EXHIBIT 1.1
10,000,000 SHARES
LEXICON GENETICS INCORPORATED
COMMON STOCK, $0.001 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
July 23, 2003
July 23, 2003
Xxxxxx Xxxxxxx & Co. Incorporated
UBS Securities LLC
CIBC World Markets Corp.
Punk, Xxxxxx & Company, L.P.
c/o Morgan Xxxxxxx & Co.
Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
Lexicon Genetics Incorporated, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS") 10,000,000 shares of its Common Stock, $0.001 par
value per share (the "FIRM SHARES"). The Company also proposes to issue and sell
to the several Underwriters not more than an additional 1,500,000 shares of its
Common Stock, $0.001 par value per share (the "ADDITIONAL SHARES") if and to the
extent that you, as Managers of the offering, shall have determined to exercise,
on behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "SHARES." The
shares of Common Stock, $0.001 par value per share of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (File No. 333-101549) (the
"S-3 REGISTRATION STATEMENT"), including a prospectus (the "BASE PROSPECTUS"),
relating to the Shares, and has filed with, or transmitted for filing to, or
shall promptly hereafter file with or transmit for filing to, the Commission a
final prospectus supplement (the "PROSPECTUS SUPPLEMENT") specifically relating
to the Shares pursuant to Rule 424 under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). The term "REGISTRATION STATEMENT" means the S-3
Registration Statement, including the exhibits thereto, as amended to the date
of this Agreement. If the Company has filed an abbreviated registration
statement to register additional shares of Common Stock pursuant to Rule 462(b)
under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any
reference
herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule
462 Registration Statement. The term "PROSPECTUS" means the Base Prospectus
together with the Prospectus Supplement. The term "PRELIMINARY PROSPECTUS" means
a preliminary prospectus supplement specifically relating to the Shares,
together with the Base Prospectus. All references to the Registration Statement,
Base Prospectus, preliminary prospectus or Prospectus shall include in each case
the documents, if any, incorporated therein by reference. The terms "SUPPLEMENT"
and "AMENDMENT" or "AMEND" as used in this Agreement with respect to the
Registration Statement or the Prospectus shall include all documents
subsequently filed by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), that are deemed to be
incorporated by reference in the Registration Statement or the Prospectus,
including without limitation any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the S-3
Registration Statement that is deemed to be incorporated by reference in the
Registration Statement.
1. Representations and Warranties. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant
to the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with the
Securities Act, the Exchange Act and the applicable rules and
regulations of the Commission thereunder, (ii) the Registration
Statement, when it became effective and as of the date of filing of the
Company's Annual Report on Form 10-K for the year ended December 31,
2002, did not contain and, as amended or supplemented, if applicable,
will not contain any 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 not misleading, (iii) the Registration
Statement and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Securities
Act and the applicable rules and regulations of the Commission
thereunder and (iv) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
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information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiary, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(d) The subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the State of Delaware, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a Material Adverse Effect; all of
the issued shares of capital stock of the subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(h) The Shares have been duly authorized and, when issued,
delivered and paid for in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance
of such Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene (i) any provision of applicable law, (ii) the
certificate of
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incorporation or by-laws of the Company, (iii) any agreement or other
instrument binding upon the Company or its subsidiary that is material
to the Company and its subsidiary, taken as a whole, or (iv) any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or its subsidiary, except with
respect to clauses (i), (iii) and (iv) for any contraventions that
would not, singly or in the aggregate, have a Material Adverse Effect.
No consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such (i) as
have been obtained under the Securities Act, (ii) as may be required by
the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Shares and (iii) as may be required by
the rules and regulations of the National Association of Securities
Dealers, Inc. (the "NASD"), other than those relating to the Nasdaq
National Market.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiary, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened to which the Company or its
subsidiary is a party or to which any of the properties of the Company
or its subsidiary is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents, including
without limitation, relating to Intellectual Property (as defined
below), that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder,
except that the representation and warranty set forth in this paragraph
does not apply to statements or omissions in the preliminary prospectus
based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use
therein.
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(m) 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 Prospectus will not be, required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(n) The Company and its subsidiary (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
Material Adverse Effect.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a Material Adverse Effect.
(p) The Company and its subsidiary have all consents,
approvals, orders, certificates, authorizations and permits issued by,
and have made all declarations and filings with, all appropriate
federal, state or foreign governmental or self-regulatory authorities
and all courts and other tribunals necessary (i) to conduct their
businesses, including without limitation all such consents, approvals,
orders, certificates, authorizations and permits required by the United
States Food and Drug Administration (the "FDA") or any other federal,
state or foreign agencies or bodies engaged in the regulation of
pharmaceuticals or biohazardous materials, and (ii) to own, lease or
license and use their properties in the manner described in the
Prospectus, except for such consents, approvals, orders, certificates,
authorizations, permits, declarations and filings the failure of which
to have, maintain or make would not have a Material Adverse Effect;
neither the Company nor its subsidiary has received any written notice
of proceedings relating to the revocation or modification of any such
consent, approval, order, certificate, authorization or permit; and the
Company and its subsidiary are in compliance with all applicable
foreign,
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federal, state and local laws and regulations, except for any
noncompliance that, singly or in the aggregate, would not have a
Material Adverse Effect.
(q) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement. All of such rights have been waived with respect to the
Registration Statement and the transactions contemplated hereunder.
(r) The consolidated financial statements of the Company and
its subsidiary (together with the related notes thereto) incorporated
by reference in the Registration Statement and the Prospectus (i)
complied as to form, as of their respective dates of filing with the
Commission, in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission
with respect thereto (including, without limitation, Regulation S-X),
(ii) have been prepared in accordance with generally accepted
accounting principles in the United States (except in the case of
unaudited statements, to the extent permitted by Regulation S-X for
quarterly reports on Form 10-Q) applied on a consistent basis during
the periods and at the dates involved (except as may be indicated in
the notes thereto) and (iii) fairly present, in all material respects,
the consolidated financial condition and results of the operations and
cash flows of the Company and its subsidiary as of the respective dates
indicated and for the respective periods specified, subject in the case
of interim periods to normal year-end adjustments.
(s) Ernst & Young LLP are, and during the periods covered in
its report included in the Registration Statement and the Prospectus
were, and Xxxxxx Xxxxxxxx LLP, during the periods covered in its report
included in the Registration Statement and the Prospectus were,
independent accountants with respect to the Company as required by the
Securities Act and the rules and regulations of the Commission
thereunder.
(t) The Company has made and keeps books, records and
accounts, which, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company and its
subsidiary. The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of consolidated financial statements of the
Company in conformity with generally accepted accounting principles and
to maintain
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accountability for assets of the Company and its subsidiary; (iii)
access to assets of the Company and its subsidiary is permitted only in
accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets of the Company and its
subsidiary is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
principal executive officer and principal financial officer of the
Company have made all certifications required by the Xxxxxxxx-Xxxxx Act
or any related rules and regulations promulgated by the Commission, and
the statements contained in any such certification are complete and
correct. The Company maintains "disclosure controls and procedures" (as
defined in Rule 13a-14(c) under the Exchange Act), and such controls
and procedures are designed (i) to ensure that information 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 Commission's rules and forms
and (ii) to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act
is accumulated and communicated to the Company's management, including
its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
The Company does not have any material weaknesses in internal controls,
and there has been no fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company's internal controls. The Company is otherwise in compliance in
all material respects with all applicable effective provisions of the
Xxxxxxxx-Xxxxx Act and the rules and regulations promulgated by the
Commission.
(u) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and except as reflected in the Prospectus, (i) the Company and its
subsidiary, taken as a whole, have not incurred any material liability
or obligation, direct or contingent, nor entered into any material
transaction, in either case that is not in the ordinary course of
business; (ii) the Company and its subsidiary have not purchased any of
the Company's outstanding capital stock, and the Company has not
declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (iii) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiary, taken as a whole.
(v) The information contained in the Registration Statement
and Prospectus concerning the issued patents and pending patent
applications, owned by or licensed to the Company or its subsidiary is
accurate in all material respects. The Company and its subsidiary own
or have valid, binding and enforceable licenses or other rights to use
any patents,
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trademarks, trade names, service marks, service names, copyrights,
confidential and proprietary information, including without limitation,
trade secrets, know-how, inventions and technology, whether patented or
not, proprietary computer software and other intellectual property
rights (collectively, the "INTELLECTUAL PROPERTY") necessary to conduct
the business of the Company and its subsidiary in the manner in which
it has been and is contemplated to be conducted, as described in the
Prospectus, and without any conflict with the rights of others, except
as described in the Prospectus and except for such conflicts which, if
determined adversely to the Company or its subsidiary, would not have,
singly or in the aggregate, a Material Adverse Effect. Neither the
Company nor its subsidiary has knowledge that, or has received any
notice from any other person alleging that, the business of the Company
and its subsidiary in the manner in which it has been and is
contemplated to be conducted, as described in the Prospectus, conflicts
with the Intellectual Property rights of others, except for such
conflicts which, if determined adversely to the Company or its
subsidiary, would not have, singly or in the aggregate, a Material
Adverse Effect.
(w) All patent applications owned by the Company or its
subsidiary, which are material to the conduct of the business of the
Company and its subsidiary in the manner in which it has been and is
contemplated to be conducted, have been duly and properly filed or
caused to be filed with the United States Patent and Trademark Office
("PTO") and, in some cases, applicable foreign and international patent
authorities, and assignments for all patents and patent applications
owned by the Company or its subsidiary, which are material to the
conduct of the business of the Company and its subsidiary in the manner
in which it has been and is contemplated to be conducted (collectively,
the "PATENT RIGHTS"), have been properly executed and recorded for each
named inventor. To the knowledge of the Company, all printed
publications and patent references material to the patentability of the
inventions claimed in the Patent Rights have been disclosed to those
patent offices so requiring. To the knowledge of the Company, each of
the Company, its subsidiary and the inventors has met its duty of
candor and good faith to the PTO for the Patent Rights. To the
knowledge of the Company, no material misrepresentation has been made
to the PTO in connection with the Patent Rights. Neither the Company
nor its subsidiary is aware of any facts material to a determination of
patentability regarding the Patent Rights not disclosed to the PTO.
Neither the Company nor its subsidiary is aware of any facts not
disclosed to the PTO or other applicable patent office which would
preclude the patentability, validity or enforceability of any patent or
patent application in the Patent Rights. The Company has no knowledge
of any facts which would preclude the Company or its subsidiary from
having clear title to the patents and patent applications in the Patent
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Rights. To the Company's knowledge, the patents in the Patent Rights
are valid and enforceable, and have not been adjudged invalid or
unenforceable in whole or in part.
(x) To the knowledge of the Company, no third party is
engaging in any activity that infringes, misappropriates or otherwise
violates the Intellectual Property owned by or licensed to the Company
or its subsidiary, except as described in the Prospectus and except for
such activities which, singly or in the aggregate, would not have a
Material Adverse Effect.
(y) With respect to each material agreement governing all
rights in and to any Intellectual Property licensed by or licensed to
the Company or its subsidiary, (i) such agreement is legal, valid,
binding and enforceable and in full force and effect; (ii) neither the
Company nor its subsidiary has received any notice of termination or
cancellation under such agreement, received any notice of breach or
default under such agreement, which breach has not been cured, or
granted to any third party any rights, adverse or otherwise, under such
agreement that would constitute a material breach of such agreement;
and (iii) none of the Company, its subsidiary or, to Company's
knowledge, any other party to such agreement, is in breach or default
thereof in any material respect, and no event has occurred that, with
notice or lapse of time, would constitute such a material breach or
default or permit termination, modification or acceleration under such
agreement.
(z) The studies, tests and preclinical trials, if any,
conducted by or on behalf of the Company that are described in the
Registration Statement and the Prospectus were and, if still pending,
are being, conducted in all material respects in accordance with
experimental protocols, procedures and controls pursuant to, where
applicable, accepted professional scientific standards; the
descriptions of the results of such studies, tests and trials contained
in the Registration Statement and the Prospectus are accurate in all
material respects; and the Company has not received any notices or
correspondence from the FDA or any foreign, state or local governmental
body exercising comparable authority requiring the termination,
suspension or material modification of any studies, tests or
preclinical or clinical trials conducted by or on behalf of the Company
which termination, suspension or material modification would have a
Material Adverse Effect.
(aa) Neither the Company nor its subsidiary own any real
property; each of the Company and its subsidiary has good and
marketable title to all personal property owned by it which is material
to the business of the Company and its subsidiary taken as a whole,
free and clear of all
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liens, encumbrances and defects except such as are described in the
Prospectus or such as do not interfere in any material respect with the
use made and currently proposed to be made of such property by the
Company and its subsidiary; and any real or personal property and
buildings held under lease by each of the Company and its subsidiary
are held by such entity under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere in any
material respect with the use made and currently proposed to be made of
such property and buildings by the Company and its subsidiary, in each
case except as described in the Prospectus.
(bb) No material labor dispute with the employees of the
Company or its subsidiary exists, or, to the knowledge of the Company,
is imminent; and the Company is not aware of any existing, threatened
or imminent labor disturbance by the employees of any of its or its
subsidiary's principal suppliers, manufacturers or contractors that
could have a Material Adverse Effect.
(cc) The Company and its subsidiary carry, or are covered by,
insurance in such amounts and covering such risks as the Company
reasonably believes are adequate for the conduct of its business and
the value of its properties and as are customary in the businesses in
which the Company and its subsidiary are engaged; and neither the
Company nor its subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not have
a Material Adverse Effect.
(dd) Each material contract, agreement and license filed as an
exhibit to the Registration Statement to which the Company or its
subsidiary is bound is legal, valid, binding and enforceable in
accordance with its terms and in full force and effect against the
Company or its subsidiary, and, to the knowledge of the Company, each
other party thereto. Neither the Company nor its subsidiary nor, to the
Company's knowledge, any other party is in material breach or default
with respect to any such contract, agreement or license, and, to the
Company's knowledge, no event has occurred which with notice or lapse
of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under any such contract,
agreement or license. To the Company's knowledge, no party has
repudiated any material provision of any such contract, agreement or
license.
(ee) The Company has filed a notice of listing of the Shares
on The NASDAQ National Market; the Common Stock is registered pursuant
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to Section 12(g) of the Exchange Act, and the outstanding shares of
Common Stock are listed for quotation on The NASDAQ National 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 NASDAQ National
Market, nor has the Company received any notification that the
Commission or The NASDAQ National Market is contemplating terminating
such registration or listing.
(ff) The statistical 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.
(gg) All existing trading plans or other arrangements pursuant
to Rule 10b5-1 under the Securities Exchange Act of 1934 entered into
by the executive officers of the Company relating to the Common Stock
have been suspended for the period commencing on the date hereof and
ending 90 days after the date of the Prospectus.
2. Agreements to Sell and Purchase. The Company hereby agrees to
issue and sell to the several Underwriters, and each Underwriter, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective numbers of Firm Shares set forth in Schedule I
hereto opposite its name at $4.935 a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have the
right to purchase, severally and not jointly, up to 1,500,000 Additional Shares
at the Purchase Price. You may exercise this right on behalf of the Underwriters
in whole or from time to time in part by giving written notice of each election
to exercise the option not later than 30 days after the date of this Agreement.
Any exercise notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased. Each purchase date must be at least one business day after the
written notice is given and may not be earlier than the closing date for the
Firm Shares nor later than ten business days after the date of such notice.
Additional Shares may be purchased as provided in Section 4 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. On each day, if any, that Additional Shares are to be purchased
(an "OPTION CLOSING DATE"), each Underwriter agrees, severally and not jointly,
to purchase the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as
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you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased on such Option Closing Date as the number of
Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter
bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Xxxxxx Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus Supplement,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof of
which the Underwriters have been advised in writing or (C) the grant by the
Company of options to purchase shares of Common Stock under the Company's 2000
Equity Incentive Plan as in effect on the date hereof or the Company's 2000
Non-Employee Directors' Stock Option Plan as in effect on the date hereof. The
Company agrees to take all necessary action so that all existing trading plans
or other arrangements pursuant to Rule 10b5-1 under the Securities Exchange Act
of 1934 entered into by the executive officers of the Company relating to the
Common Stock are suspended, and remain suspended, at all times during the period
commencing on the date hereof and ending 90 days after the date of the
Prospectus.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$5.25 a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by
you at a price that represents a concession not in excess of $.20 a share under
the Public Offering Price.
4. Payment and Delivery. Payment for the Firm Shares shall be made to
the Company by wire transfer of immediately available funds against delivery of
such Firm Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on July 29, 2003, or at such other time on the
same or such other date, not later than August 5, 2003, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred to
as the "CLOSING DATE."
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Payment for any Additional Shares shall be made to the Company by wire
transfer of immediately available funds against delivery of such Additional
Shares for the respective accounts of the several Underwriters at 10:00 a.m.,
New York City time, on the date specified in the corresponding notice described
in Section 2 or at such other time on the same or on such other date, in any
event not later than September 8, 2003, as shall be designated in writing by
you.
The Firm Shares and Additional Shares shall be registered in such names
and in such denominations as you shall request in writing not later than one
full business day prior to the Closing Date or the applicable Option Closing
Date, as the case may be. The Firm Shares and Additional Shares shall be
delivered to you on the Closing Date or an Option Closing Date, as the case may
be, for the respective accounts of the several Underwriters, with any transfer
taxes payable in connection with the transfer of the Shares to the Underwriters
duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 2:00 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiary, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that, in
your judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect that the representations and warranties
of the Company contained in this Agreement are true and correct as of
the Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
complied with or satisfied hereunder on or before the Closing Date.
13
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date
an opinion of Xxxxxx & Xxxxxx, L.L.P., outside counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of Delaware, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing as a foreign corporation in
the State of Texas;
(ii) the subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing as
a foreign corporation in the State of New Jersey;
(iii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in or incorporated into the Prospectus;
(iv) the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of the
subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(vi) the Shares have been duly authorized and, when
issued, delivered and paid for in accordance with the terms of
this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
14
(viii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the
Company or any agreement or other instrument binding upon the
Company or its subsidiary that is set forth in a schedule to
such opinion (which schedule shall include the agreements or
other instruments filed as exhibits to the Registration
Statement), or, to such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court
having jurisdiction over the Company or its subsidiary, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by the Company of its obligations under this
Agreement (other than such consents, approvals,
authorizations, orders and qualifications as have been
obtained under the Securities Act), except that such counsel
expresses no opinion with respect to (A) the securities or
Blue Sky laws of the various states in connection with the
offer and sale of the Shares or (B) the rules and regulations
of the NASD (other than those relating to the Nasdaq National
Market);
(ix) the statements relating to legal matters or
documents (A) incorporated into the Prospectus regarding the
capital stock of the Company, (B) included in the Prospectus
under the captions "Management's Discussion and Analysis of
Financial Condition and Result of Operations - Liquidity and
Capital Resources," "Business - Alliances, Collaborations and
Licenses - Drug Discovery Alliances," "- LexVision
Collaborations," "- Target Validation Collaborations," and "-
Technology Licenses," and "Business - Properties,", (C)
included in the Company's Proxy Statement for the Annual
Meeting of Stockholders held on April 30, 2003 under the
caption "Executive Compensation - Employment Agreements", (D)
included in the Prospectus under the caption "Underwriters"
and (E) included in the Registration Statement in Item 15, in
each case, fairly summarize in all material respects such
matters or documents;
(x) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company or its subsidiary is a party or to which any of the
properties of the Company or its subsidiary is subject that
are required to be described in the Registration Statement or
the Prospectus and are not so described or of any statutes,
regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus
or to be filed as
15
exhibits to the Registration Statement that are not described
or filed as required;
(xi) 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 Prospectus will not be,
required to register as an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
and
(xii) nothing has come to the attention of such
counsel that causes such counsel to believe that (A) any
document filed pursuant to the Exchange Act and incorporated
by reference in the Registration Statement and the Prospectus
(except for the financial statements and financial schedules
and other financial and statistical data included therein, as
to which such counsel need not express any belief) did not
comply when so filed as to form in all material respects with
the requirements of the Securities Act, the Exchange Act and
the applicable rules and regulations of the Commission
thereunder; (B) the Registration Statement or the Prospectus
(except for the financial statements and financial schedules
and other financial and statistical data included therein, as
to which such counsel need not express any belief) do not
comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules
and regulations of the Commission thereunder, (C) the
Registration Statement or the prospectus included therein
(except for the financial statements and financial schedules
and other financial and statistical data included therein, as
to which such counsel need not express any belief) at the time
the Registration Statement became effective contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or (D) the
Prospectus (except for the financial statements and financial
schedules and other financial and statistical data included
therein, as to which such counsel need not express any belief)
as of its date or as of the Closing Date contained or contains
an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date
an opinion of Xxxxx X. Xxxxxxxx, Esq., patent counsel for the Company,
dated the Closing Date, in form and substance reasonably satisfactory
to the Underwriters and their counsel.
16
(e) The Underwriters shall have received on the Closing Date
an opinion of Xxxx and Xxxx LLP, counsel for the Underwriters, dated
the Closing Date, (i) to the effect that the statements relating to
legal matters or documents included in the Prospectus under the caption
"Underwriters" fairly summarize in all material respects such matters
or documents and (ii) covering the matters referred to in clauses (B),
(C) and (D) of Section 5(c)(xii) above.
With respect to Section 5(c)(xii) above, Xxxxxx & Xxxxxx
L.L.P. may state that their beliefs are based upon their
participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and
documents incorporated by reference and review and discussion
of the contents, thereof, and review and discussion of the
contents thereof, but are without independent check or
verification, except as specified. With respect to clauses
(B), (C) and (D) of Section 5(c)(xii), Xxxx and Xxxx LLP may
state that their beliefs are based upon their participation in
the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto (other than
documents incorporated by reference) and upon review and
discussion of the contents thereof (including documents
incorporated by reference), but are without independent check
or verification except as specified.
The opinions of Xxxxxx & Xxxxxx L.L.P. and Xxxxx X. Xxxxxxxx,
Esq. described in Sections 5(c) and 5(d) above shall be
rendered to the Underwriters at the request of the Company and
shall so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Ernst & Young LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in or incorporated by reference into the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(g) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.
17
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Shares to be sold on such Option Closing Date and other matters
related to the issuance of such Additional Shares.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of
the Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each other Underwriter a
conformed copy of the Registration Statement (without exhibits thereto
but including documents incorporated by reference) and to furnish to
you in New York City, without charge, prior to 5:00 p.m. New York City
time on the business day next succeeding the date of this Agreement and
during the period mentioned in Section 6(c) below, as many copies of
the Prospectus, any documents incorporated by reference, and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object unless advised
in writing by outside counsel reasonably acceptable to you that the
filing of such amendment or supplement is required by law, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition shall exist as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare,
file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
18
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement of the
Company and its subsidiary covering a period of at least 12 months
beginning after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act) that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing
any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as provided in Section 6(d)
hereof, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters in connection with such qualification
and in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association
of Securities Dealers, Inc., (v) all costs and expenses incident to
listing the Shares on The NASDAQ National Market, (vi) the cost of
19
printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and
any such consultants, and the cost of any aircraft chartered in
connection with the road show, (ix) the document production charges and
expenses associated with printing this Agreement and (x) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel,
stock transfer taxes payable on resale of any of the Shares by them and
any advertising expenses connected with any offers they may make.
7. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
each person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and each
affiliate of any Underwriter within the meaning of Rule 405 under the Securities
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), 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, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein; provided, however, that
with respect to any preliminary prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the persons
asserting any such losses, claims, damages or liabilities purchased Shares, to
any person controlling such Underwriter or any affiliate of such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company shall
20
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities, unless such failure to send or give a copy of the Prospectus is the
result of noncompliance by the Company with Section 6(a), 6(b) or 6(c).
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a) or 7(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Xxxxxx Xxxxxxx & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from
21
and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in Section 7(a) or
7(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
22
(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 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 that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section
7 and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter, any person controlling any Underwriter or
any affiliate of any Underwriter or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Shares.
8. Termination. The Underwriters may terminate this Agreement by notice
given by you to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on, or by, as the case may be, any of the New
York Stock Exchange or The NASDAQ National Market, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a material disruption in securities settlement,
payment or clearance services in the United States shall have occurred, (iv) any
moratorium on commercial banking activities shall have been declared by Federal
or New York State authorities or (v) there shall have occurred any outbreak or
escalation of hostilities, or any change in financial markets or any calamity or
crisis that, in your judgment, is material and adverse and which, singly or
together with any other event specified in this clause (v), makes it, in your
judgment,
23
impracticable or inadvisable to proceed with the offer, sale or delivery of the
Shares on the terms and in the manner contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
number of Shares without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company; provided, however, that in any such
case either you or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. If, on an Option Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Additional
Shares and the aggregate number of Additional Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased on such Option Closing Date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation hereunder
to purchase the Additional Shares to be sold on such Option Closing Date or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the
24
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
25
12. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
LEXICON GENETICS INCORPORATED
By: /s/ XXXXXX X. XXXXX
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: President & CEO
Accepted as of the date hereof
Xxxxxx Xxxxxxx & Co. Incorporated
UBS Securities LLC
CIBC World Markets Corp.
Punk, Xxxxxx & Company, L.P.
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto.
By: Xxxxxx Xxxxxxx & Co. Incorporated
By: /s/ XXXXXXXX XXXXX
---------------------------------------
Name: Xxxxxxxx Xxxxx
Title: Executive Director
26
SCHEDULE I
NUMBER OF FIRM SHARES TO BE
UNDERWRITER PURCHASED
Xxxxxx Xxxxxxx & Co. Incorporated.......................... 5,000,000
UBS Securities LLC......................................... 2,500,000
CIBC World Markets Corp.................................... 1,500,000
Punk, Xxxxxx & Company, L.P................................ 1,000,000
-------------
Total:............................................ 10,000,000
EXHIBIT A
[FORM OF LOCK-UP LETTER]
_____________, 2003
Xxxxxx Xxxxxxx & Co. Incorporated
UBS Securities LLC
CIBC World Markets Corp.
Punk, Xxxxxx & Company, L.P.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated
("XXXXXX XXXXXXX") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Lexicon Genetics Incorporated, a Delaware
corporation (the "COMPANY"), providing for the public offering (the "PUBLIC
OFFERING") by the several Underwriters, including Xxxxxx Xxxxxxx (the
"UNDERWRITERS"), of up to 12,000,000 shares (the "SHARES") of the Common Stock,
par value $0.001 per share, of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 90 days after the date of the final prospectus
supplement relating to the Public Offering (the "PROSPECTUS"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement, (b) transactions relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the Public Offering or (c) the transfer of shares of Common Stock
or other securities by the undersigned to his or her immediate family, to a
trust the beneficiaries of which are the undersigned and/or members of his or
her immediate family or to a corporation, partnership, limited partnership or
limited liability company the stockholders, partners and members of which are
the undersigned and/or members of his or her immediate family; provided,
however, that it shall be a condition to any transfer described in clause (c)
above that (i) the transferee execute and deliver to Xxxxxx Xxxxxxx an agreement
stating that the transferee is receiving and holding the Common Stock or other
securities so transferred subject to the provisions of this Lock-Up Agreement,
(ii) there shall be no further transfer of such Common Stock or other securities
except in accordance with this Lock-Up Agreement and (iii) no filing by any
party (transferor or transferee) under Section 16(a) of the Securities Exchange
Act of 1934, as amended, shall be required or shall be made voluntarily in
connection with such transfer (other than a filing on a Form 5 made after the
expiration of the 90-day period referred to above). For purposes of this Lock-Up
Agreement, "immediate family" shall mean spouse, lineal descendant, father,
mother, brother or sister of the transferor.
In addition, the undersigned hereby waives any rights the undersigned
may have to require registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock in connection
with, arising out of or relating to the Public Offering. The undersigned further
agrees that, without the prior written consent of Xxxxxx Xxxxxxx on behalf of
the Underwriters, it will not, during the period commencing on the date hereof
and ending 90 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock, and hereby waives any and all rights the undersigned may have to require
the Company to include shares of Common Stock in the registration statement
filed by the Company on November 27, 2002 and to receive notice of the filing of
such registration statement or the offering contemplated thereby. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of the
undersigned's shares of Common Stock except in compliance with the foregoing
restrictions. The undersigned further agrees to suspend any existing trading
plans or other arrangements pursuant to Rule 10b5-1 under the Securities
Exchange Act of 1934, and agrees not to enter into any such plan or arrangement
during the period commencing on the date hereof and ending 90 days after the
date of the Prospectus.
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Public Offering. The undersigned further understands that this Lock-Up
Agreement is irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors and assigns.
This Lock-Up Agreement shall terminate and have no further force or
effect if the Public Offering is not consummated by July 31, 2003.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
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(Name)
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(Address)
