INHALE THERAPEUTIC SYSTEMS
Common Stock
UNDERWRITING AGREEMENT
----------------------
▇▇▇▇▇▇ BROTHERS INC.
BANCAMERICA ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
VECTOR SECURITIES INTERNATIONAL, INC.
VOLPE, BROWN, ▇▇▇▇▇▇ & COMPANY
c/▇ ▇▇▇▇▇▇ BROTHERS INC.
Three World Financial Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Inhale Therapeutic Systems, a California corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule 1
hereto (the "Underwriters") 1,500,000 shares (the "Firm Stock") of the Company's
Common Stock, par value $0.001 per share (the "Common Stock"). In addition, for
the sole purpose of covering over-allotments in connection with the sale of the
Firm Stock, the Company proposes to grant to the Underwriters an option to
purchase up to an additional 225,000 shares (the "Option Stock") of Common
Stock. The Firm Stock and any Option Stock purchased pursuant to this Agreement
are hereinafter collectively called the "Stock." This is to confirm the
agreement concerning the purchase of the Stock from the Company by the
Underwriters.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to, and agrees that:
(a) A registration statement on Form S-3 (File No. 333-37195) and
amendments thereto with respect to the Stock have been prepared by the Company
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and have been filed with the Commission under the Securities Act: a
first amendment to such registration statement, including a final prospectus as
part thereof, is now proposed to be filed with the Commission. Copies of such
registration statement, the amendments thereto and the form of such final
prospectus have been delivered by the Company to you as the Underwriters. As
used in this Agreement, "Effective Time" means the date and the time as of which
such registration statement is declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus" means
each prospectus included in such registration statement, or amendments thereof,
before it becomes effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the Underwriters pursuant
to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such
registration statement or any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations (a "Rule 462(b) Registration Statement"), as
amended at the Effective Time and, in the event of any amendment thereto after
the Effective Date of such registration statement, shall also mean such
registration statement as so amended (including any Rule 462(b) Registration
Statement); and "Prospectus" means such final prospectus (or if such final
prospectus is not in existence, the Preliminary Prospectus) as filed as part of
the Registration Statement, with any changes thereto made by the Company with
the consent of the Underwriters. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements thereto will, when they become effective or
are filed with the Commission, as the case may be, conform in all material
respects to the requirements of the Securities Act and the Rules and Regulations
and will not as of the applicable effective date contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; PROVIDED that no
representation or warranty is made as to information contained in or omitted
from the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Company through the
Underwriters by or on behalf of any Underwriter specifically for inclusion
therein.
(c) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the affairs, management, business, properties, financial condition or results of
operations of the Company, and has all power and authority necessary to own or
hold its properties and to conduct the business in which it is engaged; and the
Company has no subsidiaries.
(d) The Company has an authorized capitalization as set forth in the
Prospectus and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and nonassessable
and conform to the description thereof contained in the Prospectus.
(e) The unissued shares of the Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly and validly authorized and,
when
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issued and delivered against payment therefor as provided herein, will be duly
and validly issued, fully-paid and non assessable.
(f) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or assets
of the Company is subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or bylaws of the Company or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or assets;
and except for the registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under the Exchange Act and applicable state or foreign securities laws
in connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
(g) There are no contracts, agreements or understandings between the
Company and any person (i) granting such person the right (other than rights
which have been waived or satisfied) to require the Company to include any
securities of the Company owned or to be owned by such person in the securities
registered pursuant to the Registration Statement, or (ii) except as set forth
in the Registration Statement and Prospectus, granting such person the right to
file a registration statement under the Securities Act with respect to such
securities.
(h) The Company has not sustained, since the date of the latest
audited financial statements included in the Prospectus, any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since such date, there has not been any
change in the capital stock or long-term debt of the Company or any material
adverse change in or affecting the affairs, management, business, properties,
financial condition, shareholders' equity, results of operations or prospects of
the Company, except (i) as set forth or contemplated in the Prospectus, or (ii)
any grants under the Company's employee stock plans in accordance with the terms
of such plans as described in the Prospectus, or other shares of Common Stock
(or rights to receive Common Stock) issued to service providers to the Company
in the ordinary course of business (the "Authorized Grants"), or (iii) operating
losses incurred in the ordinary course of business.
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(i) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement, or included
in the Prospectus, present fairly the financial condition and results of
operations of the Company, at the dates and for the periods indicated, and have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
(j) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Registration Statement
and the Prospectus and who have delivered the initial letter referred to in
Section 7(g) hereof, are independent certified public accountants as required by
the Securities Act and the Rules and Regulations.
(k) The Company has good and marketable title to all personal
property owned by it, free and clear of all liens, encumbrances, security
interests, claims and defects, except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company; and
all real property and personal property held under lease by the Company is held
by it under valid, subsisting and enforceable leases, with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company. The Company does not own any
real property.
(l) The Company carries, or is covered by, insurance as is customary
for companies similarly situated and engaged in similar businesses in similar
industries.
(m) The Company owns, or possesses adequate rights to use, all
material trademarks, service marks, trade names, trademark registrations,
service ▇▇▇▇ registrations and copyrights necessary for the conduct of its
business and has no reason to believe that the conduct of its business will
conflict with, and has not received any notice of any claim of conflict with,
any such rights of others.
(n) There is no legal or governmental proceeding pending to which the
Company is a party or of which any property or assets of the Company is subject
which if determined adversely to the Company, might have a material adverse
effect on the financial position, shareholders' equity, the business,
properties, results of operation or prospects of the Company; and to the best of
the Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the
Prospectus, threatened by others.
(o) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the
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Securities Act or by the Rules and Regulations which have not been described in
the Prospectus or filed as exhibits to the Registration Statement or
incorporated therein by reference as permitted by the Rules and Regulations.
(p) No relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, shareholders, customers
or suppliers of the Company on the other hand, which is required to be described
in the Prospectus and which is not so described.
(q) No labor disturbance by the employees of the Company exists or,
to the knowledge of the Company, is imminent which might be expected to have a
material adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and its
subsidiaries.
(r) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(s) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof or has
requested extensions thereof and has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company which has had (nor does
the Company have any knowledge of any tax deficiency which, if determined
adversely to the Company, might have) a material adverse effect on the
consolidated financial position, stockholders' equity, results of operations,
business or prospects of the Company.
(t) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities (other than
Authorized Grants), (ii) incurred any material liability or obligation, direct
or contingent, other than liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any
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material transaction not in the ordinary course of business, or (iv) declared or
paid any dividend on its capital stock.
(u) The Company (i) makes and keeps materially accurate books and
records and (ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals.
(v) The Company is not (i) in violation of its charter or bylaws,
(ii) in default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) in violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its property or
assets may be subject or has failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business, except to the
extent that any such default, event or violation described in the foregoing
clauses (i), (ii) and (iii) would not have a material adverse effect on the
affairs, management, business, properties, financial condition, results of
operations or prospects of the Company.
(w) Neither the Company nor any director, officer, agent or employee
acting on behalf of the Company has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(x) The Company is not an "investment company" within the meaning of
such term under the United States Investment Company Act of 1940 and the rules
and regulations of the Commission thereunder.
(y) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company (or, to the
knowledge of the Company, any of its predecessors in interest) at, upon or from
any of the property now or previously owned or leased by the Company in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law,
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ordinance, rule, regulation, order, judgment, decree or permit, except for any
violation or remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such violations and
remedial actions a material adverse effect on the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company; there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or with respect to which the Company has knowledge, except for any such spill,
discharge, leak, emission, injection, escape, dumping or release which would not
have or would not be reasonably likely to have, singularly or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company; and the terms "hazardous wastes", "toxic wastes", "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect to
environmental protection.
(z) Except as described in the Registration Statement and the
Prospectus, (i) there are no outstanding warrants or options issued by the
Company to purchase any shares of the capital stock of the Company (except, in
the case of options, any Authorized Grants), (ii) there are no statutory,
contractual, preemptive or other rights to subscribe for or to purchase any
Common Stock that do not by their terms terminate upon the First Delivery Date
(as defined below), and (iii) there are no restrictions upon transfer of the
Common Stock pursuant to the Company's articles of incorporation or bylaws.
(aa) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and perform its obligations hereunder; all
corporate action required to be taken by the Company for the due and proper
authorization, issuance, sale and delivery of the Stock has been duly and
validly taken; and this Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or in law) and except as enforcement of Section 8 of this Agreement may
be limited by applicable law.
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(bb) The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
shares of Stock.
(cc) The Company owns, or possesses adequate rights to use, all
material patents necessary for the conduct of its business. Except as set forth
or contemplated in the Registration Statement and Prospectus, no valid United
States patent is, or to the knowledge of the Company would be, infringed by the
activities of the Company in the manufacture, use or sale of any product or
component thereof as described in the Registration Statement and the Prospectus.
The patent applications (the "Patent Applications") filed by or on behalf of the
Company described in the Registration Statement and the Prospectus have been
properly prepared and filed on behalf of the Company; each of the Patent
Applications and patents (the "Patents") described in the Registration Statement
and the Prospectus is assigned or licensed to the Company, and, except as set
forth or contemplated in the Registration Statement and Prospectus, no other
entity or individual has any right or claim in any Patent, Patent Application or
any patent to be issued therefrom; and, to the knowledge of the Company, each of
the Patent Applications discloses potentially patentable subject matter. There
are no actions, suits or judicial proceedings pending relating to patents or
proprietary information to which the Company is a party or of which any property
of the Company is subject, and, to the knowledge of the Company, no actions,
suits or judicial proceedings are threatened by governmental authorities or,
except as set forth or contemplated in the Registration Statement and
Prospectus, others. The Company is not aware of, except as set forth or
contemplated in the Registration Statement and the Prospectus any claim by
others that the Company is infringing or otherwise violating any patents or
other intellectual property rights of others and is not aware of any rights of
third parties to any of the Company's Patent Applications, licensed Patents or
licenses which could affect materially the use thereof by the Company. Except
as set forth in the Registration Statement and Prospectus, the Company owns or
possesses sufficient licenses or other rights to use all patents, trade secrets,
technology and know-how necessary to conduct the Company's business as described
in the Registration Statement and the Prospectus; and under the Genentech, Inc.
Nonexclusive License Agreement dated September 6, 1990, assigned to the Company
by ▇▇▇▇ ▇. ▇▇▇▇▇▇, the Company has a nonexclusive license from Genentech, Inc.
for the term specified in such agreement to the Patent Applications and Patents
described in the Registration Statement relating to aerosol drug delivery
technology for the therapeutic treatment of disease.
(dd) The Company has filed with the Food and Drug Administration (the
"FDA") and the California Food and Drug Branch ("CFDB") for and received
approval of all registrations, applications, licenses, requests for exemptions,
permits and other regulatory authorizations necessary to conduct the Company's
business as it is described
8
in the Registration Statement and the Prospectus; the Company is in material
compliance with all such registrations, applications, licenses, requests for
exemptions, permits and other regulatory authorizations, and all applicable FDA
and CFDB rules and regulations, guidelines and policies, including but not
limited to, applicable FDA and CFDB rules, regulations and policies relating to
current good manufacturing practice ("CGMP") and current good laboratory
practice ("CGLP"); the Company has no reason to believe that any party granting
any such registration, application, license, request for exemption, permit or
other authorization is considering limiting, suspending or revoking the same and
knows of no basis for any such limitation, suspension or revocation;
(ee) The human clinical trials, animal studies and other preclinical
tests conducted by the Company or in which the Company has participated that are
described in the Registration Statement and the Prospectus or the results of
which are referred to in the Registration Statement or the Prospectus, and, to
the knowledge of the Company, such studies and tests conducted on behalf of the
Company, were and, if still pending, are being conducted in accordance with
commonly used or appropriate experimental protocols, procedures and controls
applied by research scientists generally in the preclinical or clinical study of
new drugs; the descriptions or the results of such studies and tests contained
in the Registration Statement and the Prospectus are accurate and complete in
all material respects, and the Company has no knowledge of any other studies or
tests, the results of which reasonably call into question the results described
or referred to in the Registration Statement and the Prospectus; and the Company
has not received any notices or other correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification of any
animal studies or other preclinical tests, or clinical studies conducted by or
on behalf of the Company or in which the Company has participated that are
described in the Registration Statement or the Prospectus or the results of
which are referred to in the Registration Statement or the Prospectus.
(ff) Except as described in the Registration Statement or Prospectus,
the Company has not sold or issued any shares of Common Stock during the six
month period preceding the date of the Prospectus, including any sales pursuant
to Rule 144A, or Regulations D or S of, the Securities Act, other than shares
issued under employee benefit plans, qualified stock option plans or other
employee compensation plans or pursuant to outstanding options, rights or
warrants.
(gg) The Company has complied and will comply with all of the
provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida
Statutes, and all regulations promulgated thereunder relating to issuers doing
business in Cuba.
(hh) The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
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2. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of this Agreement, the Company agrees to issue and sell 1,500,000
shares of the Stock to the several Underwriters, and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Stock
set forth opposite that Underwriter's name in Schedule 1 hereto. The price to
be paid by the Underwriters shall be $______ per share. The respective purchase
obligations of the Underwriters with respect to the Stock shall be rounded among
the Underwriters to avoid fractional shares, as the Underwriters may determine.
In addition, the Company grants to the Underwriters an option to purchase
up to 225,000 shares of Option Stock. Such option is granted solely for the
purpose of covering over-allotments in the sale of Firm Stock and is exercisable
as provided in Section 4 hereof. Shares of Option Stock shall be purchased
severally for the account of the Underwriters in proportion to the number of
shares of Firm Stock set forth opposite the name of such Underwriter in Schedule
1 hereto. The respective purchase obligations of each Underwriter with respect
to Option Stock shall be adjusted by the Underwriters so that no Underwriter
shall be obligated to purchase Option Stock other than in 100-share quantities.
The price of both the Firm Stock and any Option Stock shall be $____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.
3. OFFERING OF STOCK BY THE UNDERWRITERS. Upon authorization by the
Underwriters of the release of the Firm Stock the several Underwriters propose
to offer the Firm Stock for sale upon the terms and conditions set forth in the
Prospectus.
4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment for
the Firm Stock shall be made at the office of ▇▇▇▇▇▇ Godward LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M. New York City time, on the
fifth full business day following the Effective Date or at such other date or
place as shall be determined by agreement between the Underwriters and the
Company. This date and time are sometimes referred to as the "First Delivery
Date." On the First Delivery Date, the Company shall deliver or cause to be
delivered certificates representing the Firm Stock to the Underwriters for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (next day) funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
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Firm Stock shall be registered in such names and in such denominations as the
Underwriters shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking
and packaging of the certificates for the Firm Stock, the Company shall make
the certificates representing the Firm Stock available for inspection by the
Underwriters in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the Effective Date the
option granted in Section 2 may be exercised by written notice being given to
the Company by the Underwriters. Such notice shall set forth the aggregate
number of shares of Option Stock as to which the option is being exercised, the
names in which the shares of Option Stock are to be registered, the
denominations in which the shares of Option Stock are to be issued and the date
and time, as determined by the Underwriters, when the shares of Option Stock are
to be delivered; PROVIDED, HOWEVER, that this date and time shall not be earlier
than the First Delivery Date nor earlier than the second business day after the
date on which the option shall have been exercised nor later than the fifth
business day after the date on which the option shall have been exercised. The
date and time the shares of Option Stock are delivered are sometimes referred to
as the "Second Delivery Date" and the First Delivery Date and the Second
Delivery Date are sometimes referred to as a "Delivery Date").
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Underwriters
and the Company) at 10:00 A.M., New York City time, on the Second Delivery Date.
On the Second Delivery Date, the Company shall deliver or cause to be delivered
the certificates representing the Option Stock to the Underwriters for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (next day) funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
Option Stock shall be registered in such names and in such denominations as the
Underwriters shall request in the aforesaid written notice. For the purpose of
expediting the checking and packaging of the certificates for the Option Stock,
the Company shall make the certificates representing the Option Stock available
for inspection by the Underwriters in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Second Delivery Date.
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5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To make no further amendments or any supplement to the
Registration Statement or to the Prospectus except as permitted herein; to
advise the Underwriters, promptly after it receives notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
becomes effective or any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish the Underwriters with copies thereof; to advise
the Underwriters, promptly after it receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use prompt, diligent and good faith efforts to obtain its
withdrawal;
(b) To furnish promptly to each of the Underwriters and to counsel
for the Underwriters a signed copy of the Registration Statement as originally
filed with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;
(c) To deliver promptly to the Underwriters such number of the
following documents as the Underwriters shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the Commission and
each amendment thereto (in each case excluding exhibits other than this
Agreement and the computation of per share earnings) (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if
the delivery of a prospectus is required at any time after the Effective Time in
connection with the offering or sale of the Stock and if at such time any events
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
to amend or supplement the Prospectus in order to comply with the Securities Act
to notify the Underwriters and, upon their request to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Underwriters may from time to time reasonably request of an
amended or supplemented Prospectus which will correct such statement or omission
or effect such compliance;
12
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Underwriters, be required by the
Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any (i) amendment to the
Registration Statement or supplement to the Prospectus or (ii) any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to
the Underwriters and counsel for the Underwriters and obtain the consent of the
Underwriters to the filing;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver to the
Underwriters an earnings statement of the Company (which need not be audited)
complying with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Underwriters copies of all materials furnished by the Company to
its shareholders and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange upon
which the Stock may be listed pursuant to requirements of or agreements with
such exchange or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Underwriters may reasonably request to qualify the Stock for offering and sale
under the securities laws of such jurisdictions as the Underwriters may request
and to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Stock;
(i) For a period of 90 days from the date of the Prospectus, not to
offer for sale, sell or otherwise dispose of (or enter into any transaction
which is designed to, or could be expected to, result in the disposition by any
person of), directly or indirectly, any shares of Common Stock (other than the
Stock), or sell or grant options, rights or warrants with respect to any shares
of Common Stock (other than Authorized Grants or issuances of shares of Common
Stock or rights to receive shares of Common Stock in connection with
collaborative agreements entered into in the ordinary course of business (the
"Collaborative Shares")) without the prior written consent of ▇▇▇▇▇▇ Brothers
Inc.; and to cause each officer and director of the Company to furnish to the
Underwriters, prior to the First Delivery Date, and to cause each person or
entity receiving any such Authorized Grants or Collaborative Shares to furnish
to the Underwriters, prior to issuance of any such Authorized Grants or
Collaborative Shares, a letter or letters, in form and substance satisfactory to
counsel for the Underwriters, pursuant to which each such
13
person shall agree not to offer for sale, sell or otherwise dispose of (or
enter into any transaction which is designed to, or could be expected to,
result in the disposition of any person of), directly or indirectly, any
shares of Common Stock beneficially owned, deemed to be beneficially owned,
or in the future acquired by each such person for a period of 90 days from
the date of the Prospectus, without the prior written consent of ▇▇▇▇▇▇
Brothers Inc.;
(j) To apply the net proceeds from the sale of the Stock being sold
by the Company as set forth in the Prospectus; and
(k) To take such steps as shall be necessary to ensure that the
Company shall not become an "investment company" within the meaning of such term
under the United States Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(l) The Company has not taken and until a period of 90 days has
elapsed from the date of the Prospectus shall not take, directly or indirectly,
any action which releases ▇▇▇▇▇▇ World Trade Corporation ("Baxter") from or
waives any restrictions imposed on Baxter with respect to the transfer of shares
of Common Stock contained in to the Stock Purchase Agreement between Baxter and
the Company, dated March 1, 1996.
(m) The Company has not taken and until a period of 90 days has
elapsed from the date of the Prospectus shall not take, directly or indirectly,
any action which releases Pfizer, Inc. ("Pfizer") from or waives any
restrictions imposed on Pfizer with respect to the transfer of shares of Company
Common Stock contained in the Stock Purchase Agreement between Pfizer and the
Company, dated January 18, 1995.
6. EXPENSES. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of reproducing and distributing this Agreement and
the Agreement Among Underwriters; (e) the costs of distributing the terms of
agreement relating to the organization of the underwriting syndicate and selling
group to the members thereof by mail, telex or other means of communication; (f)
the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of sale of the Stock; (g)
any applicable listing or other fees; (h) the fees and expenses of qualifying
the Stock under the securities laws of the several jurisdictions as provided in
Section 5(h) and of
14
preparing, printing and distributing a Blue Sky Memorandum (including related
expenses and reasonable fees of counsel to the Underwriters); (i) $___________
of the expenses of the Underwriters; and (j) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement; provided that, except as provided in this Section 6 and in Section 11
the Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Common Stock which they may
sell and the expenses of advertising any offering of the Stock made by the
Underwriters.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations
of the Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become effective, and the
Underwriters shall have received notice thereof, not later than the first full
business day next following the date of this Agreement or such later date as
shall be consented to in writing by the Underwriters; 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 any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise) shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to such Delivery Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto, contains an untrue statement
of fact which in the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇, counsel to the
Underwriters, is material, or omits to state a fact which, in your opinion, or
in the opinion of counsel to the Underwriters, is material or omits to state a
fact which, in the opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the Registration
Statement and the Prospectus, other than financial statements and other
financial data, and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be satisfactory in all respects to
counsel to the Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request to enable
then to pass upon such matters.
15
(d) ▇▇▇▇▇▇ Godward LLP shall have furnished to the Underwriters its
written opinion, as counsel to the Company, addressed to the Underwriters and
dated such Delivery Date, in form and substance satisfactory to the
Underwriters, to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its respective ownership or
lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the Company, and has all corporate power and authority necessary to
own or hold its properties and conduct the business in which it is engaged; and,
to the knowledge of such counsel, the Company has no subsidiaries;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the Company
(including the shares of Stock being delivered on such Delivery Date) have been
duly and validly authorized and issued, are fully paid and non assessable and
conform to the description thereof contained in the Prospectus in the section
entitled "Description of Capital Stock";
(iii) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of, any shares
of Stock pursuant to the Company's articles of incorporation or bylaws or any
agreement or other instrument to which the Company is a party known to such
counsel;
(iv) To the knowledge of such counsel and other than as set
forth in the Prospectus, there are no legal or governmental proceedings pending
to which the Company is a party or of which any property or assets of the
Company is the subject which, if determined adversely to the Company, might have
a material adverse effect on the financial position, stockholders' equity,
results of operations or business of the Company; and, to the knowledge of such
counsel, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(v) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion and, to the
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose is
pending or threatened by the Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to such
Delivery Date (other than the financial statements and related schedules and
financial and statistical data therein, as to which such counsel need express no
opinion) comply as to
16
form in all material respects with the requirements of the Securities Act and
the Rules and Regulations;
(vii) To the knowledge of such counsel, there are no contracts
or other documents to which the Company is a party which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statement as permitted by the
Rules and Regulations;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms (except for
Section 8 of this Agreement with respect to which such counsel expresses no
opinion), subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) or an implied covenant of good
faith and fair dealing;
(ix) The issue and sale of the shares of Stock being delivered
on such Delivery Date by the Company and the compliance by the Company with all
of the provisions of this Agreement and the consummation of the transactions
contemplated hereby do not result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to such counsel
to which the Company is a party or by which the Company is bound or to which any
of the property or assets of the Company is subject, nor will such actions
result in any violation of the provisions of the charter or bylaws of the
Company or any statute or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over the Company or
any of its properties or assets; and, except for the registration of the Stock
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange Act and
applicable state or foreign securities laws in connection with the purchase and
distribution of the Stock by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby; and
(x) To the knowledge of such counsel, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right (other than rights which have been waived or satisfied) to
require the Company to include any securities of the Company owned or to be
owned by such person in the securities registered pursuant to the Registration
Statement.
17
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of California and the General Corporation Law of the State
of California and may state that it is relying, in respect of matters of fact,
upon certificates of officers of the Company, PROVIDED that such counsel shall
state that it believes that both the Underwriters and it are justified in
relying upon such certificates. Such counsel shall also have furnished to the
Underwriters a written statement, addressed to the Underwriters and dated such
Delivery Date, in form and substance satisfactory to the Underwriters, to the
effect that such counsel has acted as counsel to the Company in connection with
the preparation of the Registration Statement, and based on the foregoing, no
facts have come to the attention of such counsel which lead it to believe that
the Registration Statement (other than the financial statements, financial and
statistical data and supporting schedules as to which such counsel shall make no
statement), as of the Effective Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, or that the
Prospectus (other than the financial statements, financial and statistical data
and supporting schedules as to which such counsel shall make no statement)
contains any untrue statement of a material fact or omits 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.
(e) ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Crew shall have furnished to
the Underwriters its written opinions, as intellectual property counsel to the
Company, addressed to the Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Underwriters, to the effect that:
(i) Such counsel has no reason to believe that the information
contained in the Intellectual Property Portion of the Registration Statement or
the Prospectus at the time it became effective 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, at
the Closing Date, the information contained in the Intellectual Property Portion
or the Prospectus or any amendment or supplement to the Intellectual Property
Portion of the Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) You shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇,
counsel to the Underwriters, such opinions dated such Delivery Date, with
respect to the incorporation of the Company, the validity of the Securities
being sold on such Delivery Date, the Registration Statement, the Prospectus and
other related matters as you
18
reasonably may request, and such counsel shall have received such papers and
information as they reasonably request to enable them to pass upon such matters.
(g) With respect to the letter of Ernst & Young LLP delivered to the
Underwriters concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Underwriters a letter (the
"bring-down letter") of such accountants, addressed to the Underwriters and
dated such Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S X of the Commission, (ii) stating, as of the date of
the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of the bring-down letter, the conclusions and findings of such
firm with respect to the financial information and other matters covered by the
initial letter and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letter.
(h) The Company shall have furnished to the Underwriters a
certificate, dated such Delivery Date, of the Company signed by its President
and Chief Executive Officer or a Vice President and its Chief Financial Officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date; the Company
has complied with all its agreements contained herein; and the conditions set
forth in Sections 5(a) and 7(i) have been fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (B)
since the Effective Date no event has occurred which should have been set forth
in a supplement or amendment to the Registration Statement or the Prospectus.
(i) (i) The Company shall not have sustained since the date of the
latest audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, except (A) as set forth or contemplated in
the Prospectus and (B) for operating losses incurred in the ordinary course of
business, or (ii) since the date of the latest audited financial statements
included in the Prospectus there shall not have been any change in the capital
stock or long-term debt of the Company (except for issuances of Common
19
Stock upon exercise of outstanding options described in the Prospectus or
pursuant to Authorized Grants) or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is, in the reasonable
judgment of the Underwriters, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or minimum prices shall have
been established on either of such exchanges or such market by the Commission by
such exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by Federal or
state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest of the
several Underwriters, impracticable or inadvisable to proceed with the public
offering or delivery of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(k) The Common Stock shall be trading, and the Stock shall be
approved for trading, on the Nasdaq National Market.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
for the Underwriters.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls any Underwriter within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Stock to which such Underwriter or person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage or liability or
action arises out of, or is based upon, (i) any untrue
20
statement or alleged untrue statement of a material fact contained in (A) any
Preliminary Prospectus, the Registration Statement, the Prospectus or in any
amendment or supplement thereto or (B) in any blue sky application or other
document prepared or executed by the Company (or based upon any written
information furnished by the Company) specifically for the purpose of qualifying
any or all of the Stock under the securities laws of any state or other
jurisdiction (any such application, document or information being hereinafter
called a "Blue Sky Application"), or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse each Underwriter and
each such controlling person promptly upon demand for any legal or other
expenses reasonably incurred by the Underwriter or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
PROVIDED, HOWEVER, that the Company shall not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through the Underwriters by or on behalf of any Underwriter
specifically for inclusion therein; and PROVIDED FURTHER that as to any
Preliminary Prospectus this indemnity agreement shall not inure to the benefit
of any Underwriter or any person controlling that Underwriter on account of any
loss, claim damage, liability or action arising from the sale of Stock to any
person by that Underwriter if that Underwriter failed to send or give a copy of
the Prospectus as the same may be amended or supplemented to that person within
the time required by the Securities Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the Prospectus,
unless such failure resulted from non-compliance by the Company with Section
7(c). The foregoing indemnity is in addition to any liability which the Company
may otherwise have to any Underwriter or any controlling person of that
Underwriter.
(b) Each Underwriter severally and not jointly shall indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in (A)
any Preliminary Prospectus, the Registration Statement, or the Prospectus or in
any amendment or supplement thereto or (B) in any Blue Sky Application or other
document
21
prepared or executed by the Company (or based upon any written information
furnished by the Company) specifically for the purpose of qualifying any or all
of the Stock under the securities laws of any state or other jurisdiction, or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through the
Underwriters by or on behalf of that Underwriter specifically for inclusion
therein, and shall reimburse the Company and any such director, officer or
control person for any legal or other expenses reasonably incurred by the
Company or in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director, officer or
controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, 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 claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to so notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, PROVIDED FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 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
the Underwriters shall have the right to employ counsel to represent jointly the
Underwriters and those other Underwriters and their respective controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the Company under this
Section 8, if the Underwriters shall have reasonably concluded that there may be
one or more legal defenses available to the Underwriters and their respective
controlling persons that are different from or additional to those available to
the Company and its controlling persons, the fees and expenses of a single
separate counsel shall be paid by the Company. No indemnifying party shall be
liable for any
22
settlement effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with such consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) and 8(b), then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or liability
or action in respect thereof (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Stock or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Underwriters on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Stock (before
deducting expenses) received by the Company on the one hand and the total
underwriting discounts and commissions received by the Underwriters with respect
to the Stock purchased under this Agreement on the other bear to the total gross
proceeds from the offering of the Stock under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Underwriters
and 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 contributions pursuant to this
Section 8(d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for purposes
of
23
this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending, or preparing to
defend against any such action or claim; provided, that such legal expenses
shall not be incurred in circumstances other than those set forth in Section
8(c). Notwithstanding the provisions of this Section 8(d), no Underwriters
shall be required to contribute any amount in excess of the amount by which the
total price at which the Stock underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 8(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm that the statements with
respect to the public offering of the Stock set forth on the cover page of, and
under the caption "Underwriting" in, the Prospectus are correct and constitute
the only information furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Stock
which the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of shares of the Firm Stock
set forth opposite the name of each remaining non-defaulting Underwriter in
Schedule 1 hereto bears to the total number of shares of the Firm Stock set
forth opposite the names of all the remaining non-defaulting Underwriters in
Schedule 1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting
Underwriters shall not be obligated to purchase any of the Stock on such
Delivery Date if the total number of shares of the Stock which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date exceeds
9.09% of the total number of shares of the Stock to be purchased on such
Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Underwriters who
so agree, shall have the right, but shall not be obligated, to purchase, in such
proportions as may be agreed upon among them, all shares of the Stock to be
purchased on such Delivery Date. If the remaining Underwriters or other
underwriters satisfactory to the Underwriters do not elect to purchase the
shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such Delivery Date, this
24
Agreement (or, with respect to the Second Delivery Date, the obligation of the
Underwriters to purchase, and of the Company to sell the Option Stock) shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term "Underwriter" includes, for all purposes of this Agreement
unless the context requires otherwise, any party not listed in Schedule 1 hereto
who, pursuant to this Section 9, purchases Stock which a defaulting Underwriter
agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated to agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Underwriters or the Company may postpone
the First Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by the Underwriters by notice given to and received by the Company
prior to delivery of and payment for the Firm Stock if, prior to that time, any
of the events described in Sections 7(i) or 7(j) shall have occurred or if the
Underwriters shall decline to purchase the Stock for any reason permitted under
this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) the Company shall
fail to tender the Stock for delivery to the Underwriters for any reason
permitted under this Agreement or (b) the Underwriters shall decline to purchase
the Stock for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10, other than by reason of an
occurrence described in Section 7(j)) the Company shall reimburse the
Underwriters for the fees and expenses of their counsel and for such other out
of pocket expenses as shall have been incurred by them in connection with this
Agreement and the proposed purchase of the Stock and upon demand the Company
shall pay the full amount thereto to the Underwriters. If this Agreement is
terminated pursuant to Section 9 by reason of the default of one or more
Underwriters, the Company shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to ▇▇▇▇▇▇ Brothers Inc., Three World Financial Center,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Syndicate Department
(Fax: ▇▇▇ ▇▇▇-▇▇▇▇);
25
(b) if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: ▇▇▇▇▇▇ ▇. Chess (Fax: ▇▇▇ ▇▇▇-▇▇▇▇);
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such an
Underwriter at its address set forth in its acceptance telex to the
Underwriters, which address will be supplied to any other party hereto by the
Underwriters upon request. Any such statements, requests, notices or agreements
shall take effect at the time of receipt thereof. The Company shall be entitled
to act and rely upon any request, consent, notice or agreement given or made on
behalf of the Underwriters by ▇▇▇▇▇▇ Brothers Inc., Volpe, Brown, ▇▇▇▇▇▇ &
Company, BancAmerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and Vector Securities International,
Inc.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Underwriters, the Company and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
14. SURVIVAL. The respective indemnities, representations, warranties and
agreements of the Company and the Underwriters contained in this Agreement or
made by or on behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Stock and shall remain in full force
and effect, regardless of any investigation made by or on behalf of any of them
or any person controlling any of them.
15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For purposes
of this Agreement (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
26
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New York.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning of
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
INHALE THERAPEUTIC SYSTEMS
By:
---------------------------
▇▇▇▇▇▇ ▇. Chess, President
and Chief Executive Officer
Accepted:
▇▇▇▇▇▇ BROTHERS INC.
For themselves and as representatives
of the several Underwriters
named in Schedule 1 hereto
By: ▇▇▇▇▇▇ BROTHERS INC.
By:
-------------------------------
Authorized Representative
27
SCHEDULE I
INHALE THERAPEUTIC SYSTEMS
Number of Initial
Securities Purchased
UNDERWRITER from the Company
----------- ----------------
▇▇▇▇▇▇ Brothers Inc. . . . . . . . . . . . . . . . . . . . . .
Volpe, Brown, ▇▇▇▇▇▇ & Company . . . . . . . . . . . . . . . .
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company . . . . . . . . . . . . . . . . .
Vector Securities International, Inc. . . . . . . . . . . . . .
28
