EXHIBIT 1.1
Pharmos Corporation
10,500,000 Shares*
Common Stock
($0.03 par value)
Underwriting Agreement
New York, New York
December 16, 2003
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
As Representatives of the several Underwriters,
c/o ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Ladies and Gentlemen:
Pharmos Corporation, a Nevada corporation (the "Company"), proposes
to issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, 10,500,000 shares of Common Stock, $0.03 par value ("Common
Stock") of the Company (said shares to be issued and sold by the Company being
hereinafter called the "Underwritten Securities"). The Company also proposes to
grant to the Underwriters an option to purchase up to 1,575,000 additional
shares of Common Stock (the "Option Securities"; the Option Securities, together
with the Underwritten Securities, being hereinafter called the "Securities"). To
the extent there are no additional Underwriters listed on Schedule I other than
you, the term Representatives as used herein shall mean you, as Underwriters,
and the terms Representatives and Underwriters shall mean either the singular or
plural as the context requires.
The terms which follow, when used in this Agreement, shall have the
meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder
"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.
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* Plus an option to purchase from the Company up to 1,575,000 additional
shares to cover over-allotments.
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"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or supplements thereto and any Rule
462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Prospectus" shall mean the prospectus or any prospectus supplement
relating to the Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean
the form of final prospectus or prospectus supplement relating to the Securities
included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a), including exhibits and financial statements, as
amended, effective at the Execution Time and, in the event any post-effective
amendment thereto, supplement or any Rule 462(b) Registration Statement becomes
effective prior to the Closing Date (as hereinafter defined), shall also mean
such registration statement as so amended or supplemented or any Rule 462(b)
Registration Statement, as the case may be. Such term shall include any Rule
430A Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462(b)" refer to such rules under
the Act.
"Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the registration statement referred to in Section 1(a)
hereof.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, each Underwriter that:
(a) The Company has prepared and filed with the Commission a
Registration Statement (File Number 333-110578) on Form S-3, for the
registration, pursuant to Rule 415 under the Act, of the offering
and sale of the Securities, which registration statement, as
amended, was declared effective on December 2, 2003. The Company
filed with the Commission on December 2, 2003, a preliminary
prospectus supplement. The Company will next file with the
Commission a final prospectus in accordance with
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Rules 430A and 424(b) or a final prospectus supplement. The Company
has included in the Registration Statement, as amended at the
Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Registration Statement and the Prospectus. As filed, such amendment
and form of final prospectus, or such final prospectus as
supplemented, shall contain all Rule 430A Information, together with
all other such required information, and, except to the extent the
Representatives shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to you prior to
the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and
other changes as the Company has advised you, prior to the Execution
Time, will be included or made therein. Any reference herein to the
Registration Statement or the Prospectus, in either case as amended
or supplemented, shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed under the Act on or before the effective
date of the Registration Statement or the date of the Prospectus, as
the case may be, and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration
Statement, or the Prospectus shall be deemed to refer to and include
(i) the filing of any document under the Exchange Act after the
effective date of the Registration Statement or the date of the
Prospectus, as the case may be, which is incorporated therein by
reference and (ii) any such document so filed.
(b) The documents incorporated by reference in the
Registration Statement or the Prospectus, when such documents became
effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so
filed and incorporated by reference in the Registration Statement or
Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein , in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter of
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Securities through the Representatives expressly for use in the
Prospectus, as amended or supplemented.
(c) Pharmos Ltd., a corporation organized under the laws of
the State of Israel, is the only active and significant subsidiary
of the Company as defined by Rule 1-02 of Regulation S-X (the
"Subsidiary"). The Company's other subsidiaries are inactive and
have no material assets or liabilities.
(d) Each of the Company and the Subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is chartered
or organized with full corporate power and authority to own, lease
or license its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(e) All the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in
the Prospectus, all outstanding shares of capital stock of the
Subsidiary are owned by the Company, free and clear of any perfected
security interest and any other security interests, claims, liens or
encumbrances.
(f) The Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms
in all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock have been duly
and validly authorized and issued and are fully paid and
nonassessable; the Securities being sold hereunder have been duly
and validly authorized, and, when issued, delivered to and paid for
by the Underwriters pursuant to this Agreement, will be fully paid
and nonassessable; the Securities are duly listed, and admitted and
authorized for trading, subject to official notice of issuance and
evidence of satisfactory distribution on the Nasdaq SmallCap Market;
the certificates for the Securities are in valid and sufficient
form; the holders of outstanding shares of capital stock of the
Company are not entitled to preemptive or other rights to subscribe
for the Securities, except for such rights of the investors in the
Company's May 30, 2003 private placement (the "Private Placement"),
which rights have been effectively waived and, except as set forth
in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding.
(g) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or
5
filed as required; and the statements in the Prospectus under the
heading "Our Business" fairly summarize the matters therein
described.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms.
(i) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of
1940, as amended.
(j) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in
connection with the transactions contemplated herein, except (i)
such as have been obtained or made under the Act or with respect to
the Nasdaq SmallCap Market; (ii) such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Securities; or (iii) such as may be
required by the National Association of Securities Dealers, Inc. in
connection with the purchase and distribution of the Securities by
the Underwriters in the manner contemplated herein and in the
Prospectus.
(k) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated
nor the fulfillment of the terms hereof will conflict with, result
in a breach or violation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the
Subsidiary pursuant to (i) the charter or by-laws of the Company or
the Subsidiary or (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which
the Company or the Subsidiary is a party or bound or to which its or
their property is subject, all of which have been duly authorized,
executed and delivered by the Company or the Subsidiary, as the case
may be, or (iii) any statute, law, rule, regulation, judgment, order
or decree applicable to the Company or the Subsidiary of any court,
regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company
or the Subsidiary or any of its or their properties.
(l) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement
except for such rights granted in the Private Placement as have been
effectively waived.
(m) The consolidated financial statements, including the notes
thereto, and supporting schedules included or incorporated by
reference in the Prospectus and the Registration Statement present
fairly the financial
6
condition, results of operations and cash flows of the Company and
the consolidated Subsidiary as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as otherwise noted
therein). No other financial statements or supporting schedules are
required to be included in the Registration Statement. The other
financial and statistical information included or incorporated by
reference in the Registration Statement and the Prospectus present
fairly the information included therein and have been prepared on a
basis consistent with that of the financial statements that are
included or incorporated by reference in the Registration Statement
and the Prospectus and the books and records of the respective
entities presented therein.
(n) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or the Subsidiary or its or their property is pending
or, to the knowledge of the Company, threatened that (i) could
reasonably be expected to have a material adverse effect on the
performance of this Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole,
whether or not arising from transactions in the ordinary course of
business; and no labor disturbance by or dispute with the employees
of the Company or the Subsidiary exists or is threatened or is
imminent that could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary,
taken as a whole, whether or not arising from transactions in the
ordinary course of business.
(o) Each of the Company and the Subsidiary, owns or leases all
such properties as are necessary to the conduct of its operations as
presently conducted; neither the Company nor the Subsidiary is in
violation of any law, rule or regulation of any federal, state or
local governmental or regulatory authority applicable to it or is
not in non-compliance with any term or condition of, or has failed
to obtain and maintain in effect, any license, certificate, permit
or other governmental authorization required for the ownership or
lease of its property or the conduct of its business, except to the
extent that any such violation, non-compliance or failure to obtain
such approvals, as the case may be, would individually or in the
aggregate have a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and the Subsidiary, taken as a whole, whether or not arising
from transactions in the ordinary course of business; and the
Company has not received notice of any proceedings relating to the
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revocation or material modification of any such license,
certificate, permit or other authorization.
(p) Neither the Company nor the Subsidiary is in violation or
default of (i) any provision of its charter or by-laws, or (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which it is a party or bound or
to which its property is subject.
(q) PricewaterhouseCoopers LLP, who have certified certain
financial statements of the Company and the consolidated Subsidiary
and delivered their report with respect to the audited consolidated
financial statements and schedules included or incorporated by
reference in the Prospectus, are independent public accountants with
respect to the Company within the meaning of the Act.
(r) There are no transfer taxes or other similar fees or
charges under federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the
Company or sale by the Company of the Securities.
(s) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to
file would not have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole,
whether or not arising from transactions in the ordinary course of
business) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in
good faith or as described in or as would not have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary,
taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated
in the Prospectus.
(t) The Company and the Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which they are engaged; neither the Company nor the Subsidiary
has been refused any insurance coverage sought or applied for; and
neither the Company nor the Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from
similar insurers as may be
8
necessary to continue its business at a cost that would not have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business.
(u) The Subsidiary is not currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making
any other distribution on the Subsidiary's capital stock, from
repaying to the Company any loans or advances to the Subsidiary from
the Company or from transferring any of the Subsidiary's property or
assets to the Company.
(v) The Company and the Subsidiary own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service ▇▇▇▇
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the
conduct of the Company's business as now conducted or as proposed in
the Prospectus to be conducted. Except as set forth in the
Prospectus under the caption "Our Business--Patents, Proprietary
Rights and Licenses" (a) there are no rights of third parties to any
such Intellectual Property; (b) there is no material infringement by
third parties of any such Intellectual Property; (c) there is no
pending or threatened action, suit, proceeding or claim by others
challenging the Company's rights in or to any such Intellectual
Property, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (d) there is no pending or
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property, and the
Company is unaware of any facts which would form a reasonable basis
for any such claim; (e) there is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others
that the Company infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of
others, and the Company is unaware of any other fact which would
form a reasonable basis for any such claim; (f) to the Company's
knowledge, there is no U.S. patent or published U.S. patent
application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by
or licensed to the Company or that interferes with the issued or
pending claims of any such Intellectual Property; and (g) there is
no prior art of which the Company is aware that may render any U.S.
patent held by the Company invalid or any U.S. patent application
held by the Company unpatentable which has not been disclosed to the
U.S. Patent and Trademark Office. Neither the Company nor the
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any item listed in the first sentence
of this paragraph (u) or notice of infringement of or conflict with
asserted rights
9
of others listed in the second sentence of this paragraph (u) which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse
effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary,
taken as a whole, whether or not arising from transactions in the
ordinary course of business.
(w) The Company and the Subsidiary (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have
received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) have not received
notice of any actual or potential liability under any environmental
law, except where such non-compliance with Environmental Laws,
failure to receive required permits, licenses or other approvals, or
liability would not, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business. Neither the Company
nor the Subsidiary has been named as a "potentially responsible
party" under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
(x) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws on the
business, operations and properties of the Company and the
Subsidiary, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties). On the basis of
such review, the Company has reasonably concluded that such
associated costs and liabilities would not, singly or in the
aggregate, have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole,
whether or not arising from transactions in the ordinary course of
business.
(y) Each of the Company and the Subsidiary maintains a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's
10
general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(z) The Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act and files reports with the
Commission on its Electronic Data Gathering, Analysis and Retrieval
System ("▇▇▇▇▇"). The Common Stock is registered pursuant to Section
12(g) of the Exchange Act, the outstanding shares of Common Stock
are listed for quotation on the Nasdaq SmallCap Market and the
Company is in full compliance with the listing requirements of the
Nasdaq SmallCap Market. The Company has taken no action designed to,
or likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act or de-listing the Common Stock
from the Nasdaq SmallCap Market, nor has the Company received any
notification that the Commission or Nasdaq SmallCap Market is
contemplating terminating such registration or listing.
(aa) Neither the Company nor any of its affiliates (within the
meaning of Rule 144 under the Act) has, prior to the date hereof,
made any offer or sale of any securities which could be integrated
for purposes of the Act with the offer and sale of the Securities
pursuant to the Registration Statement. Except as disclosed in the
Registration Statement and the Prospectus, neither the Company nor
any of its affiliates has sold or issued any relevant security
during the six-month period preceding the date of the Prospectus,
including, but not limited to, any sale pursuant to Rule 144A or
Regulations D or S under the Act, other than shares of Common Stock
issued pursuant to employee benefit plans, qualified stock option
plans or the employee compensation plans or pursuant to outstanding
options, rights or warrants described in the Registration Statement
and the Prospectus, and no such sale or issuance described in the
Registration Statement or Prospectus was made other than in
compliance with the provisions of the Act.
(bb) The conditions for use of Form S-3 to register the
offering of the Securities under the Act, as set forth in the
general instructions to such Form, have been satisfied.
(cc) The Company is in compliance in all material respects
with applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") that are effective and is actively taking
steps to ensure that it will be in compliance with other applicable
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act upon the effectiveness of such
provisions.
(dd) The minimum funding standard under Section 302 of the
Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder ("ERISA"), has
been
11
satisfied by each "pension plan" (as defined in Section 3(2) of
ERISA) which has been established or maintained by the Company
and/or the Subsidiary, and the trust forming part of each such plan
which is intended to be qualified under Section 401 of the Internal
Revenue Code of 1986, as amended, is so qualified; each of the
Company and the Subsidiary has fulfilled its obligations, if any,
under Section 515 of ERISA; neither the Company nor the Subsidiary
maintains or is required to contribute to a "welfare plan" (as
defined in Section 3(1) of ERISA) which provides retiree or other
post-employment welfare benefits or insurance coverage (other than
"continuation coverage" (as defined in Section 602 of ERISA)); each
pension plan and welfare plan established or maintained by the
Company and/or the Subsidiary is in compliance in all material
respects with the currently applicable provisions of ERISA; and
neither the Company nor the Subsidiary has incurred or could
reasonably be expected to incur any withdrawal liability under
Section 4201 of ERISA, any liability under Section 4062, 4063, or
4064 of ERISA, or any other liability under Title IV of ERISA.
(ee) Neither the Company nor the Subsidiary nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or the Subsidiary is aware of or has taken
any action, directly or indirectly, that would result in a violation
by such persons of the Foreign Corrupt Practice Act of 1977, as
amended and the rules and regulations thereunder ("FCPA"),
including, without limitation, making use of the mails or any means
or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any "foreign
official" as such term is defined in the FCPA or any foreign
political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA and the Company, the
Subsidiary and, to the knowledge of the Company, its affiliates have
conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure,
and which are reasonably expected to continue to ensure, continued
compliance therewith.
(ff) The human clinical trials, animal studies and other
preclinical tests conducted by the Company or the Subsidiary or in
which the Company or the Subsidiary has participated or that are
described in the Registration Statement and Prospectus or the
results of which are referred to in the Registration Statement or
Prospectus, and such studies and tests conducted on behalf of the
Company or the Subsidiary or that the Company or the Subsidiary
intends to rely on in support of regulatory approval by the United
States Food and Drug Administration (the "FDA") or any foreign
regulatory agencies, were and, if still pending, are being conducted
in all material respects in accordance with experimental protocols,
procedures and controls generally used by qualified experts in
12
the preclinical or clinical study of new drugs or diagnostics as
applied to comparable products to those being developed by the
Company; the descriptions of the results of such studies, test and
trials contained in the Registration Statement and Prospectus are
accurate and complete in all material respects, and except as set
forth in the Registration Statement and Prospectus, the Company has
no knowledge of any other trials, studies or tests, the results of
which the Company believes reasonably call into question the
clinical trial results described or referred to in the Registration
Statement and Prospectus when viewed in the context in which such
results are described and the clinical state of development; and
neither the Company nor the Subsidiary has received any notices or
correspondence from the FDA or any other domestic or foreign
governmental agency requiring the termination, suspension or
modification (other than such modifications as are normal in the
regulations, any such modifications which are material have been
disclosed to you in writing) of any animal studies, preclinical
tests or clinical trials conducted by or on behalf of the Company or
the Subsidiary or in which the Company or the Subsidiary has
participated that are described in the Registration Statement or
Prospectus or the results of which are referred to in the
Registration Statement or Prospectus.
(gg) The FDA has not and no applicable foreign regulatory
agency has, commenced, or, to the knowledge of the Company,
threatened to initiate, any action against the Company or the
Subsidiary.
(hh) To the Company's knowledge, all of the manufacturing
facilities and operations of its and the Subsidiary's suppliers of
products intended to be sold in the United States are in compliance
with applicable FDA regulations, including current "Good
Manufacturing Practices," and meet sanitation standards set by the
Federal Food, Drug and Cosmetic Act of 1938, as amended, and all
manufacturing facilities and operations of its and the Subsidiary's
suppliers of products intended to be sold outside the United States
are in compliance with applicable foreign regulatory requirements
and standards, except to the extent that the failure to be in
compliance with such regulations and standards would not have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business.
(ii) The Company has operated its business in the United
States and currently is in compliance in all material respects with
all applicable rules, regulations and policies of the FDA, and the
Subsidiary has operated and currently is in compliance in all
material respects with the foreign regulations applicable to it.
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(jj) The Company has satisfied and will continue to satisfy
all conditions and requirements of the instruments of approval
granted to it by the Office of Chief Scientist of the Israeli
Ministry of Industry and Trade (the "Office of the Chief Scientist")
and any applicable laws and regulations, including the Law for the
Encouragement of Industrial Research and Development, 1984, with
respect to any research and development grants given to it by such
office, and is in full compliance with the repayment of all
royalties, interest and penalties due under such laws and
regulations. All information supplied by the Company with respect to
such applications was true, correct and complete in all material
respects when supplied to the appropriate authorities.
Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a
purchase price of $2.585 per share, the amount of the Underwritten
Securities set forth opposite such Underwriter's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company
hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to 1,575,000 shares of Option
Securities at the same purchase price per share as the Underwriters
shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the
Underwritten Securities by the Underwriters. Said option may be
exercised, in whole or in part, at any time on or before the 30th
day after the date of the Prospectus upon written notice by the
Representatives to the Company setting forth the number of shares of
the Option Securities as to which the several Underwriters are
exercising the option and the settlement date. Delivery of
certificates for the shares of Option Securities, and payment
therefor, shall be made as provided in Section 3 hereof. The number
of shares of the Option Securities to be purchased by each
Underwriter shall be the same percentage of the total number of
shares of the Option Securities to be purchased by the several
Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.
14
3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
December 19, 2003, or such time on such later date not more than three Business
Days after the foregoing date as the Representatives shall designate, which date
and time may be postponed by agreement between the Representatives and the
Company or as provided in Section 9 hereof (such date and time of delivery and
payment for the Securities being herein called the "Closing Date"). Delivery of
the Securities shall be made to the Representatives for the respective accounts
of the several Underwriters against payment by the several Underwriters through
the Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same day funds to an account specified by
the Company. Delivery of the Underwritten Securities and the Option Securities
shall be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct. Certificates for the Securities shall
be registered in such names and in such denominations as the Representatives may
request not less than two full Business Days in advance of the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company will deliver the
Option Securities (at the expense of the Company) to the Representatives on the
date specified (the "Option Closing Date") by the Representatives (which shall
be within three Business Days after exercise of said option), for the respective
accounts of the several underwriters against payment by the several Underwriters
through the Representatives of the purchase price thereof to or upon the order
of the Company by wire transfer payable in same day funds to an account
specified by the Company. Delivery of the Option Securities shall be made
through facilities of The Depository Trust Company unless the Representatives
shall otherwise instruct. Certificates for the Option Securities shall be
registered in such names and in such denominations as the Representatives may
request not less than two full Business Days in advance of the Closing Date.
If settlement for the Option Securities occurs after the Closing
Date, the Company will deliver to the Representatives on the settlement date for
the Option Securities, and the obligation of the Underwriters to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters
that:
(a) The Company will use its best efforts to cause any
amendment to the Registration Statement to become effective. Prior
to the termination of the offering of the Securities, the Company
will not file any
15
amendment of the Registration Statement or supplement to the
Prospectus or any Rule 462(b) Registration Statement unless the
Company has furnished the Representatives a copy for their review
prior to filing and will not file any such proposed amendment or
supplement to which the Representatives reasonably object. Subject
to the foregoing sentence, if the Registration Statement has become
or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto
to be filed with the Commission pursuant to the applicable paragraph
of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to the Representatives of such timely filing.
The Company will promptly advise the Representatives (i) when the
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any
Rule 462(b) Registration Statement shall have been filed with the
Commission, (ii) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have
been filed or become effective, (iii) of any request by the
Commission or its staff for any amendment of the Registration
Statement, or any Rule 462(b) Registration Statement, or for any
supplement to the Prospectus or for any additional information, (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the institution or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event
occurs as a result of which the Prospectus as then supplemented
would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein in
the light of the circumstances under which they were made not
misleading, or if it shall be necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Act, the
Company promptly will (i) notify the Representatives of any such
event, (ii) prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect
such compliance and (iii) supply any supplemented Prospectus to you
in such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and the Subsidiary
which will
16
satisfy the provisions of Section 11(a) of the Act and Rule 158
under the Act.
(d) The Company will furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including exhibits thereto) and to each
other Underwriter a copy of the Registration Statement (without
exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of
the Prospectus and any supplement thereto as the Representatives may
reasonably request.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate, will maintain
such qualifications in effect so long as required for the
distribution of the Securities; provided that in no event shall the
Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising
out of the offering or sale of the Securities, in any jurisdiction
where it is not now so subject.
(f) The Company will not, for a period of 90 days following
the Execution Time, without the prior written consent of ▇.▇.
▇▇▇▇▇▇▇▇▇, Towbin, offer, sell or contract to sell, pledge, or
otherwise dispose of (or enter into any transaction which is
designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or
any affiliate of the Company or any person in privity with the
Company or any affiliate of the Company) directly or indirectly,
including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or
establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16
of the Exchange Act, any other shares of Common Stock or any
securities convertible into, or exercisable, or exchangeable for,
shares of Common Stock, or publicly announce an intention to effect
any such transaction, provided, however, that the Company may issue
and sell Common Stock pursuant to any employee stock option plan,
stock ownership plan or dividend reinvestment plan of the Company in
effect at the Execution Time and the Company may issue Common Stock
issuable upon the conversion of securities or the exercise of
warrants outstanding at the Execution Time and disclosed in the
Prospectus.
(g) The Company will comply with all applicable securities and
other applicable laws, rules and regulations, including, without
limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and to use its best efforts to
cause the Company's directors and officers, in their capacities as
such, to comply with such
17
laws, rules and regulations, including, without limitation, the
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(h) The Company will not take, directly or indirectly, any
action designed to or that would constitute or that might reasonably
be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.
(i) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or
reproduction and filing with the Commission of the Registration
Statement (including financial statements and exhibits thereto), the
Prospectus, and each amendment or supplement to either of them; (ii)
the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such
copies of the Registration Statement, the Prospectus, and all
amendments or supplements to either of them, as may, in each case,
be reasonably requested for use in connection with the offering and
sale of the Securities; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the
Securities, including any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (iv) the printing
(or reproduction) and delivery of this Agreement, any Blue Sky
memorandum and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the
Securities; (v) the registration of the Securities under the Act and
the listing of the Securities on the Nasdaq SmallCap Market; (vi)
any registration or qualification of the Securities for offer and
sale under the securities or Blue Sky laws of the several states
(including filing fees and the reasonable fees and expenses of
counsel for the Underwriters relating to such registration and
qualification); (vii) any filings required to be made with the
National Association of Securities Dealers, Inc. (including filing
fees and the reasonable fees and expenses of counsel for the
Underwriters relating to such filings); (viii) the transportation
and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective
purchasers of the Securities; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; and (x) all
other costs and expenses incident to the performance by the Company
of its obligations hereunder.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and the Option Closing Date, if applicable,
to the accuracy of the statements of the Company
18
made in any certificates pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions:
(a) The Prospectus as amended or supplemented in relation to
the applicable Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the Representatives' reasonable satisfaction;
(b) The Company shall have requested and caused counsel for
the Company to have furnished to the Representatives their opinion,
dated the Closing Date and addressed to the Representatives, to the
effect that:
(i) each of the Company and the Subsidiary is validly existing
as a corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate power and
authority to own, lease or license as the case may be, and to operate its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification;
(ii) all the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the Subsidiary are
owned by the Company, free and clear of any perfected security interest
and, to the knowledge of such counsel, after due inquiry, any other
security interests, claims, liens or encumbrances;
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Registration
Statement and Prospectus; the outstanding shares of Common Stock and all
other outstanding equity securities of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable and
issued in compliance with the Act; the Securities have been duly and
validly authorized, and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities are duly listed, and admitted and authorized
for trading, subject to official notice of issuance and evidence of
satisfactory distribution on the Nasdaq SmallCap Market; the certificates
for the
19
Securities are in valid and sufficient form; and the holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Securities except for such
rights granted in the Private Placement, which have been effectively
waived; and except as set forth in the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
rights to convert any obligations into or exchange any securities for,
shares of capital stock of or ownership interests in the Company are
outstanding;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary or its or their property of a character required
to be disclosed in the Registration Statement which is not adequately
disclosed in the Prospectus, and there is no franchise, contract or other
document of a character required to be described in the Registration
Statement or Prospectus, or to be filed as an exhibit thereto, which is
not described or filed as required and each such disclosed franchise,
contract and other document has, if required, been duly and validly
authorized, executed and delivered by the Company or the Subsidiary;
(v) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or threatened
and the Registration Statement and the Prospectus (other than the
financial statements and other financial and statistical information
contained therein as to which such counsel need express no opinion) comply
as to form in all material respects with the applicable requirements of
the Act;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended;
(viii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions contemplated herein, except such as have
been obtained under the Act and such as may be required under the Blue Sky
laws of any jurisdiction in connection with the purchase and distribution
of the Securities by the Underwriters in the manner contemplated in this
Agreement and in the Prospectus and such other approvals as have been
obtained;
20
(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation, or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or the Subsidiary pursuant to, (i) the
charter or by-laws of the Company or the Subsidiary or (ii) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition or covenant or
instrument to which the Company or the Subsidiary is a party or bound or
to which its or their property is subject, or (iii) any statute, law,
rule, regulation, judgment, order or decree applicable to the Company or
the Subsidiary of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
the Company or the Subsidiary or any of its or their properties, which
violation or default would, in the case of clauses (ii) and (iii) above,
either individually or in the aggregate with all other violations and
defaults referred to in this paragraph (ix) (if any), have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary, taken
as a whole, whether or not arising from transactions in the ordinary
course of business;
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement except
for such rights granted in the Private Placement, which have been
effectively waived; and
(xi) such counsel has no reason to believe that on the
Effective Date or the date the Registration Statement was last deemed
amended the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus as of its date and on the Closing Date and Option Closing
Date, if applicable, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading (in each case, other than the financial
statements and other financial and statistical information contained
therein, as to which such counsel need express no opinion);
(xii) To such counsel's knowledge, the Company is not in
material violation of any material legal conditions or requirements
stipulated by the instruments of approval granted to it by the Office of
Chief Scientist, with respect to any research and development grants given
to it by such office, except such violations, individually or in the
aggregate, as would not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the
21
Company and the Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials. Alternatively, counsel may render such opinions relating only to the
laws of the State of New York and the federal laws of the United States if other
counsel satisfactory to counsel for the Underwriters renders those opinions
referred to above relating to the laws of other jurisdictions. References to the
Prospectus in this paragraph (b) shall also include any supplements thereto at
the Closing Date and Option Closing Date, if applicable.
(c) The Representatives shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Underwriters, such opinion
or opinions, dated the Closing Date and Option Closing Date, if
applicable, and addressed to the Representatives, with respect to
the issuance and sale of the Securities, the Registration Statement,
the Prospectus (together with any supplement thereto) and other
related matters as the Representatives may reasonably require, and
the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such
matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or
the President and the principal financial or accounting officer of
the Company, dated the Closing Date and Option Closing Date, if
applicable, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any
supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date and Option
Closing Date, if applicable, with the same effect as if made on the
Closing Date and Option Closing Date, if applicable, and the Company has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date and
Option Closing Date, if applicable;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the Company's knowledge, threatened; and
22
(iii) since the date of the most recent financial statements
included in the Prospectus, there has been no material adverse change in
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole, whether or
not arising from transactions in the ordinary course of business.
(e) The Company shall have requested and caused
PricewaterhouseCoopers LLP to have furnished to the Representatives,
at the Execution Time and at the Closing Date and Option Closing
Date, if applicable, letters, dated respectively as of the Execution
Time, as of the Closing Date and as of the Option Closing Date, if
applicable, in form and substance satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Act and containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements
and certain financial information contained or incorporated by
reference in the Registration Statement and the Prospectus; provided
that the letter delivered to the Representatives shall use a
"cut-off date" not earlier than the date five (5) days prior to the
date hereof.
(f) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement and
the Prospectus, there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (e) of
this Section 6 or (ii) any change, or any development involving a
prospective change, in or affecting the condition (financial or
otherwise), prospects, earnings, business or properties of the
Company and the Subsidiary, taken as a whole, whether or not arising
from transactions in the ordinary course of business, the effect of
which, in any case referred to in clause (i) or (ii) above, is, in
the sole judgment of the Representatives, so material and adverse as
to make it impractical or inadvisable to proceed with the offering
or delivery of the Securities as contemplated by the Registration
Statement and the Prospectus.
(g) Prior to the Closing Date, the Company shall have
furnished to the Representatives a letter substantially in the form
of Exhibit A hereto from each officer and director of the Company
addressed to the Representatives.
(h) The Securities shall have been listed and admitted and
authorized for trading on the Nasdaq SmallCap Market, and
satisfactory evidence of such action shall have been provided to the
Representatives.
(i) The Representatives shall have received duly executed
copies of waivers, satisfactory in form and substance to counsel for
the underwriters, by the investors in the Company's Private
Placement of any
23
rights to participate in this offering and such other rights as
shall be specified by counsel for the Underwriters.
(j) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Representatives and counsel
for the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be canceled at, or at any time prior to, the Closing Date or the
Option Closing Date, if applicable, by the Representatives. Notice of such
cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on the Closing Date
or the Option Closing Date, if applicable.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally through ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin on demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Securities.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the
meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement for the
registration of the Securities as originally filed or in any
amendment thereof, or in any preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, arise
out of or are based upon the omission or alleged omission to state
therein a material fact
24
required to be stated therein or necessary to make the statements
therein not misleading, or arise out of or are based upon any act or
failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the
Common Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered
above and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter through the Representatives specifically for
inclusion therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each
of its officers who signs the Registration Statement, and each
person who controls the Company within the meaning of either the Act
or the Exchange Act, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to
written information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any Underwriter may otherwise have.
The Company acknowledges that the following statements set forth
under the heading "Underwriting": (i) the list of Underwriters and
their respective participation in the sale of the securities, (ii)
the sentences related to concessions and reallowances and (iii) the
paragraph related to stabilization syndicate covering transactions
in any preliminary Prospectus supplement and the final Prospectus
supplement constitute the only information furnished in writing by
or on behalf of the several Underwriters for inclusion in any
Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party
other than the indemnification
25
obligation provided in paragraph (a) or (b) above. The indemnifying
party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought
(in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth
below); provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying
party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 8 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, the Company and
the Underwriters severally agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one
or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company
on the one hand and by the Underwriters on the other from the
offering of the Securities; provided, however, that in no case shall
any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be
responsible for any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by such
Underwriter hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any
26
reason, the Company and the Underwriters severally shall contribute
in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the
one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from
the offering (before deducting expenses) received by it, and
benefits received by the Underwriters shall be deemed to be equal to
the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information provided by the Company on the one hand or the
Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled
to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Underwriter within the meaning of either the
Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution
as such Underwriter, and each person who controls the Company within
the meaning of either the Act or the Exchange Act, each officer of
the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any
27
nondefaulting Underwriter or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the Nasdaq SmallCap Market or trading in securities generally
on the New York Stock Exchange or the Nasdaq SmallCap Market, (ii) a banking
moratorium shall have been declared either by federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities involving the United States or any material escalation of
hostilities involving Israel, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the sole judgment of the Representatives,
impractical or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Prospectus.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancelation of this
Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed and confirmed to them, care of ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇; or, if sent to the Company, will
be mailed, delivered or telefaxed and confirmed to it at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, to the attention of President.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
28
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
[Remainder of page intentionally left blank.]
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
Pharmos Corporation
By: /s/ Haim Aviv
-------------------------
Name: Haim Aviv
Title: Chairman & Chief
Executive Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chairman, Capital Markets
For itself and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
SCHEDULE I
Underwriters Number of Shares
------------ to be Purchased
----------------
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin ................................... 6,825,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp. ..................................... 3,675,000
----------
Total .................................................... 10,500,000
==========
EXHIBIT A
Pharmos Corporation
Public Offering of Common Stock
December ___, 2003
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Corp.
As Representatives of the several Underwriters,
c/o ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between Pharmos
Corporation a Nevada corporation (the "Company"), and [each of] you as
representative[s] of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $0.03 par value (the "Common
Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin, offer, sell, contract to sell, pledge or
otherwise dispose of, file (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by actual
disposition as effective economic disposition due to cash settlement or
otherwise) by the undersigned or any affiliate of the undersigned or any person
in privity with the undersigned or any affiliate of the undersigned), directly
or indirectly, including the filing (or participation in the filing of a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of Common Stock of the Company or any securities convertible into or
exercisable or exchangeable for such Common Stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of the Underwriting Agreement, other than shares of Common Stock disposed of as
bona fide gifts approved by ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin.
[Remainder of page intentionally left blank.]
32
If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Yours very truly,
By:
Name:
Title:
