(individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect and except (in the case of clause (ii) alone) for any lien,
charge or encumbrance disclosed in the Registration Statement and the
Prospectus.
(ll) The Company is in compliance with applicable provisions of the
Xxxxxxxx-Xxxxx Act that are effective and is actively taking steps to be in
compliance with other applicable provisions of the Xxxxxxxx-Xxxxx Act upon the
effectiveness of such provisions.
(mm) The Company has established and maintains "disclosure controls
and procedures" (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under
the Exchange Act); the Company's "disclosure controls and procedures" are
reasonably designed to ensure that (i) all information (both financial and
non-financial) required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Rules and Regulations, and
(ii) that all such information is accumulated and communicated to the Company's
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive Officer and
Chief Financial Officer of the Company required under the Exchange Act with
respect to such reports.
11
(nn) Since the date of the filing of the Company's Annual Report on
Form 10-K for the year ended December 31, 2003, the Company's auditors and the
audit committee of the board of directors of the Company (or persons fulfilling
the equivalent function) have not been advised of: (i) any significant
deficiencies in the design or operation of internal controls which could
adversely affect the Company's ability to record, process, summarize and report
financial data nor any material weaknesses in internal controls; (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's internal controls.
(oo) Since the date of the filing of the Company's Annual Report on
Form 10-K for the year ended December 31, 2003, there have been no significant
changes in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
(pp) Except as disclosed in the Registration Statement and the
Prospectus, there are no outstanding guarantees or other contingent obligations
of the Company or the Subsidiary that could reasonably be expected to have a
Material Adverse Effect.
(qq) The Company and the Subsidiary are not presently doing business
with the government of Cuba.
(rr) No event or circumstance has occurred or arisen that requires
that the Company make additional disclosure on Form 8-K which has not been so
disclosed.
Any certificate signed by or on behalf of the Company and delivered
to the Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter and each Underwriter
agrees to purchase from the Company, at a purchase price per share of $10.45,
the number of Shares set forth opposite their respective names on Schedule I
hereto together with any additional number of Shares which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 9 hereof.
12
(b) Payment of the purchase price for, and delivery of certificates
representing, the Shares shall be made at the office of Xxxxxxxx & Xxxxxxxx LLP,
1290 Avenue of the Americas, Xxx Xxxx, Xxx Xxxx 00000-0000 ("Underwriters'
Counsel"), or at such other place as shall be agreed upon by the Lead Manager
and the Company, at 10:00 A.M., New York City time, on the third or (as
permitted under Rule 15c6-1 promulgated under the Exchange Act) fourth business
day following the date of the effectiveness of the Registration Statement (or,
if the Company has elected to rely upon Rule 430A promulgated under the
Securities Act, the third or (as permitted under Rule 15c6-1 under the Exchange
Act) fourth business day (unless postponed in accordance with the provisions of
Section 9 hereof) after the determination of the public offering price of the
Shares), or such other time not later than 10 business days after such date as
shall be agreed upon by the Lead Manager and the Company (such time and date of
payment and delivery being herein called the "Closing Date").
Payment of the purchase price for the Shares shall be made by wire
transfer in same day funds to or as directed by the Company upon delivery of
certificates for the Shares to the Representative through the facilities of The
Depository Trust Company for the respective accounts of the several
Underwriters. Certificates for the Shares shall be registered in such name or
names and shall be in such denominations as the Lead Manager may request at
least two business days before the Closing Date. The Company will permit the
Lead Manager to examine such certificates for delivery at least one full
business day prior to the Closing Date.
3. Offering. Upon delivery of the Shares by the Company to the Lead
Manager, the Underwriters propose to offer the Shares for sale to the public
upon the terms and conditions set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriters that:
(a) The Registration Statement and any amendments thereto have been
declared effective, and if Rule 430A is used or the filing of the Prospectus is
otherwise required under Rule 424(b) or Rule 434, the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to Rule
424(b) within the prescribed time period and will provide evidence satisfactory
to the Lead Manager of such timely filing. If the Company elects to rely on Rule
434, the Company will prepare and file a term sheet that complies with the
requirements of Rule 434, and the Prospectus shall not be "materially different"
(as such term is used in Rule 434) from the Prospectus included in the
Registration Statement at the time it became effective.
The Company will notify the Lead Manager immediately (and, if
requested by the Lead Manager, will confirm such notice in writing) (i) when the
Registration Statement and any amendments thereto become effective, (ii) of any
request by the Commission for any amendment of or supplement to the Registration
Statement or the Prospectus or for any additional information, (iii) of the
Company's intention to file or prepare any supplement or amendment to the
Registration Statement or the Prospectus, (iv) of the mailing or the delivery to
the Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, including but not limited to Rule 462(b)
promulgated under the Securities Act, (v) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of the initiation, or the threatening, of
any proceedings therefor, it being understood that the Company shall make every
effort to avoid the issuance of any such stop order, (vi) of the receipt of any
comments from the Commission, and (vii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for that purpose. If the Commission shall propose or enter a stop order at any
time, the Company will make every reasonable effort to prevent the issuance of
any such stop order and, if issued, to obtain the lifting of such order as soon
as possible. The Company will not file any amendment to the Registration
Statement or any amendment of or supplement to the Prospectus (including the
prospectus required to be filed pursuant to Rule 424(b) or Rule 434) that
differs from the prospectus on file at the time of the effectiveness of the
Registration Statement or file any document under the Exchange Act if such
document would be deemed to be incorporated by reference into the Prospectus to
which the Lead Manager shall object in writing after being timely furnished in
advance a copy thereof. The Company will provide the Lead Manager with copies of
all such amendments, filings and other documents a sufficient time prior to any
filing or other publication thereof to permit the Lead Manager a reasonable
opportunity to review and comment thereon.
13
(b) The Company shall comply with the Securities Act and the
Exchange Act to permit completion of the distribution as contemplated in this
Agreement, the Registration Statement and the Prospectus. If at any time when a
prospectus relating to the Shares is required to be delivered under the
Securities Act or the Exchange Act in connection with the sales of Shares, any
event shall have occurred as a result of which the Prospectus as then amended or
supplemented would, in the judgment of the Underwriters or the Company, include
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances existing at the time of delivery to the
purchaser, not misleading, or if to comply with the Securities Act, the Exchange
Act or the Rules and Regulations it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement, or to file any document
incorporated by reference in the Registration Statement or the Prospectus or in
any amendment thereof or supplement thereto, the Company will notify the Lead
Manager promptly and prepare and file with the Commission, subject to Section
4(a) hereof, an appropriate amendment or supplement (in form and substance
reasonably satisfactory to the Lead Manager) which will correct such statement
or omission or which will effect such compliance and will use its best efforts
to have any amendment to the Registration Statement declared effective as soon
as possible.
(c) The Company will promptly deliver to each Underwriter and
Underwriters' Counsel a conformed copy of the Registration Statement, as
initially filed and all amendments thereto, including all consents and exhibits
filed therewith, and will maintain in the Company's files manually signed copies
of such documents for at least five years after the date of filing. The Company
will promptly deliver to each Underwriter such number of copies of any
Preliminary Prospectus, the Prospectus, the Registration Statement, all
amendments of and supplements to such documents, if any, and all documents
incorporated by reference in the Registration Statement and Prospectus or any
amendment thereof or supplement thereto, as such Underwriter may reasonably
request. Prior to 10:00 A.M., New York time, on the business day next succeeding
the date of this Agreement and from time to time thereafter, the Company will
furnish the Underwriters with copies of the Prospectus in New York City in such
quantities as they may reasonably request.
14
(d) The Company consents to the use and delivery of the Preliminary
Prospectus by the Underwriters in accordance with Rule 430 and Section 5(b) of
the Securities Act.
(e) The Company will use reasonable efforts, in cooperation with the
Lead Manager, at or prior to the time of effectiveness of the Registration
Statement, to qualify the Shares for offering and sale under the securities laws
relating to the offering or sale of the Shares of such jurisdictions, domestic
or foreign, as the Lead Manager may designate and to maintain such qualification
in effect for so long as required for the distribution thereof; except that in
no event shall the Company be obligated in connection therewith to qualify as a
foreign corporation or to execute a general consent to service of process.
(f) The Company will make generally available to its security
holders and to the Underwriters, to the extent not otherwise available via
XXXXX, as soon as practicable, but in any event not later than twelve months
after the effective date of the Registration Statement (as defined in Rule
158(c) promulgated under the Securities Act), an earnings statement of the
Company and the Subsidiary (which need not be audited) complying with Section
11(a) of the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158 promulgated under the Securities Act).
(g) During the period of 30 days from the date of the Prospectus,
without the prior written consent of the Lead Manager, the Company (i) will not,
directly or indirectly, issue, offer, sell, agree to issue, offer or sell,
solicit offers to purchase, grant any call option, warrant or other right to
purchase, purchase any put option or other right to sell, pledge, borrow or
otherwise dispose of any Relevant Security, or make any announcement of any of
the foregoing; (ii) will not establish or increase any "put equivalent position"
or liquidate or decrease any "call equivalent position" (in each case within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder) with respect to any Relevant Security, and (iii) will
not otherwise enter into any swap, derivative or other transaction or
arrangement that transfers to another, in whole or in part, any economic
consequence of ownership of a Relevant Security, whether or not such transaction
is to be settled by delivery of Relevant Securities, other securities, cash or
other consideration other than (A) the issuance of shares, options or other
rights to acquire Common Stock pursuant to employee benefit plans, qualified
stock option plans or other employee compensation plans as in existence on the
data hereof or (B) shares issued in connection with the terms of joint ventures,
collaborative arrangements, strategic alliances or similar transactions. The
Company will obtain an undertaking in substantially the form of Annex I hereto
of each of its officers and directors not to engage in any of the aforementioned
transactions on their own behalf, other than: (i) the sale of up to an aggregate
of 400,000 shares of Common Stock by officers and directors of the Company; (ii)
sales structured as pre-paid variable forwards; and (iii) the sale of Shares as
contemplated by this Agreement and the Company's issuance of Common Stock upon
(w) the conversion or exchange of convertible or exchangeable securities
outstanding on the date hereof; (x) the exercise of currently outstanding
options; (y) the exercise of currently outstanding warrants; and (z) the grant
and exercise of options under, or the issuance and sale of shares pursuant to,
employee stock option plans in effect on the date hereof, each as described in
the Registration Statement and the Prospectus. The Company will not file a
registration statement under the Securities Act in connection with any
transaction by the Company or any person that is prohibited pursuant to the
foregoing, except for registration statements on Form S-8 relating to employee
benefit plans.
15
(h) During the period ending two years from the effective date of
this Agreement, the Company will furnish to each Underwriter, to the extent not
otherwise available via XXXXX, copies of all reports or other communications
(financial or other) furnished to security holders or from time to time
published or publicly disseminated by the Company, and will deliver to each
Underwriter, (i) to the extent not otherwise available via XXXXX, as soon as
they are available, copies of any reports, financial statements and proxy or
information statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is listed;
and (ii) such additional information concerning the business and financial
condition of the Company as you may from time to time reasonably request (such
financial information to be on a consolidated basis to the extent the accounts
of the Company and the Subsidiary are consolidated in reports furnished to its
security holders generally or to the Commission).
(i) The Company will apply the net proceeds from the sale of the
Shares as set forth under the caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its reasonable efforts to list, subject to
notice of issuance, the Shares on the SmallCap Market and maintain the listing
of the Shares on the SmallCap Market.
(k) The Company, during the period when the Prospectus is required
to be delivered under the Securities Act or the Exchange Act, will file all
documents required to be filed with the Commission pursuant to the Securities
Act, the Exchange Act and the Rules and Regulations within the time periods
required thereby.
(l) The Company will use its best efforts to do and perform all
things required to be done or performed under this Agreement by the Company
prior to the Closing Date, and to satisfy all conditions precedent to the
delivery of the Shares.
(m) The Company will not take, and will cause its affiliates (within
the meaning of Rule 144 promulgated under the Securities Act) not to take,
directly or indirectly, any action which constitutes or is designed to cause or
result in, or which could reasonably be expected to constitute, cause or result
in, the stabilization or manipulation of the price of any security to facilitate
the sale or resale of the Shares in violation of Regulation M under the Exchange
Act.
16
5. Payment of Expenses. Whether or not the transactions contemplated by
this Agreement, the Registration Statement and the Prospectus are consummated or
this Agreement is terminated, the Company hereby agrees to pay all costs and
expenses incident to the performance of its obligations hereunder, including the
following: (i) all expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and any and all amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters; (ii) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Securities Act and the
Offering; (iii) the cost of producing this Agreement, any blue sky survey, any
necessary closing documents and other instruments, agreements or documents
(including any compilations thereof) in connection with the Offering; (iv) all
expenses in connection with the qualification of the Shares for offering and
sale under state or foreign securities or blue sky laws as provided in Section
4(e) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with any
blue sky survey (which fees and disbursements shall not exceed $5,000 without
the prior written consent of the Company); (v) all fees and expenses in
connection with quoting the Shares on the SmallCap Market; (vi) all travel
expenses of the Company's officers and employees and any other expense of the
Company incurred in connection with attending or hosting meetings with
prospective purchasers of the Shares; and (vii) any stock transfer taxes
incurred in connection with this Agreement or the Offering. The Company also
will pay or cause to be paid: (x) the cost of preparing stock certificates
representing the Shares; (y) the cost and charges of any transfer agent or
registrar for the Shares; and (z) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 5. It is understood, however, that except as
provided in this Section, and Sections 7, 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel and
stock transfer taxes on resale of any of the Shares by them. Notwithstanding
anything to the contrary in this Section 5, in the event that this Agreement is
terminated pursuant to Section 6 or 11(b) hereof, or subsequent to a Material
Adverse Change, the Company will pay all documented out-of pocket expenses of
the Underwriters (including but not limited to the fees and disbursements of the
Underwriters' Counsel) incurred in connection herewith.
6. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Shares as provided herein, shall be
subject to the accuracy of the representations and warranties of the Company
herein contained, as of the date hereof and as of the Closing Date to the
absence from any certificates, opinions, written statements or letters furnished
to the Representative or to Underwriters' Counsel pursuant to this Section 6 of
any misstatement or omission, to the performance by the Company of its
obligations hereunder, and to each of the following additional conditions:
(a) The Registration Statement shall have become effective and all
necessary regulatory or stock exchange approvals shall have been received not
later than 12:00 P.M., New York time on the date an amendment to the
Registration Statement containing the public offering price has been filed with
the Commission, or at such later time and date as shall have been consented to
in writing by the Lead Manager; if the Company shall have elected to rely upon
Rule 430A or Rule 434 promulgated under the Securities Act, the Prospectus shall
have been filed with the Commission in a timely fashion in accordance with
Section 4(a) hereof and a form of the Prospectus containing information relating
to the description of the Shares and the method of distribution and similar
matters shall have been filed with the Commission pursuant to Rule 424(b) within
the applicable time period; and, at or prior to the Closing Date no stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereof shall have been issued and no proceedings therefor shall have
been initiated or threatened by the Commission.
17
(b) At the Closing Date you shall have received:
(i) the favorable written opinion of Xxxxxxxxx Xxxxxxx Xxxxx &
Xxxxxxxx LLP, counsel for the Company, dated the Closing Date addressed to the
Underwriters substantially in the form attached hereto as Annex II.
(ii) the favorable written opinion of Xxxxxxxx Xxxxxxxx LLP,
intellectual property counsel for the Company, dated the Closing Date addressed
to the Underwriters substantially in the form previously provided to the
Underwriters.
(c) All proceedings taken in connection with the sale of the Shares
as herein contemplated shall be reasonably satisfactory in form and substance to
the Lead Manager and to Underwriters' Counsel, and the Underwriters shall have
received from Underwriters' Counsel a favorable written opinion, dated as of the
Closing Date, with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related matters as the
Lead Manager may require, and the Company shall have furnished to Underwriters'
Counsel such documents as it may reasonably request for the purpose of enabling
it to pass upon such matters.
(d) At the Closing Date, the Lead Manager shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company, dated the Closing Date to the effect that (i) the condition set forth
in subsection (a) of this Section 6 has been satisfied, (ii) as of the date
hereof and as of the Closing Date, the representations and warranties of the
Company set forth in Section 1 hereof are accurate, (iii) as of the Closing Date
all agreements, conditions and obligations of the Company to be performed or
complied with hereunder on or prior thereto have been duly performed or complied
with, (iv) the Company and the Subsidiary have not sustained any material loss
or interference with their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, (v) no stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued and no proceedings therefor
have been initiated or threatened by the Commission, (vi) there are no pro forma
or as adjusted financial statements that are required to be included in the
Registration Statement and the Prospectus pursuant to the Rules and Regulations
that have not been included as required and (vii) subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus there has not been any Material Adverse Change, except as to clause
(vii), as set forth in or contemplated by the Registration Statement or the
Prospectus or as described in such certificates.
(e) At the time this Agreement is executed and at the Closing Date,
the Lead Manager shall have received a comfort letter, from Ernst & Young LLP,
independent public accountants for the Company, dated, respectively, as of the
date of this Agreement and as of the Closing Date addressed to the Underwriters
and in form and substance satisfactory to the Underwriters and Underwriters'
Counsel.
(f) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given or incorporated by
reference in the Registration Statement (exclusive of any amendment thereof
after the date hereof) and the Prospectus (exclusive of any supplement thereto
after the date hereof), there shall not have been any Material Adverse Change,
including but not limited to the occurrence of any fire, flood, storm,
explosion, accident or other calamity at any of the properties owned or leased
by the Company or its Subsidiary, the effect of which, in any such case
described above, is, in the judgment of the Lead Manager, so material and
adverse as to make it impracticable or inadvisable to proceed with the Offering
on the terms and in the manner contemplated in the Prospectus (exclusive of any
supplement).
18
(g) The Lead Manager shall have received a duly executed lock-up
agreement from each person who is a director or officer of the Company, in each
case substantially in the form attached hereto as Annex I.
(h) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any federal, state or
foreign governmental or regulatory authority that would, as of the Closing Date,
prevent the issuance or sale of the Shares; and no injunction or order of any
federal, state or foreign court shall have been issued that would, as of the
Closing Date, prevent the issuance or sale of the Shares.
(i) The Company shall have furnished the Underwriters and
Underwriters' Counsel with such other certificates, opinions or other documents
as they may have reasonably requested.
(j) If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the Lead
Manager or to Underwriters' Counsel pursuant to this Section 6 shall not be
reasonably satisfactory in form and substance to the Lead Manager and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by the Lead Manager at, or at any time prior to, the Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone. Any such telephone notice shall be confirmed promptly thereafter in
writing.
7. Indemnification.
(a) The Company shall indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
and all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus or the Prospectus, or in any supplement thereto
or amendment thereof, or (ii) the omission or alleged omission to state in the
Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus or the Prospectus, or in any supplement thereto
or amendment thereof, a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that the
Company will not be liable in any such case to the extent but only to the extent
that any such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, as originally filed or any
amendment thereof, or any related Preliminary Prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Lead Manager expressly for use therein. The parties
agree that such information provided by or on behalf of any Underwriter through
the Lead Manager consists solely of the material referred to in the last
sentence of Section 1(b) hereof. This indemnity agreement will be in addition to
any liability which the Company may otherwise have, including but not limited to
other liability under this Agreement. The foregoing indemnity agreement with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter who failed to deliver a Prospectus (as then amended or supplemented,
provided by the Company to the several Underwriters in the requisite quantity
and on a timely basis to permit proper delivery on or prior to the Closing Date)
to the person asserting any losses, claims, damages and liabilities and
judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, or caused by 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, if such
material misstatement or omission or alleged material misstatement or omission
was cured, as determined by a court of competent jurisdiction in a decision not
subject to further appeal, in such Prospectus and such Prospectus was required
by law to be delivered at or prior to the written confirmation of sale to such
person.
19
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, as originally filed or any amendment thereof, or any
related Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, 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, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Lead Manager specifically for use therein;
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares to be purchased by such Underwriter hereunder. The parties agree that
such information provided by or on behalf of any Underwriter through the Lead
Manager consists solely of the material referred to in the last sentence of
Section 1(b) hereof. This indemnity will be in addition to any liability which
any Underwriter may otherwise have, including but not limited to other liability
under this Agreement.
20
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of any claims or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the claim or the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
the indemnifying party from any liability which it may have under this Section 7
to the extent that it is not materially prejudiced as a result thereof and in
any event shall not relieve it from any liability that such indemnifying party
may have otherwise than on account of the indemnity agreement hereunder). In
case any such claim or action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate, at its own expense in the defense of such
action, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party; provided, however, that counsel to the indemnifying
party shall not (except with the written consent of the indemnified party) also
be counsel to the indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action,
(iii) the indemnifying party does not diligently defend the action after
assumption of the defense, or (iv) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. No indemnifying party shall, without the prior written
consent of the indemnified parties, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
claim, investigation, action or proceeding in respect of which indemnity or
contribution may be or could have been sought by an indemnified party under this
Section 7 or Section 8 hereof (whether or not the indemnified party is an actual
or potential party thereto), unless (x) such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such claim, investigation, action or proceeding and
(ii) does not include a statement as to or an admission of fault, culpability or
any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder
with respect to such settlement, compromise or judgment.
8. Contribution. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, liabilities, claims,
damages and expenses suffered by the Company, any contribution received by the
Company from persons, other than the Underwriters, who may also be liable for
contribution, including persons who control the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, officers of
the Company who signed the Registration Statement and directors of the Company)
as incurred to which the Company and one or more of the Underwriters may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company and the Underwriters from the Offering or, if such
allocation is not permitted by applicable law, in such proportions as are
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the Offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company bears to (y) the underwriting discount or commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of each of the Company and of
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 8 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any judicial, regulatory or other legal or
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission. Notwithstanding the provisions of this Section 8, (i) no Underwriter
shall be required to contribute any amount in excess of the amount by which the
discounts and commissions applicable to the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) of the immediately preceding sentence. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 8 or
otherwise. The obligations of the Underwriters to contribute pursuant to this
Section 8 are several in proportion to the respective number of Shares to be
purchased by each of the Underwriters hereunder and not joint.
21
9. Underwriter Default.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Shares hereunder, and if the Shares with respect to which
such default relates (the "Default Shares") do not (after giving effect to
arrangements, if any, made by the Lead Manager pursuant to subsection (b) below)
exceed in the aggregate 10% of the number of Shares, each non-defaulting
Underwriter, acting severally and not jointly, agrees to purchase from the
Company that number of Default Shares that bears the same proportion of the
total number of Default Shares then being purchased as the number of Shares set
forth opposite the name of such Underwriter in Schedule I hereto bears to the
aggregate number of Shares set forth opposite the names of the non-defaulting
Underwriters, subject, however, to such adjustments to eliminate fractional
shares as the Lead Manager in its sole discretion shall make.
(b) In the event that the aggregate number of Default Shares exceeds
10% of the number of Shares, the Lead Manager may in its discretion arrange for
itself or for another party or parties (including any non-defaulting Underwriter
or Underwriters who so agree) to purchase the Default Shares on the terms
contained herein. In the event that within five calendar days after such a
default the Lead Manager does not arrange for the purchase of the Default Shares
as provided in this Section 9, this Agreement shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Sections 5, 7, 8, 10 and 11(d)) or the Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter or Underwriters of its
or their liability, if any, to the other Underwriters and the Company for
damages occasioned by its or their default hereunder.
(c) In the event that any Default Shares are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, the Lead Manager or the Company shall have the right to postpone
the Closing Date for a period, not exceeding five business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 9 with like
effect as if it had originally been a party to this Agreement with respect to
such Shares.
22
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement or in certificates of officers of the Company or the
Subsidiary submitted pursuant hereto, including the agreements contained in
Section 5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8, 10 and 11 shall survive any termination of this Agreement, including
termination pursuant to Section 9 or 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the execution of this
Agreement. Notwithstanding any termination of this Agreement, the provisions of
this Section 11 and of Sections 1, 5, 7, 8 and 12 through 17, inclusive, shall
remain in full force and effect at all times after the execution hereof.
(b) The Lead Manager shall have the right to terminate this
Agreement at any time prior to the Closing Date, if (i) any domestic or
international event or act or occurrence has materially disrupted, or in the
opinion of the Lead Manager will in the immediate future materially disrupt, the
market for the Company's securities or securities in general; or (ii) trading on
The New York Stock Exchange (the "NYSE"), The NASDAQ National Market (the
"NASDAQ National Market") or the SmallCap Market (together with the NASDAQ
National Market, "NASDAQ") shall have been suspended or been made subject to
material limitations, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the NYSE or NASDAQ or by order of the Commission or any other governmental
authority having jurisdiction; or (iii) a banking moratorium has been declared
by any state or federal authority or if any material disruption in commercial
banking or securities settlement or clearance services shall have occurred; or
(iv) (A) there shall have occurred any outbreak or escalation of hostilities or
acts of terrorism involving the United States or there is a declaration of a
national emergency or war by the United States or (B) there shall have been any
other calamity or crisis or any change in political, financial or economic
conditions if the effect of any such event in (A) or (B), in the judgment of the
Lead Manager, makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Shares as the case may be, on the terms and
in the manner contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be
in writing.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than pursuant to (i) notification by the Lead Manager
as provided in Section 11(a) hereof or (ii) Section 9(b) hereof), or if the sale
of the Shares is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand by the
Lead Manager, reimburse the Underwriters for all documented out-of-pocket
expenses (including the fees and reasonable expenses of the Underwriters'
Counsel), incurred by the Underwriters in connection herewith.
23
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing, and:
(a) if sent to any Underwriter, shall be mailed, delivered, or faxed
and confirmed in writing to such Underwriter, c/o Bear, Xxxxxxx & Co. Inc., 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Parish, Senior
Managing Director, Equity Capital Markets, with a copy to Underwriter's Counsel
at Xxxxxxxx & Xxxxxxxx LLP, 1290 Avenue of the Americas, New York, New York
10104-0050, Attention: Xxxxx X. Xxxxxxxxx, Esq.; and
(b) if sent to the Company, shall be mailed, delivered, or faxed and
confirmed in writing to the Company, 000 Xxxxx Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Ph.D., President
and Chief Executive Officer, with a copy to the Company's counsel at Xxxxxxxxx
Xxxxxxx Xxxxx & Xxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX
00000-0000, Attention: Xxx X. Xxxxx, Esq.
provided, however, that any notice to an Underwriter pursuant to Section 7 shall
be delivered or sent by mail or facsimile transmission to such Underwriter at
its address set forth in its acceptance facsimile to Bear Xxxxxxx, which address
will be supplied to any other party hereto by Bear Xxxxxxx upon request. Any
such notices and other communications shall take effect at the time of receipt
thereof.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Sections 7 and
8 hereof, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and said
controlling persons and their respective successors, officers, directors, heirs
and legal representatives, and it is not for the benefit of any other person,
firm or corporation. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. Governing Law and Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. The Company and each Underwriter irrevocably (a) submits to the
jurisdiction of any court of the State of New York or the United State District
Court for the Southern District of the State of New York for the purpose of any
suit, action, or other proceeding arising out of this Agreement, or any of the
agreements or transactions contemplated by this Agreement, the Registration
Statement and the Prospectus (each, a "Proceeding"), (b) agrees that all claims
in respect of any Proceeding may be heard and determined in any such court, (c)
waives, to the fullest extent permitted by law, any immunity from jurisdiction
of any such court or from any legal process therein, (d) agrees not to commence
any Proceeding other than in such courts, and (e) waives, to the fullest extent
permitted by law, any claim that such Proceeding is brought in an inconvenient
forum. THE COMPANY AND EACH UNDERWRITER (ON BEHALF OF ITSELF AND, TO THE FULLEST
EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND
CREDITORS) HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE REGISTRATION STATEMENT AND
THE PROSPECTUS.
24
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument. Delivery of
a signed counterpart of this Agreement by facsimile transmission shall
constitute valid and sufficient delivery thereof.
16. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
17. Time is of the Essence. Time shall be of the essence of this
Agreement. As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
[signature page follows]
25
If the foregoing correctly sets forth your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among us.
Very truly yours,
DISCOVERY LABORATORIES, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx, C.P.A., Esq.
Title: Senior Vice President, and
General Counsel
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxxxxx Parish
----------------------------------------
Name: Xxxxxxx Parish
Title: Senior Managing Director
Equity Capital Markets
On behalf of itself and the other
Underwriters named in Schedule I hereto.
26
SCHEDULE I
--------------------------------------------------------------------------------
Total Number of
Underwriters Shares to be Purchased
--------------------------------------------------------------------------------
Bear, Xxxxxxx & Co. Inc. 1,980,000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx & Co., Inc. 220,000
--------------------------------------------------------------------------------
ANNEX I
Form of Lock-Up Agreement
March ___, 2004
Bear, Xxxxxxx & Co. Inc.
As Representative of the several Underwriters
referred to below
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Equity Capital Markets
Discovery Laboratories, Inc. Lock-Up Agreement
Ladies and Gentlemen:
This letter agreement (this "Agreement") relates to the proposed public
offering (the "Offering") by Discovery Laboratories, Inc., a Delaware
corporation (the "Company"), of its common stock, $.001 par value per share (the
"Stock").
In order to induce Bear Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") to underwrite
the Offering, the undersigned hereby agrees that, without the prior written
consent of Bear Xxxxxxx, during the period from the date hereof until thirty
(30) days from the date of the final prospectus for the Offering (the "Lock-Up
Period"), the undersigned (a) will not, directly or indirectly, offer, sell,
agree to offer or sell, solicit offers to purchase, grant any call option or
purchase any put option or other right to sell, pledge, borrow or otherwise
dispose of any Relevant Security (as defined below) or make any announcement of
any of the foregoing, (b) will not establish or increase any "put equivalent
position" or liquidate or decrease any "call equivalent position" with respect
to any Relevant Security (in each case within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder), or (c) otherwise enter into any swap, derivative or
other transaction or arrangement that transfers to another, in whole or in part,
any economic consequence of ownership of a Relevant Security, whether or not
such transaction is to be settled by delivery of Relevant Securities, other
securities, cash or other consideration other than: (i) the sale of up to an
aggregate of 400,000 shares of Common Stock by officers and directors of the
Company; (ii) sales structured as pre-paid variable forwards; and (iii) the
Company's issuance of Common Stock upon (w) the conversion or exchange of
convertible or exchangeable securities outstanding on the date hereof; (x) the
exercise of currently outstanding options; (y) the exercise of currently
outstanding warrants; and (z) the grant and exercise of options under, or the
issuance and sale of shares pursuant to, employee stock option plans in effect
on the date hereof, each as described in the Registration Statement and the
Prospectus.
As used herein "Relevant Security" means the Stock, any other equity
security of the Company or its subsidiary and any security convertible into, or
exercisable or exchangeable for, any Stock or other such equity security.
The undersigned hereby authorizes the Company during the Lock-Up Period to
cause any transfer agent for the Relevant Securities to decline to transfer, and
to note stop transfer restrictions on the stock register and other records
relating to, Relevant Securities for which the undersigned is the record holder
and, in the case of Relevant Securities for which the undersigned is the
beneficial but not the record holder, agrees during the Lock-Up Period to cause
the record holder to cause the relevant transfer agent to decline to transfer,
and to note stop transfer restrictions on the stock register and other records
relating to, such Relevant Securities. The undersigned hereby further agrees
that, without the prior written consent of Bear Xxxxxxx, during the Lock-up
Period the undersigned (x) will not file or participate in the filing with the
Securities and Exchange Commission (the "Commission") of any registration
statement, excluding a registration statement on Form S-8 relating to employee
benefit plans, or circulate or participate in the circulation of any preliminary
or final prospectus or other disclosure document with respect to any proposed
offering or sale of a Relevant Security and (y) will not exercise any rights the
undersigned may have to require registration with the Commission of any proposed
offering or sale of a Relevant Security.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Agreement and that this Agreement
constitutes the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms. Upon written request, the undersigned
will execute any additional documents necessary in connection with enforcement
hereof. Any obligations of the undersigned shall be binding upon the successors
and assigns of the undersigned from the date first above written.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Delivery of a signed copy of this letter by
facsimile transmission shall be effective as delivery of the original hereof.
Very truly yours,
By: _____________________________
Print Name: _______________________
I-2
ANNEX II
1. Each of the Company and Acute Therapeutics, Inc., validly exists as a
corporation in good standing under the laws of the State of Delaware, with the
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement and the Prospectus.
2. The Company, is duly qualified and in good standing as a foreign
corporation in California and Pennsylvania.
3. The Company has the authorized capitalization set forth in the
Registration Statement and the Prospectus. The Shares to be delivered on the
Closing Date have been duly and validly authorized and, when issued, delivered
and paid for in accordance with the Underwriting Agreement, will be fully paid
and non-assessable. The Common Stock and the Shares conform as to legal matters
to the descriptions thereof contained in the Registration Statement and the
Prospectus in all material respects.
4. The Statements in the Prospectus and the Registration Statement under
the heading Description of Common Stock, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to therein,
fairly present in all material respects the information called for with respect
to such legal matters, documents and proceedings.
5. Neither the Company nor its Subsidiary is in violation of its
respective charter or bylaws and, to the best of such counsel's knowledge,
neither the Company nor its Subsidiary is in default in the performance of any
obligation, agreement, covenant or condition contained in any document filed as
an exhibit to the Registration Statement or incorporated by reference therein.
6. There are no preemptive or, to the best of such counsel's knowledge,
similar rights that entitle or will entitle any person to acquire any Shares
from the Company upon issuance or sale thereof pursuant to any document filed as
an exhibit to the Registration Statement or incorporated by reference therein.
7. The Company has the corporate power and authority to execute and
deliver the Underwriting Agreement and the Shares and to perform its obligations
under the Underwriting Agreement. All corporate action required to be taken for
the due and proper authorization, execution and delivery of the Underwriting
Agreement and the Shares and consummation of the transactions contemplated by
the Underwriting Agreement have been duly and validly taken.
8. The Underwriting Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
9. To our knowledge and other than as set forth in the Registration
Statement or the Prospectus, there are no judicial, regulatory or other legal or
governmental proceedings pending to which the Company or the Subsidiary is a
party or of which any property of the Company or the Subsidiary is the subject
which are required to be disclosed in the Registration Statement or the
Prospectus that are not described as required.
10. The execution, delivery and performance of the Underwriting Agreement
and consummation of the transactions contemplated by the Underwriting Agreement
do not and will not (A) conflict with or result in a breach of any of the terms
and provisions of, or constitute a default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or the Subsidiary pursuant to, any indenture, mortgage,
deed of trust, loan agreement or any other agreement, instrument, franchise,
license or permit known to such counsel to which the Company or the Subsidiary
is a party or by which any of the Company or the Subsidiary or their respective
properties or assets may be bound and which is filed as an exhibit to the
Registration Statement and the documents incorporated therein by reference, (B)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Company or the Subsidiary, or, to (C) our knowledge, any
judgment, decree, order, statute, rule or regulation of any court or any
judicial, regulatory or other legal or governmental agency or body known by us
to be applicable to the Company and the Subsidiary, except (in the case of
clauses (A) and (C)) for any of the foregoing in that would not individually or
in the aggregate have a Material Adverse Effect.
11. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any judicial,
regulatory or other legal or governmental agency or body is required for the
execution, delivery and performance of the Underwriting Agreement or
consummation of the transactions contemplated by the Underwriting Agreement,
including the issuance and sale of the Shares, except for (1) such as may be
required under state securities or blue sky laws in connection with the purchase
and distribution of the Shares by the Underwriters (as to which no opinion is
expressed), (2) such as have been made or obtained under the Securities Act and
(3) such as are required by the NASD.
12. The Registration Statement and the Prospectus and any amendments
thereof or supplements thereto (other than the financial statements, schedules
and other financial data included or incorporated by reference therein, as to
which no opinion is expressed) comply as to form in all material respects with
the requirements of the Securities Act, the Exchange Act and the Rules and
Regulations. The documents filed under the Exchange Act and incorporated by
reference in the Registration Statement and the Prospectus or any amendment
thereof or supplement thereto (other than the financial statements, schedules
and other financial data included or incorporated by reference therein, as to
which no opinion is expressed) when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material respects
with the Securities Act or the Exchange Act, as applicable, and the Rules and
Regulations.
II-2
13. The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Registration Statement and the Prospectus, will not be, an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended.
14. The Registration Statement is effective under the Securities Act, and,
to our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the Commission and all
filings required by Rule 424(b) and Rule 430A promulgated under the Securities
Act have been made.
In our role as special counsel to the Company in connection with the
preparation by the Company of the Registration Statement and the Prospectus, we
have participated in conferences with officers and representatives of the
Company, and counsel for the Underwriter, at which the contents of the
Registration Statement and the Prospectus and related matters were discussed. We
do not, however, represent the Company in connection with the regulation of the
Company's activities, facilities and products by the United States Food and Drug
Administration and other comparable foreign and domestic agencies and regulatory
bodies. Further, we have no understanding of the technical properties,
characteristics and capabilities of the Company's products, innovations and
technologies. On the basis of the facts that we gained in the course of the
foregoing, considered in the light of our understanding of the applicable law
(including the requirements of Form S-3 and the character of the prospectus
required thereby) and the experience we have gained through our practice under
the Securities Act, and the limited scope of our engagement, we confirm to you
that no facts came to our attention that have caused us to believe that either
the Registration Statement, at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any
amendment thereof made prior to the Closing Date, as of the date of such
amendment, contained or incorporated by reference any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made, or that the Prospectus, as of its date (or any amendment thereof or
supplement thereto made prior to the Closing Date as of the date of such
amendment or supplement), contained or incorporated by reference any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.
We express no view with respect to (i) financial statements or schedules
and other data of a financial, or accounting nature (including the notes
thereto), including, without limitation, any projections, forward-looking
statements or other estimates, (ii)any statutes or governmental rules,
regulations, proceedings or actions relating to patents, patent applications,
trademarks, service marks, trade names, copyrights or know-how and (iii) the
assumptions underlying any of the foregoing.
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