EXHIBIT 1.1
Delcath Systems, Inc.
2,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
UNDERWRITING AGREEMENT
----------------------
Whale Securities Co., L.P. New York, New York
as Representative of the ____________, 2000
Secured Underwriters named
in Schedule A hereto
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Delcath Systems, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the underwriters (the "Underwriters") named in Schedule A to
this underwriting agreement (the "Agreement") for whom Whale Securities Co.,
L.P. (the "Representative") is acting as representative, Two Million (2,000,000)
shares (the "Offered Shares") of the common stock, par value $.01 per share,
which Offered Shares are presently authorized but unissued shares of the common
stock par value $.01 per share (individually, a "Common Share" and collectively
the "Common Shares"), of the Company. In addition, the Representative, in order
to cover over-allotments in the sale of the Offered Shares, may purchase up to
an aggregate of Three Hundred Thousand (300,000) Common Shares (the "Optional
Shares"; the Offered Shares and the Optional Shares are hereinafter sometimes
collectively referred to as the "Shares"). The Shares are described in the
Registration Statement and the Prospectus, as defined below. The Company also
proposes to issue and sell to the Representative for its own account and the
accounts of its designees, warrants to purchase up to an aggregate of Two
Hundred Thousand (200,000) Common Shares at an exercise price of $9.90 per share
(the "Underwriter's Warrants"), which sale will be consummated in accordance
with the terms and conditions of the form of Representative's Warrant filed as
an exhibit to the Registration Statement.
The Company hereby confirms its respective agreements with the
Representative and each of the Underwriters, on whose behalf the Representative
is signing this Agreement, as follows:
1. Purchase and Sale of Offered Shares. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, the Company hereby agrees to sell the Offered Shares to the
Underwriters, severally, and each of the Underwriters, severally and not
jointly, agrees to purchase the Offered Shares from the Company, at a purchase
price of $5.40 per share the number of Offered Shares which such Underwriter may
become obligated to purchase pursuant to the provisions of Section 10 hereof.
The Underwriters plan to offer the Shares to the public at a public offering
price of $6.00 per Offered Share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to the Company by wire
transfer or certified or official bank check or checks payable to its order in
New York Clearing House funds, at the offices of the Representative, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, against delivery of the Offered Shares to the
Representative. Such payment and delivery will be made at 10:00 A.M., New York
City time, on the third business day following the Effective Date (as
hereinafter defined) (the fourth business day following the Effective Date in
the event that trading of the Offered Shares commences on the day following the
Effective Date), the date and time of such payment and delivery being herein
called the "Closing Date." The certificates representing the Offered Shares to
be delivered will be in such denominations and registered in such names as the
Representative may request not less than two full business days prior to the
Closing Date, and will be made available to the Representative for inspection,
checking and packaging at the office of the Company's transfer agent or
correspondent in New York City, American Stock Transfer & Trust Company, 00 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 not less than one full business day prior to
the Closing Date.
(b) On the Closing Date, the Company will sell the Representative's
Warrants to the Representative or to the Representative's designees limited to
officers and partners of the Representative, members of the selling group and
syndicate members and/or their officers or partners (collectively, the
Representative's Designees"). The Representative's Warrants will be in the form
of, and in accordance with, the provisions of the Representative's Warrant
attached as an exhibit to the Registration Statement. The aggregate purchase
price for the Representative's Warrants is One Hundred Dollars ($100.00). The
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Representative's Warrants will be restricted from sale, transfer, assignment or
hypothecation for a period of one (1) year from the Effective Date, except to
the Representative's Designees. Payment for the Representative's Warrants will
be made to the Company by check or checks payable to its order on the Closing
Date against delivery of the certificates representing the Representative's
Warrants. The certificates representing the Representative's Warrants will be in
such denominations and such names as the Representative may request prior to the
Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Offered Shares as contemplated by the
Prospectus, the Representative is hereby granted an option to purchase all or
any part of the Optional Shares from the Company. The purchase price to be paid
for the Optional Shares will be the same price per Optional Share as the price
per Offered Share set forth in Section 1 hereof. The option granted hereby may
be exercised by the Representative as to all or any part of the Optional Shares
at any time within 45 days after the Effective Date. The Representative will not
be under any obligation to purchase any Optional Shares prior to the exercise of
such option.
(b) The option granted hereby may be exercised by the Representative
by giving oral notice to the Company, which must be confirmed by a letter, telex
or telegraph setting forth the number of Optional Shares to be purchased, the
date and time for delivery of and payment for the Optional Shares to be
purchased and stating that the Optional Shares referred to therein are to be
used for the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. If such notice is given prior to
the Closing Date, the date set forth therein for such delivery and payment will
not be earlier than either two full business days thereafter or the Closing
Date, whichever occurs later. If such notice is given on or after the Closing
Date, the date set forth therein for such delivery and payment will not be
earlier than two full business days thereafter. In either event, the date so set
forth will not be more than 15 full business days after the date of such notice.
The date and time set forth in such notice is herein called the "Option Closing
Date." Upon exercise of such option, through the Representative's delivery of
the aforementioned notice, the Company will become obligated to convey to the
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Representative, and, subject to the terms and conditions set forth in Section
3(d) hereof, the Representative will become obligated to purchase, the number of
Optional Shares specified in such notice.
(c) Payment for any Optional Shares purchased will be made to the
Company by wire transfer or certified or official bank check or checks payable
to its order in New York Clearing House funds, at the office of the
Representative, against delivery of the Optional Shares purchased to the
Representative. The certificates representing the Optional Shares to be
delivered will be in such denominations and registered in such names as the
Representative requests not less than two full business days prior to the Option
Closing Date, and will be made available to the Representative for inspection,
checking and packaging at the aforesaid office of the Company's transfer agent
or correspondent not less than one full business day prior to the Option Closing
Date.
(d) The obligation of the Representative to purchase and pay for any
of the Optional Shares is subject to the accuracy and completeness (as of the
date hereof and as of the Option Closing Date) of and compliance in all material
respects with the representations and warranties of the Company herein, to the
accuracy and completeness of the statements of the Company or its officers made
in any certificate or other document to be delivered by the Company pursuant to
this Agreement, to the performance in all material respects by the Company of
its obligations hereunder, to the satisfaction by the Company of the conditions,
as of the date hereof and as of the Option Closing Date, set forth in Section
3(b) hereof, and to the delivery to the Representative of opinions, certificates
and letters dated the Option Closing Date substantially similar in scope to
those specified in Section 5, 6(b), (c), (d) and (e) hereof, but with each
reference to "Offered Shares" and "Closing Date" to be, respectively, to the
Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority, corporate and other, to own or lease, as the case may be, and operate
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its properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement and to execute, deliver and perform this
Agreement, the Representative's Warrant Agreement and the Consulting Agreement
described in Section 5(r) hereof (the "Consulting Agreement") and to consummate
the transactions contemplated hereby and thereby. The Company has no
subsidiaries. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and where failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company. The Company has no equity interests in any entity.
(b) This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, and each of the
Representative's Warrant Agreement and the Consulting Agreement, when executed
and delivered by the Company on the Closing Date, will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms. The execution, delivery and performance of this
Agreement, the Representative's Warrant Agreement and the Consulting Agreement
by the Company, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms of this
Agreement, the Consulting Agreement and the Representative's Warrant Agreement
have been duly authorized by all necessary corporate action and do not and will
not, with or without the giving of notice or the lapse of time, or both, (i)
result in any violation of the Certificate of Incorporation or By-Laws, each as
amended, of the Company; (ii) result in a breach of or conflict with any of the
terms or provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which the Company is a party or
by which the Company or any of its properties or assets is or may be bound or
affected; (iii) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company, or any of its properties or business; or (iv)
have any effect on any permit, certification, registration, approval, consent
order, license, franchise or other authorization (collectively, the "Permits")
necessary for the Company to own or lease and operate any of its properties and
to conduct its business.
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(c) No Permits of any court or governmental agency or body, other than
under the Securities Act of 1933, as amended (the "Act"), the Regulations (as
hereinafter defined) and applicable state securities or Blue Sky laws, are
required (i) for the valid authorization, issuance, sale and delivery of the
Shares to the Underwriters, and (ii) the consummation by the Company of the
transactions contemplated by this Agreement, the Consulting Agreement or the
Representative's Warrant Agreement.
(d) The conditions for use of a registration statement on Form SB-2
set forth in the General Instructions to Form SB-2 have been satisfied with
respect to the Company, the transactions contemplated herein and in the
Registration Statement. The Company has prepared in conformity with the
requirements of the Act and the rules and regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333-39470) on Form SB-2 and has
filed one or more amendments thereto, covering the registration of the Shares
under the Act, including the related preliminary prospectus or preliminary
prospectuses (each thereof being herein called a "Preliminary Prospectus") and a
proposed final prospectus. Each Preliminary Prospectus was endorsed with the
legend required by Item 501(a)(5) of Regulation S-B of the Regulations and, if
applicable, Rule 430A of the Regulations. Such registration statement including
any documents incorporated by reference therein and all financial schedules and
exhibits thereto, as amended at the time it becomes effective, and the final
prospectus included therein are herein, respectively, called the "Registration
Statement" and the "Prospectus," except that, (i) if the prospectus filed by the
Company pursuant to Rule 424(b) of the Regulations differs from the Prospectus,
the term "Prospectus" will also include the prospectus filed pursuant to Rule
424(b), and (ii) if the Registration Statement is amended or such Prospectus is
supplemented after the date the Registration Statement is declared effective by
the Commission (the "Effective Date") and prior to the Option Closing Date, the
terms "Registration Statement" and "Prospectus" shall include the Registration
Statement as amended or supplemented.
(e) Neither the Commission nor, to the best of the Company's knowledge
after due investigation, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge after due investigation, threatened
to institute any proceedings with respect to such an order.
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(f) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with the
Commission pursuant to Rule 424(b), and both documents as of the Closing Date
and the Option Closing Date, referred to below, will contain all statements
which are required to be stated therein in accordance with the Act and the
Regulations and will in all material respects conform to the requirements of the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, on such dates, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Representative, or by any Underwriter
through the Representative expressly for use therein.
(g) The Company had at the date or dates indicated in the Prospectus a
duly authorized and outstanding capitalization as set forth in the Registration
Statement and the Prospectus. Based on the assumptions stated in the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth therein. Except as set forth in
the Registration Statement or the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
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(h) The descriptions in the Registration Statement and the Prospectus
of contracts and other documents are accurate and present fairly the information
required to be disclosed, and there are no contracts or other documents required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the Regulations which
have not been so described or filed as required.
(i) KPMG LLP, the accountants who have certified certain of the
financial statements filed and to be filed with the Commission as part of the
Registration Statement and the Prospectus, are independent public accountants
within the meaning of the Act and Regulations. The financial statements and
schedules and the notes thereto filed as part of the Registration Statement and
included in the Prospectus are complete, correct and present fairly the
financial position of the Company as of the dates thereof, and the results of
operations and changes in financial position of the Company for the periods
indicated therein, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved except
as otherwise stated in the Registration Statement and the Prospectus. The
selected financial data set forth in the Registration Statement and the
Prospectus present fairly the information shown therein and have been compiled
on a basis consistent with that of the audited and unaudited financial
statements included in the Registration Statement and the Prospectus.
(j) The Company has filed with the appropriate federal, state and
local governmental agencies, and all appropriate foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such returns and all assessments
received by it to the extent that the same have become due; and the provisions
for income taxes payable, if any, shown on the financial statements filed with
or as part of the Registration Statement are sufficient for all accrued and
unpaid foreign and domestic taxes, whether or not disputed, and for all periods
to and including the dates of such financial statements. Except as disclosed in
writing to the Representative, the Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the period for
assessment or collection of any income taxes and is not a party to any pending
action or proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or collection of
taxes have been asserted against the Company.
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(k) The outstanding Common Shares and outstanding options and warrants
to purchase Common Shares have been duly authorized and validly issued. The
outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
Company has duly reserved a sufficient number of Common Shares from its
authorized but unissued Common Shares for issuance upon exercise of the
outstanding options and warrants. None of the outstanding Common Shares or
options or warrants to purchase Common Shares has been issued in violation of
the preemptive rights of any stockholder of the Company. None of the holders of
the outstanding Common Shares is subject to personal liability solely by reason
of being such a holder. The offers and sales of the outstanding Common Shares
and outstanding options and warrants to purchase Common Shares were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized Common Shares and outstanding options and warrants to purchase Common
Shares conform to the descriptions thereof contained in the Registration
Statement and Prospectus. Except as set forth in the Registration Statement and
the Prospectus, on the Effective Date and the Closing Date, there will be no
outstanding options or warrants for the purchase of, or other outstanding rights
to purchase or acquire, Common Shares or securities convertible into Common
Shares.
(l) No securities of the Company have been sold by the Company or by
or on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(m) The issuance and sale of the Shares have been duly authorized and,
when the Shares have been issued and duly delivered against payment therefor as
contemplated by this Agreement, the Shares will be validly issued, fully paid
and nonassessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. The Shares will not be subject
to preemptive rights of any stockholder of the Company.
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(n) The issuance and sale of the Common Shares issuable upon exercise
of the Representative's Warrants have been duly authorized and, when such Common
Shares have been duly delivered against payment therefor, as contemplated by the
Representative's Warrant Agreement, such Common Shares will be validly issued,
fully paid and nonassessable. Holders of Common Shares issuable upon the
exercise of the Representative's Warrants will not be subject to personal
liability solely by reason of being such holders. Neither the Representative's
Warrants nor the Common Shares issuable upon exercise thereof will be subject to
preemptive rights of any stockholder of the Company. The Company has reserved a
sufficient number of Common Shares from its authorized but unissued Common
Shares for issuance upon exercise of the Representative's Warrants in accordance
with the provisions of the Representative's Warrant Agreement. The
Representative's Warrants conform to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(o) The Company is not in violation of, or in default under, (i) any
term or provision of its Certificate of Incorporation or By-Laws, each as
amended; (ii) any material term or provision or any financial covenants of any
indenture, mortgage, contract, commitment or other agreement or instrument to
which it is a party or by which it or any of its property or business is or may
be bound or affected; or (iii) any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of the Company's properties
or businesses. The Company owns, possesses or has obtained all governmental and
other (including those obtainable from third parties) Permits, necessary to own
or lease, as the case may be, and to operate its properties, whether tangible or
intangible, and to conduct its respective business and operations as presently
conducted and all such Permits are outstanding and in good standing, and there
are no proceedings pending or, to the best of the Company's knowledge after due
investigation, threatened, or any basis therefor, seeking to cancel, terminate
or limit such Permits.
(p) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's
knowledge after due investigation, threatened against the Company or involving
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the Company's properties or business which, if determined adversely to the
Company, would, individually or in the aggregate, result in any material adverse
change in the financial position, stockholders' equity, results of operations,
properties, business, management or affairs or business prospects of the Company
or which question the validity of the capital stock of the Company or this
Agreement or of any action taken or to be taken by the Company pursuant to, or
in connection with, this Agreement; nor, to the best of the Company's knowledge
after due investigation, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no outstanding
orders, judgments or decrees of any court, governmental agency or other tribunal
naming the Company and enjoining the Company from taking, or requiring the
Company to take, any action, or to which the Company, or the Company's
properties or business is bound or subject.
(q) Neither the Company nor any of its affiliates has incurred any
liability for any finder's fees or similar payments in connection with the
transactions herein contemplated.
(r) The Company owns or possesses adequate and enforceable rights to
use all patents, patent applications, trademarks, service marks, copyrights,
rights, trade secrets, confidential information, processes and formulations used
or proposed to be used in the conduct of its business as described in the
Prospectus (collectively the "Intangibles"); to the best of the Company's
knowledge, after due investigation the Company has not infringed nor is
infringing upon the rights of others with respect to the Intangibles; and the
Company has not received any notice of conflict with the asserted rights of
others with respect to the Intangibles which could, singly or in the aggregate,
materially adversely affect its business as presently conducted or the
prospects, financial condition or results of operations of the Company, and the
Company knows of no basis therefor; and, to the best of the Company's knowledge,
no others have infringed upon the Intangibles of the Company.
(s) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus and the Company's latest financial
statements, the Company has not incurred any material liability or obligation,
direct or contingent, or entered into any material transaction, whether or not
incurred in the ordinary course of business, and has not sustained any material
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loss or interference with its business from fire, storm, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there have not been, and prior to the Closing Date referred to below
there will not be, any changes in the capital stock or any material increases in
the long-term debt of the Company or any material adverse change in or affecting
the general affairs, management, financial condition, stockholders' equity,
results of operations or prospects of the Company, otherwise than as set forth
or contemplated in the Prospectus.
(t) The Company does not own any real property. The Company has good
title to all personal property (tangible and intangible) owned by it, free and
clear of all security interests, charges, mortgages, liens, encumbrances and
defects, except such as are described in the Registration Statement and
Prospectus or such as do not materially affect the value or transferability of
such property and do not interfere with the use of such property made, or
proposed to be made, by the Company. The leases, licenses or other contracts or
instruments under which the Company leases, holds or is entitled to use with
respect to any property, real or personal, are valid, subsisting and enforceable
only with such exceptions as are not material and do not interfere with the use
of such property made, or proposed to be made, by the Company, and all rentals,
royalties or other payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid, and the Company, to the best of the
Company's knowledge after due investigation, is not aware of any other party in
default thereunder and, to the best of the Company's knowledge after due
investigation, no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default thereunder. The Company
has not received notice of any violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties. The
Company has adequately insured its properties against loss or damage by fire or
other casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar businesses
located in its geographic area.
(u) Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its properties or
businesses is or may be bound or affected and to which reference is made in the
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Prospectus has been duly and validly executed, is in full force and effect in
all material respects and is enforceable against the parties thereto in
accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and the Company, to the best of the Company's knowledge
after due investigation is not, and any other party is not, in default
thereunder and, to the best of the Company's knowledge after due investigation,
no event has occurred which, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
None of the material provisions of such contracts or instruments
violates any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court having jurisdiction over the Company
or any of its respective assets or businesses, including, without limitation,
the United States Food and Drug Administration (the "FDA") and the United States
Federal Trade Commission (the "FTC"), and comparable foreign state and local
regulatory authorities.
(v) The employment, consulting, confidentiality and non-competition
agreements between the Company and its officers, employees, consultants and any
other third parties described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, the Company does not have
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974.
(x) To the best of the Company's knowledge after due investigation, no
labor problem exists with any of the Company's employees or is imminent which
could adversely affect the Company.
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(y) The Company has not directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
in all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(z) The Shares have been approved for listing on the Nasdaq SmallCap
Market and the Boston Stock Exchange.
(aa) Neither the Company nor any of its officers or directors has
distributed, and will not distribute prior to the later of (i) the Closing Date
or any date on which Optional Shares are to be purchased, as the case may be, or
(ii) the expiration of the period during which dealers effecting transactions in
the Shares may be required to deliver a Prospectus, any offering material in
connection with the offering and sale of the Shares, other than any Preliminary
Prospectus, the Prospectus, the Registration Statement and other materials, if
any, permitted by the Act.
(ab) The Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with the offering of the Shares were
identical to the versions of the Preliminary Prospectus and Prospectus filed
with the Commission via the Commission's Electronic Data Gathering Analysis and
Retrieval System, except to the extent permitted by Regulation S-T.
(ac) The Company has provided to Blank Rome Xxxxxx Xxxxxxxxxx LLP,
counsel to the Underwriters ("Underwriters' Counsel"), all agreements,
certificates, correspondence and other items, documents and information in its
possession and/or available to it requested by such counsel's Corporate Review
Memorandum dated April 3, 2000 (the "Memorandum") and the Company's response to
such Memorandum is accurate and complete in all material respects.
Any certificate or questionnaire signed by an officer of the Company
and delivered to any Underwriter or to Underwriters' Counsel shall be deemed to
be a representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
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5. Certain Covenants of the Company. The Company covenants with the several
Underwriters as follows:
(a) The Company will not at any time, whether before the Effective
Date or thereafter during such period as the Prospectus is required by law to be
delivered in connection with the sales of the Shares by the Representative or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representative has not been previously
advised and furnished a copy, or to which the Representative shall object in
writing.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Representative immediately,
and, if requested by the Representative, confirm such advice in writing, (i)
when the Registration Statement, or any post-effective amendment to the
Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary Prospectus, or of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or of the initiation of any
proceedings for any of such purposes. The Company will use its best efforts to
prevent the issuance of any such stop order or of any order preventing or
suspending such use and to obtain as soon as possible the lifting thereof, if
any such order is issued.
(c) The Company will deliver to each Underwriter, without charge, from
time to time until the Effective Date, as many copies of each Preliminary
Prospectus as each Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to each Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as each Underwriter may
reasonably request. The Company has furnished or will furnish to the
Representative a signed copy of the Registration Statement as originally filed
and of all amendments thereto, whether filed before or after the Registration
Statement becomes effective, a copy of all exhibits filed therewith and a signed
copy of all consents and certificates of experts.
15
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 5(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and sale
under the securities or Blue Sky laws relating to the offering in such
jurisdictions as the Representative may reasonably designate, provided that no
such qualification will be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
(f) The Company will make generally available to its securityholders,
in the manner specified in Rule 158(b) under the Act, and deliver to the
Representative and Underwriters' Counsel as soon as practicable and in any event
not later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earning statement meeting the requirements of Rule 158(a) under the Act covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
16
(g) For a period of five years from the Effective Date, the Company
will deliver to the Representative and to Underwriters' Counsel on a timely
basis (i) a copy of each report or document, including, without limitation,
reports on Forms 8-K, 10-K (or 10-KSB), 10-Q (or 10-QSB) and exhibits thereto,
filed or furnished to the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. (the "NASD") on the date each such
report or document is so filed or furnished; (ii) as soon as practicable, copies
of any reports or communications (financial or other) of the Company mailed to
its securityholders; (iii) as soon as practicable, a copy of any Schedule 13D,
13G, 14D-1 or 13E-3 received or prepared by the Company from time to time; (iv)
monthly statements setting forth such information regarding the Company's
results of operations and financial position (including balance sheet, profit
and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company; and (v) such additional
information concerning the business and financial condition of the Company as
the Representative may from time to time reasonably request and which can be
prepared or obtained by the Company without unreasonable effort or expense. The
Company will furnish to its stockholders annual reports containing audited
financial statements and such other periodic reports as it may determine to be
appropriate or as may be required by law.
(h) Neither the Company nor any person that controls, is controlled by
or is under common control with the Company will take any action designed to or
which might be reasonably expected to cause or result in the stabilization or
manipulation of the price of the Common Shares.
(i) If the transactions contemplated by this Agreement are
consummated, the Representative shall retain the $50,000 previously paid to it,
and the Company will pay or cause to be paid the following: all costs and
expenses incident to the performance of the obligations of the Company under
this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto; the printing and mailing of the Selected Dealer Agreement,
the issuance and delivery of the Shares to the Underwriters; all taxes, if any,
on the issuance of the Shares; the fees, expenses and other costs of qualifying
the Shares for sale under the Blue Sky or securities laws of those states in
which the Shares are to be offered or sold, including fees and disbursements of
17
counsel in connection therewith, and including those of such local counsel as
may have been retained for such purpose; the filing fees incident to securing
any required review by the NASD and either the Boston Stock Exchange or Pacific
Stock Exchange; the cost of printing and mailing the "Blue Sky Survey"; the cost
of furnishing to the Underwriters copies of the Registration Statement,
Preliminary Prospectuses and the Prospectus as herein provided; the costs of
placing "tombstone advertisements" in any publications which may be selected by
the Representative; and all other costs and expenses incident to the performance
of the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 5(i).
In addition, at the Closing Date or the Option Closing Date, as the
case may be, the Representative will deduct from the payment for the Offered
Shares or any Optional Shares three percent (3%) of the gross proceeds of the
offering (less the sum of $50,000 previously paid to the Representative), as
payment for the Representative's nonaccountable expense allowance relating to
the transactions contemplated hereby, which amount will include the fees and
expenses of Underwriters' Counsel (other than the fees and expenses of
Underwriters' Counsel relating to Blue Sky qualifications and registrations,
which, as provided for above, shall be in addition to the three percent (3%)
nonaccountable expense allowance and shall be payable directly by the Company to
Underwriters' Counsel on or prior to the Closing Date).
(j) If the transactions contemplated by this Agreement or related
hereto are not consummated because the Company decides not to proceed with the
offering for any reason or because the Representative decides not to proceed
with the offering as a result of a breach by the Company of its representations,
warranties or covenants in the Agreement or as a result of adverse changes in
the affairs of the Company, then the Company will be obligated to reimburse the
Representative for its accountable expenses up to the sum of $75,000, inclusive
of the $50,000 previously paid to the Representative by the Company. In all
cases other than those set forth in the preceding sentence, if the Company or
the Representative decide not to proceed with the offering, the Company will
only be obligated to reimburse the Representative for its accountable expenses
up to $25,000, and inclusive of the amounts previously paid to the
Representative by the Company. In no event, however, will the Representative, in
the event the offering is terminated, be entitled to retain or receive more than
an amount equal to its actual accountable out-of-pocket expenses.
18
(k) The Company intends to apply the net proceeds from the sale of the
Shares for the purposes set forth in the Prospectus. Except as set forth in the
Prospectus, no portion of the net proceeds from the sale of the Shares will be
used to repay any indebtedness.
(l) During the period of twelve (12) months from the Effective Date
hereof, neither the Company nor any of its officers, directors or
securityholders will offer for sale or sell or otherwise dispose of, directly or
indirectly, any securities of the Company, in any manner whatsoever, whether
pursuant to Rule 144 of the Regulations or otherwise, and no holder of
registration rights relating to securities of the Company will exercise any such
registration rights, in either case, without the prior written consent of the
Representative. During the 12-month period commencing one year from the date
hereof, no officer, director or securityholder who beneficially owns or holds 5%
or more of the outstanding Common Shares (calculated in accordance with Rule
13d-3(d)(i) under the Exchange Act) may sell any Common Shares in excess of the
amount that they would be allowed to sell if they were deemed "affiliates" of
the Company and their shares were deemed "restricted," as those terms are
defined in Rule 144 promulgated under the Securities Act, without the prior
written consent of the Representative.
(m) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the twelve (12) months from the Effective Date,
without the Representative's prior written consent.
(n) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
19
(o) The Company will use its best efforts to maintain the listing of
the Shares on the Nasdaq SmallCap Market and will, if so qualified, list the
Shares, and maintain such listing for so long as qualified, on the Nasdaq
National Market System.
(p) The Company will, concurrently with the Effective Date, register
the class of equity securities of which the Shares are a part under Section
12(b) or 12(g) of the Exchange Act and the Company will maintain such
registration for a minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares, the Representative and
its successors will have the right to designate a nominee for election, at its
or their option, either as a member of or a non-voting advisor to the Board of
Directors of the Company (which board, during such period, shall meet at least
quarterly, have no members who are related (by marriage or otherwise) to any of
its Board members, and be comprised of members, a majority of which are not
otherwise affiliated with the Company, its management or its founders), and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of three (3) years from the Effective Date. Each of the Company's
current officers, directors and stockholders agree to vote all of the Common
Shares owned by such person or entity so as to elect and continue in office such
nominee of the Representative. Following the election of such nominee as a
director or advisor, such person shall receive no more or less compensation than
is paid to other non-officer directors of the Company for attendance at meetings
of the Board of Directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging and transportation. The Company
agrees to indemnify and hold such director or advisor harmless, to the maximum
extent permitted by law, against any and all claims, actions, awards and
judgments arising out of his service as a director or advisor and, in the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, to include such director or advisor as an
insured under such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to the
Representative insofar as it may be or may be alleged to be responsible for such
director or advisor.
20
If the Representative does not exercise its option to designate a
member of or advisor to the Company's Board of Directors, the Representative
shall nonetheless have the right to send a representative (who need not be the
same individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give the Representative notice of each such
meeting and to provide the Representative with an agenda and minutes of the
meeting no later than it gives such notice and provides such items to the
directors.
(r) The Company agrees to employ the Representative or a designee of
the Representative as a financial consultant for a period of two (2) years from
the Closing Date, pursuant to a separate written consulting agreement between
the Company and the Representative and/or such designee (the "Consulting
Agreement"), which will provide that the Company will pay the Representative
(exclusive of any accountable out-of-pocket expenses) a finder's fee in the
event the Representative originates a financing, merger, acquisition, joint
venture or other transaction to which the Company is a party. The Company
further agrees to deliver a duly and validly executed copy of said Consulting
Agreement, in form and substance acceptable to the Representative, on the
Closing Date.
(s) The Company shall retain a transfer agent for the Common Shares,
reasonably acceptable to the Representative, for a period of three (3) years
from the Effective Date. In addition, for a period of three (3) years from the
Effective Date, the Company, at its own expense, shall cause such transfer agent
to provide the Representative, if so requested in writing, with copies of the
Company's daily transfer sheets, and, when requested by the Representative, a
current list of the Company's securityholders, including a list of the
beneficial owners of securities held by a depository trust company and other
nominees.
(t) The Company hereby agrees, at its sole cost and expense, to supply
and deliver to the Representative and Underwriters' Counsel, within a reasonable
period from the date hereof, four bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
21
(u) The Company shall, as of the date hereof, have applied for listing
in Standard & Poor's Corporation Records Service (including annual report
information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual not
being sufficient for these purposes) and shall use its best efforts to have the
Company listed in such manual and shall maintain such listing for a period of
five (5) years from the Effective Date.
(v) For a period of five (5) years from the Effective Date, the
Company shall provide the Representative, on a not less than annual basis, with
internal forecasts setting forth projected results of operations for each
quarterly and annual period in the two (2) fiscal years following the respective
dates of such forecasts. Such forecasts shall be provided to the Representative
more frequently than annually if prepared more frequently by management, and
revised forecasts shall be prepared and provided to the Representative when
required to reflect more current information, revised assumptions or actual
results that differ materially from those set forth in the forecasts.
(w) For a period of three (3) years from the Effective Date, or until
such earlier time as the Common Shares are listed on the New York Stock Exchange
or the American Stock Exchange, the Company shall cause its legal counsel to
provide the Representative with a list, to be updated at least annually, of
those states in which the Common Shares may be traded in non-issuer transactions
under the Blue Sky laws of the 50 states.
(x) For a period of three (3) years from the Effective Date, the
Company shall continue to retain KPMG LLP (or such other nationally recognized
accounting firm acceptable to the Representative) as the Company's independent
public accountants.
(y) For a period of three (3) years from the Effective Date, the
Company, at its expense, shall cause its then independent certified public
accountants, as described in Section 5(x) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other equivalent report) and the
mailing of quarterly financial information to stockholders.
22
(z) For a period of twenty-five (25) days from the Effective Date, the
Company will not issue press releases or engage in any other publicity without
the Representative's prior written consent, other than normal and customary
releases issued in the ordinary course of the Company's business or those
releases required by law.
(aa) The Company will not increase or authorize an increase in the
compensation of its five (5) most highly paid employees greater than those
increases provided for in their employment agreements with the Company in effect
as of the Effective Date and disclosed in the Registration Statement, without
the prior written consent of the Representative, for a period of three (3) years
from the Effective Date.
(ab) For a period of three (3) years from the Effective Date, the
Company will promptly submit to the Representative copies of accountant's
management reports and similar correspondence between the Company's accountants
and the Company.
(ac) For a period of two (2) years from the Effective Date, the
Company will not offer or sell any of its securities (i) pursuant to Regulation
S promulgated under the Act or (ii) at a discount to market or in a discounted
transaction, without the prior written consent of the Representative, other than
the issuance of Common Shares upon exercise of options and warrants outstanding
on the Closing Date and described in the Prospectus.
(ad) For a period of three (3) years from the Effective Date, the
Company will provide to the Representative ten (10) day's written notice prior
to any issuance by the Company or its subsidiaries of any equity securities or
securities exchangeable for or convertible into equity securities of the
Company, except for (i) Common Shares issuable upon exercise of currently
outstanding options and warrants or conversion of currently outstanding
convertible securities and (ii) options available for future grant pursuant to
any stock option plan in effect on the Effective Date and the issuance of shares
of Common Shares upon the exercise of such options.
23
(ae) Prior to the Effective Date and for a period of two (2) years
thereafter, the Company will retain a financial public relations firm reasonably
acceptable to the Representative.
(af) For a period of five (5) years from the Effective Date, the
Company will cause its Board of Directors to meet, either in person or
telephonically, a minimum of four (4) times per year and will hold a
stockholder's meeting at least once per annum.
(ag) Prior to the Effective Date, the Company shall have obtained
Director's and Officer's insurance naming the Representative as an additional
insured party, in an amount equal to twenty-five percent (25%) of the gross
proceeds of the offering, and the Company will maintain such insurance for a
period of at least three (3) years from the Closing Date.
6. Conditions of the Underwriters' Obligation to Purchase the Offered
Shares from the Company. The obligation of the several Underwriters to purchase
and pay for the Offered Shares which each such Underwriter has agreed to
purchase from the Company is subject (as of the date hereof and the Closing
Date) to the accuracy of and compliance in all material respects with the
representations and warranties of the Company herein, to the accuracy of the
statements of the Company or its officers made pursuant hereto, to the
performance in all material respects by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement will have become effective not later
than 10:00 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Representative may
agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Representative's or the Company's knowledge, will be
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriters' Counsel.
(b) At the time that this Agreement is executed and at the Closing
Date, there will have been delivered to the Representative a signed opinion of
each of Morse, Zelnick, Rose & Lander LLP, Xxxxxxxxx & Xxxxxxx and ___________,
24
counsels for the Company (individually and collectively, "Company Counsel"),
dated as of the date hereof or the Closing Date, as the case may be (and any
other opinions of counsel referred to in such opinion of Company Counsel or
relied upon by Company Counsel in rendering their opinion), reasonably
satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with full power
and authority, corporate and other, and with all Permits necessary to own or
lease, as the case may be, and operate its properties, whether tangible or
intangible, and to conduct its business as described in the Registration
Statement. To the best of Company Counsel's knowledge, the Company has no
subsidiaries. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company.
(ii) The Company has full power and authority, corporate and
other, to execute, deliver and perform this Agreement, the Consulting Agreement
and the Representative's Warrant Agreement and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement, the Consulting Agreement and the Representative's Warrant Agreement
by the Company, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms of this
Agreement, the Consulting Agreement and the Representative's Warrant Agreement
have been duly authorized by all necessary corporate action, and this Agreement
has been duly executed and delivered by the Company. This Agreement is (assuming
for the purposes of this opinion that it is valid and binding upon the other
party thereto) and, when executed and delivered by the Company on the Closing
Date, each of the Consulting Agreement and the Representative's Warrant
Agreement will be, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions set forth in Section 7 hereof and the contribution
provisions set forth in Section 8 hereof may be limited by the federal
securities laws or public policy underlying such laws.
25
(iii) The execution, delivery and performance of this Agreement,
the Consulting Agreement and the Representative's Warrant Agreement by the
Company, the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this Agreement,
the Consulting Agreement and the Representative's Warrant Agreement do not, and
will not, with or without the giving of notice or the lapse of time, or both,
(A) result in a violation of the Certificate of Incorporation or By-Laws, each
as amended, of the Company, (B) result in a breach of or conflict with any terms
or provisions of, or constitute a default under, or result in the modification
or termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to any indenture, mortgage, note, contract, commitment or other
material agreement or instrument to which the Company is a party or by which the
Company, or any of the Company's properties or assets are or may be bound or
affected; (C) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company, or any of the Company's properties or business;
or (D) have any effect on any Permit necessary for the Company to own or lease,
as the case may be, and operate its properties or conduct its business or the
ability of the Company to make use of its properties or business.
(iv) To the best of Company Counsel's knowledge, no Permits of
any court or governmental agency or body (other than under the Act, the
Regulations and applicable state securities or Blue Sky laws) are required for
the valid authorization, issuance, sale and delivery of the Shares or the
Underwriter's Warrants to the Underwriter, and the consummation by the Company
of the transactions contemplated by this Agreement, the Consulting Agreement or
the Underwriter's Warrant Agreement.
(v) The Registration Statement has become effective under the
Act; to the best of Company Counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or are pending, threatened or contemplated
under the Act or applicable state securities laws.
26
(vi) The Registration Statement and the Prospectus, as of the
Effective Date, and each amendment or supplement thereto as of its effective or
issue date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which Company Counsel need not
express an opinion) comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company.
(vii) The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents (including opinions of such counsel); and the response to Item
13 of Form SB-2 have been reviewed by Company Counsel, and, based upon such
review, are accurate in all material respects and present fairly the information
required to be disclosed, and there are no material statutes, regulations or
government classifications, or, to the best of Company Counsel's knowledge,
material contracts or documents, of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
None of the material provisions of the contracts or instruments
described above violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company, or any of its assets or
businesses, including, without limitation, the FDA and FTC and comparable
foreign, state and local regulatory authorities.
(viii) The outstanding Common Shares and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any stockholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and sales
27
of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants to purchase Common Shares conform to the descriptions thereof
contained in the Registration Statement and Prospectus. To the best of Company
Counsel's knowledge, except as set forth in the Prospectus, no holders of any of
the Company's securities has any rights, "demand", "piggyback" or otherwise, to
have such securities registered under the Act.
(ix) The issuance and sale of the Shares have been duly
authorized and, when the Shares have been issued and duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. The Shares
are not subject to preemptive rights of any stockholder of the Company. The
certificates representing the Shares are in proper legal form.
(x) The issuance and sale of the Common Shares issuable upon
exercise of the Representative's Warrants have been duly authorized and, when
such Common Shares have been duly delivered against payment therefor, as
contemplated by the Representative's Warrant Agreement, such Common Shares will
be validly issued, fully paid and nonassessable. Holders of Common Shares
issuable upon exercise of the Representative's Warrants will not be subject to
personal liability solely by reason of being such holders. Neither the
Representative's Warrants nor the Common Shares issuable upon exercise thereof
will be subject to preemptive rights of any stockholder of the Company. The
Company has reserved a sufficient number of Common Shares from its authorized,
but unissued Common Shares for issuance upon exercise of the Representative's
Warrants in accordance with the provisions of the Representative's Warrant
Agreement. The Representative's Warrants conform to the descriptions thereof in
the Registration Statement and Prospectus.
(xi) Upon delivery of the Offered Shares to the Underwriters
against payment therefor as provided in this Agreement, the Underwriters
(assuming each is a bona fide purchaser within the meaning of the Uniform
Commercial Code) will acquire good title to the Offered Shares, free and clear
of all liens, encumbrances, equities, security interests and claims.
28
(xii) Assuming that the Representative exercises the
over-allotment option to purchase any of the Optional Shares and makes payment
therefor in accordance with the terms of this Agreement, upon delivery of the
Optional Shares to the Representative hereunder, the Representative (assuming it
is a bona fide purchaser within the meaning of the Uniform Commercial Code) will
acquire good title to such Optional Shares, free and clear of any liens,
encumbrances, equities, security interests and claims.
(xiii) To the best of Company Counsel's knowledge, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, foreign or domestic, or
before any private arbitration tribunal, pending or threatened against the
Company, or involving the Company's properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company which,
individually and in the aggregate, is not material.
(xiv) The Company owns or possesses adequate and enforceable
rights to use all patents, patent applications, trademarks, service marks,
copyrights, rights, trade secrets, confidential information, processes and
formulations used or proposed to be used in the conduct of its business as
described in the Prospectus (collectively the "Intangibles"); to the best of
Company Counsel's knowledge, the Company has not infringed nor is infringing
with the rights of others with respect to the Intangibles; and, to the best of
Company Counsel's knowledge, the Company has not received any notice that it has
or may have infringed, is infringing upon or is conflicting with the asserted
rights of others with respect to the Intangibles which might, singly or in the
aggregate, materially adversely affect its business, results of operations or
financial condition and such counsel is not aware of any licenses with respect
to the Intangibles which are required to be obtained by the Company other than
those licenses which the Company has obtained. The opinions described in this
Section 6(b)(xiv) may be given by Company Counsel in reliance on the opinion of
an attorney, reasonably acceptable to Underwriter's Counsel, practicing in the
patent area.
29
Company Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement (except
as to the financial statements and other financial data contained therein, as to
which Company Counsel need not express an opinion), on the Effective Date,
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or that (B) the Prospectus (except as to the
financial statements and other financial data contained therein, as to which
Company Counsel need not express an opinion) contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each counsel giving an opinion must give the opinion set
forth in this paragraph as to such subject matter of its opinion.
In rendering its opinion pursuant to this Section 6(b), Company
Counsel may rely upon the certificates of government officials and officers of
the Company as to matters of fact, provided that Company Counsel shall state
that they have no reason to believe, and do not believe, that they are not
justified in relying upon such opinions or such certificates of government
officials and officers of the Company as to matters of fact, as the case may be.
The opinion letters delivered pursuant to this Section 6(b) shall
state that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
(c) At the Closing Date, there will have been delivered to the
Representative a signed opinion of Underwriters' Counsel, dated as of the
Closing Date, to the effect that the opinions delivered pursuant to Section 6(b)
hereof appear on their face to be appropriately responsive to the requirements
of this Agreement, except to the extent waived by the Representative, specifying
the same, and with respect to such related matters as the Representative may
require.
30
(d) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
Prospectus indicate might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the business, property,
financial condition or results of operations of the Company, other than as set
forth in the Registration Statement and the Prospectus. At the Closing Date,
there will be delivered to the Representative a certificate signed by the
Chairman of the Board or the President or a Vice President of the Company, dated
the Closing Date, evidencing compliance with the provisions of this Section 6(d)
and stating that the representations and warranties of the Company set forth in
Section 4 hereof were accurate and complete in all material respects when made
on the date hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants and
31
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to or as of the Closing Date; and that, as of
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to the best of his knowledge, are contemplated or threatened. In
addition, the Representative will have received such other and further
certificates of officers of the Company as the Representative or Underwriters'
Counsel may reasonably request.
(e) At the time that this Agreement is executed and at the Closing
Date, the Representative will have received a signed letter from KPMG LLP, dated
the date such letter is to be received by the Representative and addressed to
it, confirming that it is a firm of independent public accountants within the
meaning of the Act and Regulations and stating that: (i) insofar as reported on
by them, in their opinion, the financial statements of the Company included in
the Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable Regulations; (ii) on the
basis of procedures and inquiries (not constituting an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
unaudited interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus and the latest available unaudited
interim financial statements of the Company, if more recent than that appearing
in the Registration Statement and Prospectus, inquiries of officers of the
Company responsible for financial and accounting matters as to the transactions
and events subsequent to the date of the latest audited financial statements of
the Company, and a reading of the minutes of meetings of the stockholders, the
Board of Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, nothing has come to their
attention which, in their judgment, would indicate that (A) during the period
from the date of the latest financial statements of the Company appearing in the
Registration Statement and Prospectus to a specified date not more than three
business days prior to the date of such letter, there have been any decreases in
net current assets or net assets as compared with amounts shown in such
financial statements or decreases in net sales or decreases [increases] in total
or per share net income [loss] compared with the corresponding period in the
preceding year or any change in the capitalization or long-term debt of the
Company, except in all cases as set forth in or contemplated by the Registration
32
Statement and the Prospectus, and (B) the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting principles and
practices on a basis substantially consistent with the audited financial
statements included in the Registration Statement or the Prospectus; and (iii)
they have compared specific dollar amounts, numbers of shares, numerical data,
percentages of revenues and earnings, and other financial information pertaining
to the Company set forth in the Prospectus (with respect to all dollar amounts,
numbers of shares, percentages and other financial information contained in the
Prospectus, to the extent that such amounts, numbers, percentages and
information may be derived from the general accounting records of the Company,
and excluding any questions requiring an interpretation by legal counsel) with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.
(f) There shall have been duly tendered to the Representative
certificates representing the Offered Shares to be sold on the Closing Date.
(g) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Offered Shares by the
Underwriters or the sale of the Shares by the Representative.
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date or
the Option Closing Date, as the case may be, for any member firm of the NASD to
execute transactions (as principal or as agent) in the Shares, and no
proceedings for the purpose of taking such action shall have been instituted or
shall be pending, or, to the best of the Representative's or the Company's
knowledge, shall be contemplated by the Commission or the NASD. The Company
represents at the date hereof, and shall represent as of the Closing Date or
Option Closing Date, as the case may be, that it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD.
33
(i) The Company meets the current and any existing and proposed
criteria for inclusion of the Shares on Nasdaq SmallCap Market.
(j) All proceedings taken at or prior to the Closing Date or the
Option Closing Date, as the case may be, in connection with the authorization,
issuance and sale of the Shares shall be reasonably satisfactory in form and
substance to the Representative and to Underwriters' Counsel, and such counsel
shall have been furnished with all such documents, certificates and opinions as
they may request for the purpose of enabling them to pass upon the matters
referred to in Section 6(c) hereof and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance by
the Company with any of the conditions herein contained.
(k) As of the date hereof, the Company will have delivered to the
Representative the written undertakings of its officers, directors and
securityholders and/or registration rights holders, as the case may be, to the
effect of the matters set forth in Sections 5(l) and (q).
If any of the conditions specified in this Section 6 have not been
fulfilled, this Agreement may be terminated by the Representative on notice to
the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, each officer, director, partner, employee and agent of each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse each Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
34
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or on behalf of
the Company, filed in any jurisdiction in order to qualify the Shares under the
securities laws thereof (hereinafter "application"), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Representative or an Underwriter through the
Representative or any such person through the Representative for use therein;
provided, however, that the indemnity agreement contained in this Section 7(a)
with respect to any Preliminary Prospectus will not inure to the benefit of an
Underwriter (or to the benefit of any other person that may be indemnified
pursuant to this Section 7(a)) if (A) the person asserting any such losses,
claims, damages, expenses or liabilities purchased the Shares which are the
subject thereof from such Underwriter or other indemnified person; (B) such
Underwriter or other indemnified person failed to send or give a copy of the
Prospectus to such person at or prior to the written confirmation of the sale of
such Shares to such person; and (C) the Prospectus did not contain any untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such cause, claim, damage, expense or liability.
(b) Each Underwriter (including specifically each person that may be
substituted for an underwriter as provided in Section 10 hereof) agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof), to
which they or any of them may become subject under the Act or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
35
reimburse the Company and each such director, officer or controlling person for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions, whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such Underwriter expressly for use therein.
(c) Promptly after receipt of notice of the commencement of any action
in respect of which indemnity may be sought against any indemnifying party under
this Section 7, the indemnified party will notify the indemnifying party in
writing of the commencement thereof, and the indemnifying party will, subject to
the provisions hereinafter stated, assume the defense of such action (including
the employment of counsel satisfactory to the indemnified party and the payment
of expenses) insofar as such action relates to an alleged liability in respect
of which indemnity may be sought against the indemnifying party. After notice
from the indemnifying party of its election to assume the defense of such claim
or action, the indemnifying party shall no longer be liable to the indemnified
party under this Section 7 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, in the reasonable
judgment of the indemnified party or parties, it is advisable for the
indemnified party or parties to be represented by separate counsel, the
indemnified party or parties shall have the right to employ a single counsel to
represent the indemnified parties who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the indemnified parties
thereof against the indemnifying party, in which event the fees and expenses of
36
such separate counsel shall be borne by the indemnifying party. Any party
against whom indemnification may be sought under this Section 7 shall not be
liable to indemnify any person that might otherwise be indemnified pursuant
hereto for any settlement of any action effected without such indemnifying
party's consent, which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
(subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any director of the Company, any officer of the Company who
signed the Registration Statement and any controlling person of the Company) as
one entity and the Underwriters (including, for this purpose, any contribution
by or on behalf of each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee and agent of the Underwriters) as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, so that the
Underwriters are responsible for the proportion thereof equal to the percentage
which the underwriting discount per Share set forth on the cover page of the
Prospectus represents of the initial public offering price per Share set forth
on the cover page of the Prospectus and the Company is responsible for the
remaining portion; provided, however, that if applicable law does not permit
such allocation, then, if applicable law permits, other relevant equitable
considerations such as the relative fault of the Company and the Underwriters in
connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by the
Company or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the
37
Underwriters agree that it would be unjust and inequitable if the respective
obligations of the Company and the Underwriters for contribution were determined
by pro rata or per capita allocation of the aggregate losses, liabilities,
claims, damages and expenses or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 8. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) will be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act and each officer, director, partner,
employee and agent of the Underwriters will have the same rights to contribution
as the Underwriters, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and Representations.
The respective indemnity and contribution agreements of the Company and the
Underwriters contained in Sections 7 and 8 hereof, and the representations and
warranties of the Company contained herein shall remain operative and in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of the Underwriters, the
Company or any of its directors and officers, or any controlling person referred
to in said Sections, and shall survive the delivery of, and payment for, the
Shares.
10. Substitution of Underwriters.
(a) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase does not exceed 10% of the total number of the Offered
38
Shares, the non-defaulting Underwriters will be obligated severally to purchase
and pay for (in addition to the number of Offered Shares set forth opposite
their names in Schedule A attached hereto) the full number of Offered Shares
agreed to be purchased by all defaulting Underwriters, and not so purchased, in
proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several nondefaulting Underwriters, may
take up and pay for all or any part of such additional Offered Shares to be
purchased by each such Underwriter under this Section 10(a), and may postpone
the Closing Date to a time not exceeding three full business days after the
Closing Date determined as provided in Section 2 hereof.
(b) If one or more Underwriters should default in its or their
obligation to purchase and pay for any Offered Shares hereunder and if the
aggregate number of such Offered Shares which all Underwriters so defaulting
have agreed to purchase exceeds 10% of the total number of Offered Shares, or if
one or more Underwriters for any reason permitted hereunder should cancel its or
their obligation to purchase and pay for Offered Shares hereunder, the
non-cancelling and non-defaulting Underwriters (hereinafter called the
"remaining Underwriters") will have the right to purchase such Offered Shares in
such proportion as may be agreed among them at the Closing Date determined as
provided in Section 2 hereof. If the remaining Underwriters do not purchase and
pay for such Offered Shares at such Closing Date, the Closing Date will be
postponed for 24 hours and the remaining Underwriters will have the right to
purchase such Offered Shares, or to substitute another person or persons to
purchase the same, or both, at such postponed Closing Date. If purchasers have
not been found for such Offered Shares by such postponed Closing Date, the
Closing Date will be postponed for a further 24 hours, and the Company will have
the right to substitute another person or persons, reasonably satisfactory to
the Representative to purchase such Offered Shares at such second postponed
Closing Date. If it shall be arranged for the remaining Underwriters or
substituted underwriters to take up the Offered Shares of the defaulting
Underwriter or Underwriters as provided in this Section, (A) the Company shall
have the right to postpone the time of delivery for a period of not more than
three (3) full Business Days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
39
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary. If the Company has not found such purchasers for
such Offered Shares by such second postponed Closing Date, then this Agreement
will automatically terminate, and neither the Company nor the remaining
Underwriters will be under any obligation under this Agreement (except that the
Company and the Underwriters will remain liable to the extent provided in
Sections 7 and 8 hereof and the Company will also remain liable to the extent
provided in Section 5(j) hereof). As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10(b). Nothing in Section 11 hereof will relieve a defaulting
Underwriter from the liability for its default and nothing in this Section 10(b)
will obligate any Underwriter to purchase or find purchasers for any Offered
Shares in excess of those agreed to be purchased by such Underwriter under the
terms of Section 2 hereof.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Representative, or the Representative, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Representative, after the Registration Statement becomes
effective, releases the Offered Shares for public offering. The time when the
Representative "releases the Offered Shares for public offering" for the
purposes of this Section 11 means the time when the Representative releases for
publication the first newspaper advertisement, which is subsequently published,
relating to the Offered Shares, or the time when the Representative releases for
delivery to members of a selling group copies of the Prospectus and an offering
letter or an offering telegram relating to the Offered Shares, whichever will
first occur.
(b) This Agreement, including without limitation, the obligation to
purchase the Shares and the obligation to purchase the Optional Shares after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Representative, by notice given to
the Company prior to delivery of and payment for all the Offered Shares or such
Optional Shares, as the case may be, if, prior to such time, any of the
following shall have occurred: (i) the Company withdraws the Registration
40
Statement from the Commission or the Company does not or cannot expeditiously
proceed with the public offering; (ii) the representations and warranties in
Section 4 hereof are not materially correct or cannot be complied with; (iii)
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange will have been suspended; (iv) limited or minimum prices will
have been established on either such Exchange; (v) a banking moratorium will
have been declared either by federal or New York State authorities; (vi) any
other restrictions on transactions in securities materially affecting the free
market for securities or the payment for such securities, including the Offered
Shares or the Optional Shares, will be established by either of such Exchanges,
by the Commission, by any other federal or state agency, by action of the
Congress or by Executive Order; (vii) trading in any securities of the Company
shall have been suspended or halted by any national securities exchange, the
NASD or the Commission; (viii) there has been a materially adverse change in the
condition (financial or otherwise), prospects or obligations of the Company;
(ix) the Company will have sustained a material loss, whether or not insured, by
reason of fire, flood, accident or other calamity; (x) any action has been taken
by the government of the United States or any department or agency thereof
which, in the judgment of the Representative, has had a material adverse effect
upon the market or potential market for securities in general; or (xi) the
market for securities in general or political, financial or economic conditions
will have so materially adversely changed that, in the judgment of the
Representative, it will be impracticable to offer for sale, or to enforce
contracts made by the Underwriters for the resale of, the Offered Shares or the
Optional Shares, as the case may be.
(c) If this Agreement is terminated pursuant to Section 6 hereof or
this Section 11 or if the purchases provided for herein are not consummated
because any condition of the Underwriters' obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company to comply with any of the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriters for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
41
12. Information Furnished by the Underwriters to the Company. It is hereby
acknowledged and agreed by the parties hereto that for the purposes of this
Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and 8
hereof, the only information given by the Underwriters to the Company for use in
the Prospectus are the statements set forth in the last sentence of the_____
paragraph on the cover page, the statement appearing in the ____ paragraph on
page __ with respect to stabilizing the market price of Shares, the information
in the __ paragraph on page __ with respect to concessions and reallowances, and
the information in the ___ paragraph on page ___ with respect to the
determination of the public offering price, as such information appears in any
Preliminary Prospectus and in the Prospectus.
13. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telegraphed to, the following
addresses: if to the Representative or the Underwriters, to Whale Securities
Co., L.P., Attention: Xxxxxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, with a copy to Blank Rome Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X.
Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if to the
Company, addressed to it at Delcath Systems, Inc., 0000 Xxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000, Attention: X.X. Xxxx, with a copy to Morse, Zelnick, Rose &
Lander, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx X.
Xxxxxxx, Esq.
This Agreement shall be deemed to have been made and delivered in New York
City and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York. The
Company and the Underwriters each (1) agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (2) waives
any objection which the Company may have now or hereafter to the venue of any
such suit, action or proceeding, and (3) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. Each of the Company and the Underwriters further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
42
Court, County of New York, or in the United States District Court for the
Southern District of New York and agrees that service of process upon the
Company mailed by certified mail to the Company's address shall be deemed in
every respect effective service of process upon the Company, in any such suit,
action or proceeding.
14. Parties in Interest. This Agreement is made solely for the benefit of
the Underwriters, the Company and, to the extent expressed, any person
controlling the Company or the Underwriters, each officer, director, partner,
employee and agent of the Underwriters, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares from the
Underwriters, as such purchaser.
43
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement between the Company and the Underwriters in
accordance with its terms.
Very truly yours,
DELCATH SYSTEMS, INC.
By
--------------------------------------
Name: X.X. Xxxx
Title: Chief Executive Officer
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman
Acting on behalf of itself as the
Representative of the several Underwriters
Named in Schedule A hereto
44
SCHEDULE A TO THE UNDERWRITING AGREEMENT
----------------------------------------
Underwriter Number of Shares
----------- ----------------
Whale Securities Co., L.P.
---------
Total 2,000,000
=========
