Exhibit 1.1
AYURCORE, INC.
1,350,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
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New York, New York
, 1998
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NETWORK 1 FINANCIAL SECURITIES, INC.
As Representative of the Several Underwriters
named in Schedule A hereto
The Galleria, Penthouse
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Dear Ladies and Gentlemen:
AyurCore, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Network 1 Financial Securities, Inc. ("Network 1") and each of
the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Network 1 is acting as
representative (in such capacity, Network 1 shall hereinafter be referred to
as "you" or the Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares ("Shares") of the Company's common stock, $.001
par value per share ("Common Stock"), set forth in Schedule A hereto.
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and
not jointly, up to an additional 202,500 shares of Common Stock for the
purpose of covering over-allotments, if any. Such 202,500 shares of Common
Stock are hereinafter referred to as the "Option Securities." The Company
also proposes to issue and sell to you warrants (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional
135,000 shares of Common Stock. The shares of
Common Stock issuable upon exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Securities." The Common
Stock, the Option Securities, the Representative's Warrants and the
Representative's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
a. The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-42053) including any
related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Common Stock, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations (the "Regulations") of the Commission under the
Act. The Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Underwriters and will not
file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except
as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated
therein (including, but not limited to those documents or information
incorporated by reference therein) and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the
form of prospectus in the form first filed with the Commission pursuant to
Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as applicable.
b. Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or threatened. Each of the Preliminary Prospectus,
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the Registration Statement and Prospectus at the time of filing thereof,
conformed with the requirements of the Act and the Rules and Regulations, and
none of the Preliminary Prospectus, the Registration Statement or Prospectus
at the time of filing thereof, contained any untrue statement of material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in conformity
with written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
c. When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations, and will
conform to the requirements of the Act and the Rules and Regulations; neither
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
are made, not misleading, provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in strict conformity with information furnished to the Company in
writing by or on behalf of any Underwriter expressly for use in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
d. Each of the Company and the Company's wholly-owned subsidiary,
(such subsidiary being the only subsidiary that is a "significant subsidiary"
(as defined in the Rules and Regulations) of the Company, is hereinafter
referred to as the "Subsidiary"), has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. Except as set forth in the Prospectus, neither the Company nor
the Subsidiary own an interest in any corporation, partnership, trust, joint
venture or other business entity. Each of the Company and the Subsidiary is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing or any properties or the
character of its operations requires such qualification or licensing. The
Company owns, directly or indirectly, one hundred percent (100%) of the
outstanding capital stock of the Subsidiary, and all of such shares have been
validly issued, are fully paid and non-assessable, were not issued in
violation of any preemptive rights, and, except as set forth in the
Prospectus, are owned free and clear of any liens charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever. Each of the Company and the Subsidiary has
all requisite power and authority (corporate and other), and has obtained any
and all necessary authorizations, approvals, orders,
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licenses, certificates, franchises and permits of and from all governmental
or regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, to own or lease its properties and conduct its business as described
in the Prospectus; each of the Company and the Subsidiary is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all applicable federal,
state, local and foreign laws, rules and regulations; and neither the Company
nor the Subsidiary have received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, value, operation, properties, business or
results of operations of the Company or the Subsidiary. The disclosures in
the Registration Statement concerning the effects of federal, state, local,
and foreign laws, rules and regulations on the Company's and the Subsidiary'
businesses as currently conducted and as contemplated, are correct in all
material respects and do not omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, not
misleading, in light of the circumstances under which they were made.
e. The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date and each Option Closing Date, if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities,
except for this Agreement and the Representative's Warrant Agreement and as
described in the Prospectus. The Securities and all other securities issued
or issuable by the Company conform or, when issued and paid for, will
conform, in all respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable and the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company. The Securities
are not and will not be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and will conform to the description thereof contained
in the Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities will be in due and
proper form. Upon the issuance and delivery pursuant to the terms hereof of
the Securities to be sold by the Company hereunder,
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the Underwriters or the Representative, as the case may be, will acquire good
and marketable title to such Securities free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever.
f. The consolidated financial statements of the Company and the
Subsidiary, together with the related notes and schedules thereto, included
in the Registration Statement, each Preliminary Prospectus and the
Prospectus, fairly present the financial position, income, changes in cash
flow, changes in stockholders' equity and the results of operations of the
Company and the Subsidiary at the respective dates and for the respective
periods to which they apply and such financial statements, have been prepared
in conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ &
Company, LLP, as applicable, who are independent certified public accountants
within the meaning of the Act and the Rules and Regulations, as indicated in
their respective reports filed therewith. There has been no adverse change or
development involving a prospective adverse change in the condition,
financial or otherwise, or in the earnings, position, prospects, value,
operation, properties, business, or results of operations of the Company and
the Subsidiary taken as a whole, whether or not arising in the ordinary
course of business, since the date of the financial statements included in
the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and
the Subsidiary, conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information (including, without limitation, any pro forma financial
information) set forth in the Prospectus under the headings "Summary
Consolidated Financial Information," "Selected Consolidated Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in
the Prospectus, the information set forth therein, and have been derived from
or compiled on a basis consistent with that of the audited financial
statements included in the Prospectus; and, in the case of pro forma
financial information, if any, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein. The
amounts shown as accrued for current and deferred income and other taxes in
such financial statements are sufficient for the payment of all accrued and
unpaid federal, state, local and foreign income taxes, interest, penalties,
assessments or deficiencies applicable to the Company and the Subsidiary,
whether disputed or not, for the applicable period then ended and periods
prior thereto; adequate allowance for doubtful accounts has been provided for
unindemnified losses due to the operations of the Company and the Subsidiary;
and the statements of income do not contain any items of special or
nonrecurring income not earned in the ordinary course of business, except as
specified in the notes thereto.
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g. Each of the Company and the Subsidiary (i) has paid all federal,
state, local, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986, as amended (the "Code"), and has
furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
h. No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Common Stock and the Option Securities from the Company and the purchase by
the Representative of the Representative's Warrants from the Company, (iii)
the consummation by the Company of any of its obligations under this
Agreement, or (iv) resales of the Common Stock and the Option Securities in
connection with the distribution contemplated hereby.
1. Each of the Company and the Subsidiary maintains insurance
policies, including, but not limited to, general liability, product and
property insurance, which insures each of the Company, the Subsidiary and
their respective employees, against such losses and risks generally insured
against by comparable businesses. Neither the Company nor the Subsidiary (A)
have failed to give notice or present any insurance claim with respect to any
matter, including but not limited to the Company's business, property or
employees, under any insurance policy or surety bond in a due and timely
manner, (B) have any disputes or claims against any underwriter of such
insurance policies or surety bonds or has failed to pay any premiums due and
payable thereunder, or (C) have failed to comply with all conditions
contained in such insurance policies and surety bonds. There are no facts or
circumstances under any such insurance policy or surety bond which would
relieve any insurer of its obligation to satisfy in full any valid claim of
the Company or the Subsidiary.
j. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the
Company or the Subsidiary which (i) questions the validity of the capital
stock of the Company, this Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company pursuant to
or in connection with this Agreement or the Representative's Warrant
Agreement, (ii) is required to be disclosed in the Registration Statement
which is not so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all material respects),
or (iii) might materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects,
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stockholders' equity, value, operation, properties, business or results of
operations of the Company and the Subsidiary taken as a whole.
k. The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement
and the Representative's Warrant Agreement and to consummate the transactions
provided for in this Agreement and the Representative's Warrant Agreement;
and this Agreement and the Representative's Warrant Agreement have each been
duly and properly authorized, executed and delivered by the Company. Each of
this Agreement and the Representative's Warrant Agreement constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, and none of the Company's issue and
sale of the Securities, execution or delivery of this Agreement or the
Representative's Warrant Agreement, its performance hereunder and thereunder,
its consummation of the transactions contemplated herein and therein, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default
under, or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible)
of either the Company or the Subsidiary pursuant to the terms of (i) the
certificate of incorporation or by-laws of either the Company or the
Subsidiary, (ii) any license, contract, collective bargaining agreement,
indenture, mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement
or instrument to which either the Company or the Subsidiary are a party or by
which either the Company or the Subsidiary are or may be bound or to which
any of their respective properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (iii) any statute, judgment, decree,
order, rule or regulation applicable to either the Company or the Subsidiary
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over either the Company or the Subsidiary or any of their
respective activities or properties.
1. No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic
or foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement
and the Representative's Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have
for the issue and/or sale of any of the Securities, except such as have been
or may be obtained under the Act or may be required under state securities or
Blue Sky laws in connection with the Underwriters'
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purchase and distribution of the Common Stock and the Option Securities, and
the Representative's Warrants to be sold by the Company hereunder.
m. All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which either the Company or the Subsidiary are a
party or by which either of them may be bound or to which any of their
respective assets, properties or business may be subject have been duly and
validly authorized, executed and delivered by the Company or the Subsidiary,
as the case may be, and constitute the legal, valid and binding agreements of
the Company or the Subsidiary, as the case may be, enforceable against each
of them in accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form SB-2, and there are no contracts or other documents which are
required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct
copies of the documents of which they purport to be copies.
n. Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor the Subsidiary have (i) issued any securities or incurred any liability
or obligation, direct or contingent, for borrowed money, (ii) entered into
any transaction other than in the ordinary course of business, or (iii)
declared or paid any dividend or made any other distribution on or in respect
of its capital stock of any class. and there has not been any change in the
capital stock, or any change in the debt (long or short term) or liabilities
or material adverse change in or affecting the general affairs, management,
financial operations, stockholders' equity or results of operations of either
the Company or the Subsidiary.
o. No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which either the Company or the Subsidiary are a
party or by which either the Company or the Subsidiary may be bound or to
which the property or assets (tangible or intangible) of either the Company
or the Subsidiary are subject or affected.
p. Each of the Company and the Subsidiary has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending
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investigations involving either the Company or the Subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations.
There is no unfair labor practice charge or complaint against either the
Company or the Subsidiary pending before the National Labor Relations Board,
or any comparable foreign agency, or any lockout, strike, picketing, boycott,
dispute, slowdown or stoppage pending or threatened against or involving
either the Company or the Subsidiary, or any predecessor entity, and none has
ever occurred. No representation question exists respecting the employees of
either the Company or the Subsidiary, and no collective bargaining agreement
or modification thereof is currently being negotiated by either the Company
or the Subsidiary. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of either the
Company or the Subsidiary. No labor dispute with the employees of either the
Company or the Subsidiary exists, or, is imminent.
q. Neither the Company nor the Subsidiary maintain, sponsor or
contribute to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan," or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). Neither the Company nor the Subsidiary maintain or contribute, now
or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged
in a "prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code, which could subject the Company or the Subsidiary
to any tax penalty on prohibited transactions and which has not adequately
been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply
with Code Section 401(a), stating that such ERISA Plan and the attendant
trust are qualified thereunder. Neither the Company nor the Subsidiary have
ever completely or partially withdrawn from a "multiemployer plan."
r. Neither the Company, the Subsidiary, nor any of their respective
employees, directors, stockholders, partners, or affiliates (within the
meaning of the Rules and Regulations) of any of the foregoing have taken or
will take, directly or indirectly, any action designed to or which has
constituted or which might 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 or
otherwise.
s. Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held
by either the Company or the Subsidiary, are in dispute so far as known by
the Company or are in any conflict with the right of any other
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person or entity. Each of the Company and the Subsidiary (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (ii) is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
t. Each of the Company and the Subsidiary owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), inventions, designs, processes, works of authorship,
computer programs and technical data and information (collectively herein
"intellectual property") that are material to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold
by either the Company or the Subsidiary, free and clear of and without
violating any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the possibility
exists that other persons or entities, completely independently of either the
Company or the Subsidiary, or any of their respective employees or agents,
could have developed trade secrets or items of technical information similar
or identical to those of either the Company or the Subsidiary. Neither the
Company nor the Subsidiary are aware of any such development of similar or
identical trade secrets or technical information by others.
u. Each of the Company and the Subsidiary has taken reasonable
security measures to protect the secrecy, confidentiality and value of its
intellectual property in all material respects.
v. Each of the Company and the Subsidiary has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real
and personal property stated in the Prospectus to be owned or leased by it,
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet
due and payable.
w. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company, LLP, whose reports are filed with
the Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
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x. The Company has caused to be duly executed legally binding and
enforceable agreements ("Lock-up Agreements") pursuant to which each of the
officers and directors of the Company, all holders of Shares of Common Stock
issued and outstanding on the effective date of the Registration Statement,
and all holders of options, warrants or other securities exchangeable or
exercisable for or convertible into Shares of Common Stock issued and
outstanding on the effective date of the Registration Statement has agreed
(i) not to, directly or indirectly, issue, offer, offer to sell, sell, grant
any option for the sale or purchase of, assign, transfer, pledge, hypothecate
or otherwise encumber or dispose of any shares of Common Stock or securities
convertible into, exercisable or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than twelve (12) months following
the effective date of the Registration Statement without the prior written
consent of Network 1 and (ii) to waive all rights to request or demand the
registration pursuant to the Act of any securities of the Company which are
registered in the name of or beneficially owned by any such holder. During
the twelve (12) month period commencing on the effective date of the
Registration Statement, the Company shall not, without the prior written
consent of the Representative, sell, contract or offer to sell, issue,
transfer, assign, pledge, distribute, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any options, rights or warrants
with respect to any shares of Common Stock, except pursuant to (i) the
exercise of the Representative's Warrants, (ii) options outstanding or
available for grant under the Company's option plans existing on the date
hereof (and subject to their issuance at the greater of fair market value and
$______ [the initial public offering price] per share of Common Stock on the
date of grant) and (iv) the Company's stock purchase plan existing on the
date hereof; provided, however, that the Company and any Subsidiary or
affiliates thereof may sell or offer for sale any of their securities without
the consent of the Representative in connection with any merger or
acquisition transaction, joint venture or other "corporate partnering"
transaction entered into by any of the Company and its Subsidiary or
affiliates. The Company will cause the Transfer Agent (as hereinafter
defined) to ▇▇▇▇ an appropriate legend on the face of stock certificates
representing all of such securities and to place "stop transfer" orders on
the Company's stock ledgers.
y. There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company, the Subsidiary, or any of their
respective officers, directors, stockholders, partners, employees or
affiliates, that may affect the Underwriters' compensation, as determined by
the National Association of Securities Dealers, Inc. ("NASD").
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z. The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market ("Nasdaq").
aa. None of the Company, the Subsidiary, nor any of their
respective officers, employees, agents or any other person acting on behalf
of either the Company or the Subsidiary have, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of either the Company or the
Subsidiary (or assist either the Company or the Subsidiary in connection with
any actual or proposed transaction) which (a) might subject either the
Company or the Subsidiary, or any other such person to any damage or penalty
in any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (b) if not given in the past, might have had a material adverse
effect on the assets, business or operations of either the Company or the
Subsidiary, or (c) if not continued in the future, might adversely affect the
assets, business, condition, financial or otherwise, earnings, position,
properties, value, operations or prospects of either the Company or the
Subsidiary. The Company's and the Subsidiary' internal accounting controls
are sufficient to cause each of the Company and the Subsidiary to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
bb. Except as set forth in the Prospectus, no officer,
director, stockholder or partner of the Company or of the Subsidiary, or any
"affiliate" or "associate" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) of any of the foregoing persons
or entities has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which
are furnished or sold or are proposed to be furnished or sold by either the
Company or the Subsidiary, or (B) purchases from or sells or furnishes to
either the Company or the Subsidiary any goods or services, or (ii) a
beneficiary interest in any contract or agreement to which the Company or the
Subsidiary are a party or by which it may be bound or affected. Except as set
forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among
the Company or the Subsidiary, and any officer, director, or 5% or greater
securityholder of the Company or the Subsidiary, or any partner, affiliate or
associate of any of the foregoing persons or entities.
cc. Any certificate signed by any officer of the Company or the
Subsidiary, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein)
12
shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
dd. The minute books of each of the Company and the Subsidiary
have been made available to the Underwriters and contain a summary of all
meetings and actions of the directors (including committees thereof) and
stockholders of each of the Company and the Subsidiary, since their
respective dates of incorporation, and reflect all transactions referred to
in such minutes accurately in all material respects.
ee. Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to
include any securities issued by the Company in the Registration Statement or
any registration statement to be filed by the Company or to require the
Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company.
ff. (A) Each of the Company and the Subsidiary is in compliance
with all federal, state, local or foreign laws, common law, rules, codes,
administrative orders or regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, all laws, common law, rules, codes,
administrative orders and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws") and (B) to the best of the Company's
knowledge, there are no events or circumstances that could form the basis of
an order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting either the
Company or the Subsidiary relating to any Hazardous Materials or the
violation of any Environmental Laws. The Company has no reason to believe
that it will not receive all necessary and required approvals,
authorizations, validations and certifications from the EPA and other
applicable regulatory authorities to enable the Company to commence full
operations as contemplated in the Registration Statement and the Prospectus.
gg. The Company has as of the effective date of the
Registration Statement entered into an employment agreement with each ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ ▇▇▇▇ in the form filed as Exhibit 10.2 and 10.1,
respectively, to the Registration Statement. The Company has obtained
key-person life insurance on the life of ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ in the amount of
two million ($2,000,000), naming the Company as the beneficiary under the
policy.
13
hh. As of the date hereof, the Company does not have more than
3,569,702 shares of Common Stock issued and outstanding (including securities
with equivalent rights as the Common Stock and shares of Common Stock, or
such equivalent securities, issuable upon exercise of any and all options,
warrants and other contract rights and securities convertible directly or
indirectly into shares of Common Stock or such equivalent securities, but
excluding (i) 70,000 shares of Common Stock reserved for issuance upon
exercise of stock options granted, and 157,986 shares of Common Stock
reserved for issuance upon exercise of stock options available for future
grant, under the Company's 1997 Stock Option Plan; (ii) 300,970 shares of
Common Stock reserved for issuance upon exercise of currently outstanding
non-Option Plan options; (iii) 475,000 shares of Common Stock reserved for
issuance upon exercise of currently outstanding warrants; and (iv) 135,000
shares of Common Stock reserved for issuance upon exercise of the
Representative's Warrants.
ii. Each of the Company and the Subsidiary confirms as of the
date hereof that it is in compliance with all provisions of Section 1 of Laws
of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business
with Cuba, and each of the Company and the Subsidiary further agrees that if
it or any affiliate commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or incorporated by
reference in the Prospectus, if any, concerning the Company's, the
Subsidiary' or any affiliate's, business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as appropriate, in
a form acceptable to the Department.
jj. The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act
of 1940, as amended (the "1940 Act").
kk. 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 accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorizations; and (iv) the recorded accountability for
assets is compared with the
14
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
ll. Except as set forth in the Prospectus, each of the Company
and the Subsidiary (i) is in all material respects in compliance with the
provisions of all laws relating to the regulation of the Company's products,
including the Federal Food Drug and Cosmetic act (the "FD&C Act") and all
comparable state, local and foreign laws, the rules and regulations
promulgated thereunder and all rules and regulations promulgated by the
United States Food and Drug Administration (the "FDA") and all comparable
state, local and foreign regulatory authorities; (ii) has all authorizations,
approvals, consents, orders, registrations, licenses or permits of any court
or the FDA and all comparable state and foreign regulatory authorities which
are necessary or required to conduct its business; (iii) has had no material
liabilities, debts, obligations or claims asserted against it, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
on account of such regulatory matters and (iv) does not manufacture,
fabricate or market any product or perform any service which is subject to
regulation by the FDA, or to any provision of the FD&C Act, or any rule or
regulation promulgated thereunder. The language contained in the Prospectus
with respect to the FDA and all comparable state and foreign regulatory
authorities, the laws relating to the regulation of the Company's products,
including the FD&C Act and all comparable state, local and foreign laws,
rules and regulations, and all other such 12 regulatory matters, is accurate,
complete and true in all material respects and does not omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2. Purchase Sale and Delivery of the Securities.
a. On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each
Underwriter, severally and not jointly, agrees to purchase from the Company
at a price of $______ per Share, that number of Common Stock set forth in
Schedule A opposite the name of such Underwriter, subject to such adjustment
as the Representative in its sole discretion shall make to eliminate any
sales or purchases of fractional shares, plus any additional number of Common
Stock which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
b. In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 202,500 shares of Common Stock at a price of $____ per share of
Common Stock. The option granted hereby will expire forty-five (45) days
after (i)
15
the date the Registration Statement becomes effective, if the Company has
elected not to rely on Rule 430A under the Rules and Regulations, or (ii) the
date of this Agreement if the Company has elected to rely upon Rule 430A
under the Rules and Regulations, and may be exercised in whole or in part
from time to time only for the purpose of covering over-allotments which may
be made in connection with the offering and distribution of the Common Stock
upon notice by the Representative to the Company setting forth the number of
Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for any such Option
Securities. Any such time and date of delivery (an "Option Closing Date"')
shall be determined by the Representative, but shall not be later than three
(3) full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Representative and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Common Stock shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
c. Payment of the purchase price for, and delivery of certificates
for, the Common Stock shall be made at the offices of the Representative at
The Galleria, 2 Bridge Avenue, Penthouse, Building 2, Red Bank, New Jersey
07701, or at such other place as shall be agreed upon by the Representative
and the Company. Such delivery and payment shall be made at 10:00 a.m. (New
York City time) on ____________, 1998 [settlement date] or at such other time
and date as shall be agreed upon by the Representative and the Company, but
not less than three (3) nor more than five (5) full business days after the
effective date of the Registration Statement (such time and date of payment
and delivery being herein called the "Closing Date"). In addition, in the
event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned office of
the Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company. Delivery of the
certificates for the Common Stock and the Option Securities, if any, shall be
made to the Underwriters against payment by the Underwriters, severally and
not jointly, of the purchase price for the Common Stock and the Option
Securities, if any, to the order of the Company for the Common Stock and the
Option Securities, if any, by New York Clearing House funds. In the event
such option is exercised, each of the Underwriters, acting severally and not
jointly, shall purchase that proportion of the total number of Option
Securities then being purchased which the number of Common Stock set forth in
Schedule A hereto opposite the name of such Underwriter bears to the total
number of Common Stock, subject in each case to such adjustments as the
Representative in its discretion shall make to eliminate any sales or
purchases of fractional shares. Certificates for the Common Stock and the
Option Securities, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least
16
two (2) business days prior to the Closing Date or the relevant Option
Closing Date, as the case may be. The certificates for the Common Stock and
the Option Securities, if any, shall be made available to the Representative
at such office or such other place as the Representative may designate for
inspection, checking and packaging no later than 9:30 a.m. on the last
business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
d. On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $10.00, which
Representative's Warrants shall entitle the holders thereof to purchase an
aggregate of 135,000 shares of Common Stock. The Representative's Warrants
shall be exercisable for a period of four (4) years commencing one (1) year
from the effective date of the Registration Statement at $____ per share
[125% of the respective initial public offering price of the Shares]. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the forms filed as Exhibits 4.1 and 4.2, respectively, to
the Registration Statement. Payment for the Representative's Warrants shall
be made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time
increase or decrease the respective public offering price after distribution
of the Shares has been completed to such extent as the Representative, in its
sole discretion deems advisable. The Underwriters may enter into one of more
agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
4. Covenants and Agreements of the Company. The Company
covenants and agrees with each of the Underwriters as follows:
a. The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the Act
or Exchange Act before termination of the offering of the Shares by the
Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
17
b. As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing
(i) when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose; (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any
of the Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose; (iv) of
the receipt of any comments from the Commission; and (v) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If
the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
c. The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business
on the earlier of (i) the second business day following the execution and
delivery of this Agreement and (ii) the fifth business day after the
effective date of the Registration Statement.
d. The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. ("Underwriters'
Counsel") shall object.
e. The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify
18
the Securities for offering and sale under the securities laws of such
jurisdictions as the Representative may designate to permit the continuance
of sales and dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and
furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees that such action
is not at the time necessary or advisable, use all reasonable efforts to file
and make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
f. During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with
all requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when a
prospectus relating to the Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or Underwriters' Counsel, the Prospectus, as then
amended or supplemented, includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Underwriters'
Counsel, and the Company will furnish to the Underwriters copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriters may request.
g. As soon as practicable, but in any event not later than
forty-five (45) days after the end of the 12-month period beginning on the
day after the end of the fiscal quarter of the Company during which the
effective date of the Registration Statement occurs (ninety (90) days in the
event that the end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its security holders, in
the manner specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required
by, and will otherwise comply with, the provisions of Section 11(a) of the
Act and Rule 158(a) of the Rules and Regulations, which statement need not be
audited unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
19
h. During a period of seven (7) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
i. concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the
form furnished to the Company's stockholders and certified by the Company's
principal financial or accounting officer;
ii. concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, stockholders' equity,
and cash flows of the Company for such fiscal year, accompanied by a copy of
the certificate thereon of independent certified public accountants;
iii. as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv. as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;
v. every press release and every material news item or article
of interest to the financial community in respect of the Company, or its
affairs, which was released or prepared by or on behalf of the Company; and
vi. any additional information of a public nature concerning
the Company (and any future subsidiary) or its businesses which the
Representative may request.
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiary(ies) are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
i. The Company will maintain a transfer agent and warrant agent
("Transfer Agent") and, if necessary under the jurisdiction of incorporation
of the Company, a Registrar (which may be the same entity as the Transfer
Agent) for its Common Stock.
20
j. The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two of
which copies will be signed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such
quantities as the Representative may request.
k. On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true original copies of
duly executed, legally binding and enforceable Lock-up Agreements pursuant to
which, for a period of twelve (12) months from the effective date of the
Registration Statement, each of the Company's officers and directors, or
securityholders (i) will not, directly or indirectly, issue, offer to sell,
sell, grant an option for the sale or purchase of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or evidencing
any right to purchase or subscribe for any shares of Common Stock (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of
any beneficial interest therein for a period of not less than twelve (12)
months following the effective date of the Registration Statement without the
prior consent of Network 1 and (ii) waives any and all rights to request or
demand the registration pursuant to the Act, of any securities of the Company
which are registered in the name of or beneficially owned by it or he or she,
respectively. During the twelve (12) month period commencing on the effective
date of the Registration Statement, the Company shall not, without the prior
written consent of the Representative, sell, contract or offer to sell,
issue, transfer, assign, pledge, distribute, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock, except pursuant to (i)
the exercise of the Representative's Warrants, (ii) options outstanding or
available for grant under the Company's option plans existing on the date
hereof (and subject to their issuance at the greater of fair market value and
$_____ [initial public offering price] per share of Common Stock on the date
of grant), (iii) the Company's stock purchase plan existing on the date
hereof; provided, however, that the Company and any Subsidiary or affiliates
thereof may sell or offer for sale any of their securities without the
consent of the Representative in connection with any merger or acquisition
transaction, joint venture or other "corporate partnering" transaction
entered into by any of the Company and its Subsidiary or affiliates. On or
before the Closing Date, the Company shall deliver instructions to the
Transfer Agent authorizing it to place appropriate legends on the
certificates representing the securities subject to the Lock-up Agreements
and to place appropriate stop transfer orders on the Company's ledgers.
l. None of the Company, the Subsidiary, nor any of their respective
officers, directors, stockholders, nor any of their respective affiliates
(within the meaning of the
21
Rules and Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result
in, stabilization or manipulation of the price of any securities of the
Company.
m. The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use
of Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
n. The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR as may
be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
o. The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants, as stated in their
letters to be furnished pursuant to Sections 6(1) and 6(m) hereof.
p. The Company shall cause the Common Stock to be quoted on Nasdaq
and, for a period of seven (7) years from the date hereof, use its best
efforts to maintain the Nasdaq quotation of the Common Stock to the extent
outstanding.
q. For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's reasonable
requests and at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Common Stock (ii) the list of holders of all of the
Company's securities and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the Company.
r. As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the
Exchange Act of the Securities and (ii) but in no event more than thirty (30)
days after the effective date of the Registration Statement, take all
necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and to continue such inclusion for a period of not
less than seven (7) years.
22
s. The Company hereby agrees that it will not, for a period of
twelve (12) months from the effective date of the Registration Statement,
adopt, propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or similar arrangement permitting
(i) the grant, issue, sale or entry into any agreement to grant, issue or
sell any option, warrant or other contract right (x) at an exercise price
that is less than the greater of the public offering price of the Shares set
forth herein and the fair market value on the date of grant or sale or (y) to
any of its executive officers or directors or to any holder of 5% or more of
the Common Stock, except as provided in subsection (ii) of this subparagraph;
(ii) the maximum number of shares of Common Stock or other securities of the
Company purchasable at any time pursuant to options or warrants issued by the
Company to exceed those 988,956 shares reserved for future issuance under
options granted, the Company's 1997 Stock Option Plan, Company's Non-Option
Plan options, currently outstanding warrants as described in footnote one (1)
to the "Prospectus Summary - The Offering" section of the Prospectus; (iii)
the payment for such securities with any form of consideration other than
cash; or (iv) the existence of stock appreciation rights, phantom options or
similar arrangements.
t. Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative
and Underwriters' Counsel, issue, directly or indirectly, any press release
or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
u. For a period equal to the lesser of (i) seven (7) years from the
date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form SB-2 (or other appropriate form) for
the registration under the Act of the Representative's Securities. The
Company further agrees to use its best efforts to file such post-effective
amendments to the Registration Statement, as may be necessary, in order to
maintain its effectiveness and to keep such Registration Statement effective
while any of the Representative's Warrants remain outstanding.
v. At the effective date of the Registration Statement and on each
of the Closing Date and each Option Closing Date, if any, the Company shall
have obtained all necessary and required approvals, authorizations,
franchises, licenses, orders, permits, validations and certifications from
all domestic and foreign regulatory authorities required to conduct its
business as presently conducted and described in the Prospectus, and none of
such approvals, authorizations,
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Underwriting Agreement
franchises, licenses, orders, permits, validations and certifications shall
have been revoked, restricted or limited in any manner and all of such
approvals, authorizations, franchises, licenses, orders, permits, validations
and certifications shall be in full force and effect on each of the effective
date of the Registration Statement, the Closing Date and each Option Closing
Date, if any.
w. The Company hereby agrees that the Representative
may nominate for election one person to the Company's Board of Directors
(which person shall be reasonably acceptable to the Company) for a period of
three (3) years from the Effective Date and that certain of the Company's
officers, directors and stockholders have agreed to vote their shares of
common stock in favor of such designee. In the event the Representative
elects not to exercise the right as set forth in this paragraph, then the
Representative may designate one person (which person shall be reasonably
acceptable to the Company) to attend meetings of the Company's Board of
Directors as a non-voting advisor. Such designee shall be entitled to attend
all such meetings of the Company's Board of Directors and to receive all
notices and other correspondence and communications sent by the Company to
members of its Board of Directors. The Company shall reimburse designees of
the Representative for their out-of-pocket expenses incurred in connection
with their attendance of meetings of the Company's Board of Directors.
x. Supply the Representative with three (3), and
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., with two (2), bound volumes of the underwriting
materials within a reasonable time after the latest Closing Date.
5. Payment of Expenses.
a. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date (to the extent not paid at the
Closing Date) all expenses and fees (other than fees of Underwriters'
Counsel, except as provided in (iv) below) incident to the performance of the
obligations of the Company under this Agreement and the Representative's
Warrant Agreement, including, without limitation, (i) the fees and expenses
of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing (including
mailing and handling charges), filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and
the Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage with respect thereto) and delivery
of this Agreement, the Representative's Warrant Agreement, the Agreement
Among Underwriters, the Selected Dealer Agreements, and related documents,
including the cost of all copies thereof and of the Preliminary Prospectuses
and of the Prospectus and any amendments thereof or supplements thereto
supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing, engraving,
issuance and delivery of the Securities including, but not limited to, (x)
the purchase by the Underwriters of the Common Stock and the Option
Securities and the purchase by the Representative of the Representative's
Warrants from the Company, (y)
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Underwriting Agreement
the consummation by the Company of any of its obligations under this
Agreement and the Representative's Warrant Agreement, and (z) resale of the
Common Stock and the Option Securities by the Underwriters in connection with
the distribution contemplated hereby, (iv) the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection
therewith, (v) advertising costs and expenses, including but not limited to
costs and expenses in connection with the "road show," information meetings
and presentations, bound volumes and prospectus memorabilia and "tomb-stone"
advertisement expenses; (vi) costs and expenses in connection with due
diligence investigations, including but not limited to the fees of any
independent counsel, expert or consultant retained, (vii) fees and expenses
of the Transfer Agent and registrar and all issue and transfer taxes, if any,
(viii) applications for assignment of a rating of the Securities by qualified
rating agencies, (ix) the fees payable to the Commission and the NASD, and
(x) the fees and expenses incurred in connection with the quotation of the
Securities on Nasdaq and any other exchange. It is agreed that the services
to be provided under clause (iv) of the foregoing sentence shall be performed
by Underwriters' Counsel.
b. If this Agreement is terminated by the Underwriters
in accordance with the provisions of Section 6 or Section 12, the Company
shall reimburse and indemnify the Underwriters for all of their actual
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel, less any amounts already paid pursuant to Section 5(c) hereof;
provided, however, that the Representative will refund to the Company any
unaccounted-for portion of any amounts already advanced by the Company to the
Representative pursuant to Section 5(c) hereof. In addition, the Company
shall remain liable for all Blue Sky counsel fees and disbursements, expenses
and filing fees.
c. The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check
or, at the election of the Representative, by deduction from the proceeds of
the offering contemplated herein, a non-accountable expense allowance equal
to three percent (3%) of the gross proceeds received by the Company from the
sale of the Common Stock, $10,000 of which has been paid to date. In the
event the Representative elects to exercise the over-allotment option
described in Section 2(b) hereof, the Company agrees to pay to the
Representative on the Option Closing Date (by certified or bank cashier's
check or, at the Representative's election, by deduction from the proceeds of
the offering) a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Option
Securities.
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6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of
the date hereof and as of the Closing Date and each Option Closing Date, if
any, as if they had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date
or Option Closing Date, if any, of the statements of the officers of the
Company made pursuant to the provisions hereof; and the performance by the
Company on and as of the Closing Date and each Option Closing Date, if any,
of its covenants and obligations hereunder and to the following further
conditions:
a. The Registration Statement shall have become
effective not later than 12:00 P. M., New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by
the Representative, and, at the Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriters' Counsel.
If the Company has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant
to Rule 424(b) of the Rules and Regulations within the prescribed time period
and, prior to the Closing Date, the Company shall have provided evidence
satisfactory to the Representative of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and
declared effective in accordance with the requirements of Rule 430A of the
Rules and Regulations.
b. The Representative shall not have advised the
Company that the Registration Statement, or any amendment thereto, contains
any untrue statement of fact which, in the Representative's opinion, is
material, or omits to state a fact which, in the Representative's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or that the Prospectus, or any supplement thereto, contains
any untrue statement of fact which, in the Representative's opinion, is
material, or omits to state a fact which, in the Representative's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
c. On or prior to each of the Closing Date and each
Option Closing Date, if any, the Representative shall have received from the
Company's Counsel, such opinion or opinions with respect to the organization
of the Company, the validity of the Securities, the Registration Statement,
the Prospectus and other related matters as the Representative may
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Underwriting Agreement
request and Company's Counsel shall have received such papers and information
as they request to enable them to pass upon such matters.
d. At the Closing Date, the Underwriters shall have
received the favorable opinion of Rubin, Baum, ▇▇▇▇▇, Constant & ▇▇▇▇▇▇▇▇,
counsel to the Company and the Subsidiary, dated the Closing Date, addressed
to the Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
i. each of the Company and the Subsidiary (A) has
been duly organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction, (B) is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all requisite corporate
power and authority, and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
to own or lease its properties and conduct its business as described in the
Prospectus; each of the Company and the Subsidiary is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local
and foreign laws, rules and regulations; and, neither the Company nor the
Subsidiary has received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the business, operations, condition, financial or otherwise,
or the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operations of the Company and the
Subsidiary taken as whole. The disclosures in the Registration Statement
concerning the effects of federal, state, local and foreign laws, rules and
regulations on each of the Company's and the Subsidiary' businesses as
currently conducted and as contemplated are correct in all material respects
and do not omit to state a fact required to be stated therein or necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made;
ii. The Company owns, directly or indirectly, one
hundred percent (100%) of the outstanding capital stock of the Subsidiary,
and all such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights and are
owned free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever;
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AyurCore, Inc.
Underwriting Agreement
iii. except as described in the Prospectus,
neither the Company nor the Subsidiary own an interest in any other
corporation, partnership, joint venture, trust or other business entity;
iv. the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any amendment
or supplement thereto, under "CAPITALIZATION," and the Company is not a party
to or bound by any instrument, agreement or other arrangement providing for
it to issue, sell, transfer, purchase or redeem any capital stock, rights,
warrants, options or other securities, except for this Agreement and the
Representative's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
in all material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or any similar rights granted by the Company. The Securities to be
sold by the Company hereunder and under the Representative's Warrant
Agreement are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid
for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities are in due
and proper form. The Representative's Warrants constitute a valid and binding
obligation of the Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this Agreement of the
Common Stock and the Option Securities and the Representative's Warrants to
be sold by the Company, the Underwriters and the Representative,
respectively, will acquire good and marketable title to the Common Stock and
the Option Securities and the Representative's Warrants free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security interest, or other
restriction or equity of any kind whatsoever. No transfer tax is payable by
or on behalf of the Underwriters in connection with (A) the issuance by the
Company of the Securities, (B) the purchase by the Underwriters and the
Representative of the Common Stock and the Option Securities and the
Representative's Warrants, respectively, from the Company, (C) the
consummation by the Company of any of its obligations under this Agreement or
the Representative's Warrant Agreement, or (D) resales of the Common Stock
and the Option Securities in connection with the distribution contemplated
hereby;
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AyurCore, Inc.
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v. the Registration Statement is effective under
the Act, and, if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration Statement
or Prospectus or any part of any thereof or suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or, to the best of such counsel's
knowledge, threatened or contemplated under the Act;
vi. each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of the Act
and the Rules and Regulations;
vii. to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required by the Act to
be described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits thereto, and the
exhibits which have been filed are correct copies of the documents of which
they purport to be copies; (B) the descriptions in the Registration Statement
and the Prospectus and any supplement or amendment thereto of contracts and
other documents to which the Company or the Subsidiary are a party or by
which it is bound, including any document to which the Company or the
Subsidiary are a party or by which it is bound, incorporated by reference
into the Prospectus and any supplement or amendment thereto, are accurate and
fairly represent the information required to be shown by Form SB-2; (C) there
is no action, arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including, without limitation,
those having jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give rise
to the same), or involving the properties or business of either the Company
or the Subsidiary which (x) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized
in the Registration Statement are accurately summarized in all respects), (y)
questions the validity of the capital stock of the Company or this Agreement
or the Representative's Warrant Agreement, or of any action taken or to be
taken by the Company pursuant to or in connection with any of the foregoing;
(D) no statute or regulation or legal or governmental proceeding required to
be described in the Prospectus is not described as required; and (E) there is
no action, suit or proceeding pending, or threatened, against or affecting
either the Company or the Subsidiary before any court or arbitrator or
governmental body, agency or official (or any basis thereof known to such
counsel) in which there is a reasonable possibility of a decision which may
result in a material adverse change in the
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AyurCore, Inc.
Underwriting Agreement
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of either the Company or the Subsidiary, which could adversely
affect the present or prospective ability of the Company to perform its
obligations under this Agreement or the Representative's Warrant Agreement or
which in any manner draws into question the validity or enforceability of
this Agreement or the Representative's Warrant Agreement;
viii. the Company has full legal right, power and
authority to enter into each of this Agreement and the Representative's
Warrant Agreement, and to consummate the transactions provided for therein;
and each of this Agreement and the Representative's Warrant Agreement has
been duly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto constitutes
a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or delivery
of this Agreement and the Representative's Warrant Agreement, its performance
hereunder or thereunder, its consummation of the transactions contemplated
herein or therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in
any breach or violation of any of the terms or provisions of, or constitutes
or will constitute a default under, or result in the creation or imposition
of any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of either the Company or the Subsidiary
pursuant to the terms of, (A) the certificate of incorporation or by-laws of
either the Company or the Subsidiary, (B) any license, contract, collective
bargaining agreement, indenture, mortgage, deed of trust, lease, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to which either the Company or the Subsidiary
are a party or by which either of them is or may be bound or to which any of
their respective properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (C) any statute, judgment, decree, order,
rule or regulation applicable to either the Company or the Subsidiary of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over either the Company or the Subsidiary or any of their
respective activities or properties;
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AyurCore, Inc.
Underwriting Agreement
ix. no consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws, as to which no
opinion need be rendered) is required in connection with the issuance of the
Common Stock and the Option Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Representative's Warrants, the
performance of this Agreement and the Representative's Warrant Agreement, and
the transactions contemplated hereby and thereby;
x. the properties and business of each of the
Company and the Subsidiary conform in all material respects to the
description thereof contained in the Registration Statement and the
Prospectus; and each of the Company and the Subsidiary has good and
marketable title to, or valid and enforceable leasehold estates in, all items
of real and personal property stated in the Prospectus to be owned or leased
by it, in each case free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, other than those referred to in the
Prospectus and liens for taxes not yet due and payable;
xi. neither the Company nor the Subsidiary are in
breach of, or in default under, any term or provision of any license,
contract, collective bargaining agreement, indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, partnership agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which either the Company or the Subsidiary
are a party or by which either the Company or the Subsidiary may be bound or
to which the respective properties or assets (tangible or intangible) of
either the Company or the Subsidiary are subject or affected; and neither the
Company nor the Subsidiary are in violation of any term or provision of its
Articles of Incorporation or By-Laws or in violation of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation,
domestic or foreign;
xii. the statements in the Prospectus under "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations
or legal conclusions, are correct in all material respects;
xiii. the Securities have been accepted for
quotation on Nasdaq;
xiv. to the best of such counsel's knowledge, the
persons listed under the caption "PRINCIPAL STOCKHOLDERS" in the Prospectus
are the respective
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"beneficial owners" (as such phrase is defined in regulation 13d-3 under the
Exchange Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
xv. to the best of such counsel's knowledge, none
of the Company, the Subsidiary nor any of their respective officers,
stockholders, employees or agents, nor any other person acting on behalf of
either the Company or the Subsidiary have, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who is or may be in a position to help
or hinder the business of either the Company or the Subsidiary (or assist it
in connection with any actual or proposed transaction) which (A) might
subject either the Company or the Subsidiary to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (B) if not given in
the past, might have had an adverse effect on the assets, business or
operations of the Company and the Subsidiary taken as a whole, as reflected
in any of the financial statements contained in the Registration Statement,
or (C) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company and the Subsidiary taken as
a whole;
xvi. no person, corporation, trust, partnership,
association or other entity has the right to include and/or register any
securities of the Company in the Registration Statement, require the Company
to file any registration statement or, if filed, to include any security in
such registration statement;
xvii. to the best of such counsel's knowledge,
except as described in the Prospectus, there are no claims, payments,
issuances, arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or financial consulting arrangements or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD;
xviii. assuming due execution by the parties
thereto other than the Company, the Lock-up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against the party and
any subsequent holder of the securities subject thereto in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any
32
AyurCore, Inc.
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action, legal or equitable, and except as rights to indemnity or contribution
may be limited by applicable law);
xix. except as described in the Prospectus,
neither the Company nor the Subsidiary (A) maintains, sponsors or contributes
to any ERISA Plans, (B) maintains or contributes, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA,
and (C) has ever completely or partially withdrawn from a "multiemployer
plan;"
xx. the minute books of each of the Company and
the Subsidiary have been made available to the Underwriters and contain a
summary of all meetings and actions of the directors and stockholders of the
Company since their respective dates of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects;
xxi. except as set forth in the Prospectus and to
the best knowledge of such counsel, no officer, director or stockholder of
either the Company or the Subsidiary, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (A) an interest in any person or entity which
(x) furnishes or sells services or products which are furnished or sold or
are proposed to be furnished or sold by either the Company or the Subsidiary,
or (y) purchases from or sells or furnishes to either the Company or the
Subsidiary any goods or services, or (B) a beneficial interest in any
contract or agreement to which either the Company or the Subsidiary are a
party or by which either of them may be bound or affected. Except as set
forth in the Prospectus under "CERTAIN TRANSACTIONS," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among
any of the Company or the Subsidiary, and any officer, director, or 5% or
greater securityholder of any of the Company or the Subsidiary, or any
affiliate or associate of any such person or entity;
xxii. to the best of such counsel's knowledge,
each of the Company and the Subsidiary is in compliance with all provisions
of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba; and
xxiii. none of the Company, the Subsidiary or any
of their respective affiliates shall be subject to the requirements of or
shall be deemed an "Investment Company," pursuant to and as defined under,
respectively, the Investment Company Act.
Such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company and the
Subsidiary, and representatives of the independent public accountants for the
Company and the Subsidiary, at which conferences such
33
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Underwriting Agreement
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and related matters and, although such counsel is
not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus, on the basis of the
foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became
effective or the Preliminary Prospectus or Prospectus or any amendment or
supplement thereto as of the date of such opinion contained any 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
(it being understood that such counsel need express no opinion with respect
to the financial statements and schedules and other financial and statistical
data included in the Preliminary Prospectus, the Registration Statement or
the Prospectus). Such counsel shall further state that its opinion may be
relied upon by Underwriters' Counsel in rendering its opinion to the
Underwriters.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to
Underwriters' Counsel) of other counsel acceptable to Underwriters' Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible
officers of each of the Company and the Subsidiary and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
each of the Company and the Subsidiary, provided that copies of any such
statements or certificates shall be delivered to Underwriters' Counsel if
requested. The opinion of such counsel for the Company and the Subsidiary
shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Representative, Underwriters'
Counsel and they are each justified in relying thereon. Any opinion of
counsel for the Company and the Subsidiary shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991) or any comparable state accord.
e. At each Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of Rubin, Baum, ▇▇▇▇▇,
Constant & ▇▇▇▇▇▇▇▇, counsel to the Company and the Subsidiary, dated such
Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of such Option Closing
Date the statements made by Rubin, Baum, ▇▇▇▇▇, Constant & ▇▇▇▇▇▇▇▇ in its
opinion delivered on the Closing Date.
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f. On or prior to each of the Closing Date and
each Option Closing Date, if any, Company's Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require for
the purpose of enabling them to review or pass upon the matters referred to
in subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
g. Prior to each of the Closing Date and each
Option Closing Date, if any, (i) there shall have been no adverse change nor
development involving a prospective change in the condition, financial or
otherwise, earnings, position, value, properties, results of operations,
prospects, stockholders' equity or the business activities of either the
Company or the Subsidiary, whether or not in the ordinary course of business,
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by either
the Company or the Subsidiary, from the latest date as of which the financial
condition of the Company and the Subsidiary are set forth in the Registration
Statement and Prospectus which is adverse to the Company and the Subsidiary
taken as a whole; (iii) neither the Company nor the Subsidiary shall be in
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) neither the Company nor the Subsidiary shall have issued
any securities (other than the Securities) or declared or paid any dividend
or made any distribution in respect of its capital stock of any class and
there has not been any change in the capital stock or any change in the debt
(long or short term) or liabilities or obligations of either the Company or
the Subsidiary (contingent or otherwise); (v) no material amount of the
assets of either the Company or the Subsidiary shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been
pending or threatened (or circumstances giving rise to same) against either
the Company or the Subsidiary, or affecting any of their respective
properties or businesses before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may adversely affect the business, operations,
earnings, position, value, properties, results of operations, prospects or
financial condition or income of the Company and the Subsidiary taken as a
whole; and (vii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
h. At each of the Closing Date and each Option
Closing Date, if any, the Underwriters shall have received a certificate of
the Company signed by the principal executive officer and by the chief
financial or chief accounting officer of the Company, dated the Closing Date
or Option Closing Date, as the case may be, to the effect that each of such
persons has carefully examined the Registration Statement, the Prospectus and
this Agreement, and that:
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Underwriting Agreement
i. The representations and warranties of the
Company in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
ii. No stop order suspending the effectiveness
of the Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to the
best of each of such person's knowledge, after due inquiry, are contemplated
or threatened under the Act;
iii. The Registration Statement and the
Prospectus and, if any, each amendment and each supplement thereto, contain
all statements and information required to be included therein, and none of
the Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and neither the Preliminary Prospectus or
any supplement thereto included 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, in light of the circumstances under which
they were made, not misleading; and
iv. Subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus,
(a) neither the Company nor the Subsidiary have incurred up to and including
the Closing Date or the Option Closing Date, as the case may be, other than
in the ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) neither the Company nor the Subsidiary
have paid or declared any dividends or other distributions on its capital
stock; (c) neither the Company nor the Subsidiary have entered into any
transactions not in the ordinary course of business; (d) there has not been
any change in the capital stock or long-term debt or any increase in the
short-term borrowings (other than any increase in the short-term borrowings
in the ordinary course of business) of either the Company or the Subsidiary;
(e) neither the Company nor the Subsidiary have sustained any loss or damage
to any of their respective properties or assets, whether or not insured; (f)
there is no litigation which is pending or threatened (or circumstances
giving rise to same) against any of the Company or the Subsidiary or any
affiliated party of any of the foregoing which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth; and (g)
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
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AyurCore, Inc.
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References to the Registration Statement and the Prospectus
in this subsection (h) are to such documents as amended and supplemented at
the date of such certificate.
i. By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriters, as described in the Registration Statement.
j. At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii)
below) in all respects to the Underwriters and Underwriters' Counsel, from
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company, LLP:
i. confirming that they are independent
certified public accountants with respect to the Company and the Subsidiary
within the meaning of the Act and the applicable Rules and Regulations;
ii. stating that it is their opinion that the
consolidated financial statements of the Company and the Subsidiary included
in the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Representative may rely upon the opinion
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company, LLP with respect to the consolidated
financial statements included in the Registration Statement;
iii. stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
financial statements of each of the Company and the Subsidiary, a reading of
the latest available minutes of the stockholders and board of directors and
the various committees of the boards of directors of each of the Company and
the Subsidiary, consultations with officers and other employees of each of
the Company and the Subsidiary responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that (A) the unaudited
consolidated financial statements of the Company and the Subsidiary included
in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent
with that of the audited consolidated financial statements of the Company and
the Subsidiary included in the Registration Statement, or (B) at a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there has been any change in the capital stock or
long-term debt of either the Company or the Subsidiary, or any increase in
the stockholders' deficit or net current assets or net assets of either the
Company or the
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Underwriting Agreement
Subsidiary as compared with amounts shown in the December 31, 1997 balance
sheet included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease, and (C) during
the period from January 1, 1997 to a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there was any
decrease in net revenues, net earnings or increase in net earnings per common
share of either the Company or the Subsidiary, in each case as compared with
the corresponding period beginning January 1, 1996, other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
iv. setting forth, at a date not later than
five (5) days prior to the date of the Registration Statement, the amount of
liabilities of the Company and the Subsidiary taken as a whole (including a
break-down of commercial paper and notes payable to banks);
v. stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company and the
Subsidiary set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and the
Subsidiary and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
vi. statements as to such other matters
incident to the transaction contemplated hereby as the Representative may
request.
k. At the Closing Date and each Option Closing
Date, if any, the Underwriters shall have received from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ &
Company, LLP a letter, dated as of the Closing Date or the Option Closing
Date, as the case may be, to the effect that they reaffirm that statements
made in the letter furnished pursuant to subsection (j) of this Section,
except that the specified date referred to shall be a date not more than five
(5) days prior to the Closing Date or the Option Closing Date, as the case
may be, and, if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement pursuant
to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
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l. On each of the Closing Date and each Option
Closing Date, if any, there shall have been duly tendered to the
Representative for the several Underwriters' accounts the appropriate number
of Securities.
m. No order suspending the sale of the Securities
in any jurisdiction designated by the Representative pursuant to subsection
(e) of Section 4 hereof shall have been issued on either the Closing Date or
the Option Closing Date, if any, and no proceedings for that purpose shall
have been instituted or shall be contemplated.
n. On or before the Closing Date, the Company
shall have executed and delivered to the Representative, (i) the
Representative's Warrant Agreement substantially in the form filed as Exhibit
4.1 to the Registration Statement, in final form and substance satisfactory
to the Representative, and (ii) the Representative's Warrants in such
denominations and to such designees as shall have been provided to the
Company.
o. On or before the Closing Date, the Common Stock
and Option Securities shall have been duly approved for quotation on Nasdaq,
subject to official notice of issuance.
p. On or before the Closing Date, there shall have
been delivered to the Representative all of the Lock-up Agreements, in form
and substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option
Closing Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement or, if the Representative so elects, it may waive
any such conditions which have not been fulfilled or extend the time for
their fulfillment.
7. Indemnification.
a. The Company agrees to indemnify and hold
harmless each of the Underwriters (for purposes of this Section 7,
"Underwriters" shall include the officers, directors, partners, employees,
agents and counsel of the Underwriters), and each person, if any, who
controls each of the Underwriters ("controlling person") within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions in respect thereof), whatsoever (including but not
limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriters or such controlling person may become subject under the
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AyurCore, Inc.
Underwriting Agreement
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon (A) any
untrue statement or alleged untrue statement of a material fact contained (i)
in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise
of the Securities; or (iii) in any application or other document or written
communication (in this Section 7, collectively referred to as "applications")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, the NASD, Nasdaq or any securities exchange; (B) the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances in which they were
made); or (C) any breach of any representation, warranty, covenant or
agreement of the Company contained herein or in any certificate by or on
behalf of the Company or any of its officers delivered pursuant hereto,
unless, in the case of clause (A) or (B) above, such statement or omission
was made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of
the Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, or in any application, as the case may be. The indemnity
agreement in this Section 7(a) shall be in addition to any liability which
the Company may have at common law or otherwise.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or
otherwise.
b. Each of the Underwriters agrees severally, but
not jointly, to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement,
and each other person, if any, who controls the Company within the meaning of
the Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters but only with respect to statements or omissions, if any,
made in any Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished
to the Company with respect to any Underwriter by such Underwriter expressly
for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any such
application, provided that such written information or omissions only pertain
to disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering. The Company acknowledges that the
statements with respect to the public offering of the Common Stock and the
Option Securities set
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Underwriting Agreement
forth under the heading "Underwriting" and the stabilization legend in the
Prospectus have been furnished by the Underwriters expressly for use therein
and constitute the only information furnished in writing by or on behalf of
the Underwriters for inclusion in the Prospectus.
c. Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any claim, action,
suit, investigation, inquiry, proceeding or litigation, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such claim, action, suit,
investigation, inquiry, proceeding or litigation is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. Notwithstanding
the foregoing, the indemnified party or parties shall have the right to
employ its or their own counsel in any such case but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense thereof at
the expense of the indemnifying party, (ii) the indemnifying parties shall
not have employed counsel reasonably satisfactory to such indemnified party
to have charge of the defense thereof within a reasonable time after notice
of commencement thereof, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of
the indemnifying parties (in which case the indemnifying parties shall not
have the right to direct the defense thereof on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one claim, action,
suit, investigation, inquiry, proceeding or litigation or separate but
similar or related claims, actions, suits, investigations, inquiries,
proceedings or litigation in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim, action, suit, investigation, inquiry, proceeding or
litigation effected without its written consent; provided, however, that such
consent was not unreasonably withheld. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit, investigation, inquiry, proceeding
or litigation in respect of
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Underwriting Agreement
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim,
action, suit, investigation, inquiry, proceeding or litigation), unless such
settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such claim, action,
suit, investigation, inquiry, proceeding or litigation and (ii) does not
include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
d. In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of this Section 7
provide for indemnification in such case, or (ii) contribution under the Act
may be required on the part of any indemnified party, then each indemnifying
party shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Common Stock and the
Option Securities or (B) if the allocation provided by clause (A) 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 each of the contributing parties, on the one hand,
and the party to be indemnified, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable
considerations. In any case where the Company is the contributing party and
the Underwriters are the indemnified party, the relative benefits received by
the Company on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Common Stock and the Option Securities (before deducting
expenses) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Underwriters, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to
the Common Stock and the Option Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation
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Underwriting Agreement
(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 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the
Company who has 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 this subsection (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution
may be made against another party or parties under this subsection (d),
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they
may have hereunder or otherwise than under this subsection (d), or to the
extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to
any liabilities which any indemnifying party may have at common law or
otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters and the Representative, as the
case may be.
9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the
Securities for sale to the public; provided, however, that the provisions of
Sections 5, 7 and 10 of this Agreement shall at all times be effective. For
purposes of this Section 9, the Securities to be purchased hereunder shall be
deemed to have been so released upon the earlier of dispatch by the
Representative of telegrams to securities dealers releasing such securities
for offering or the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Securities.
10. Termination.
a. Subject to Section 10(b) hereof, the
Representative shall have the right to terminate this Agreement: (i) if any
domestic or international event or act or occurrence
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Underwriting Agreement
has materially adversely disrupted, or in the Representative's opinion will
in the immediate future materially adversely disrupt, the financial markets;
or (ii) if any material adverse change in the financial markets shall have
occurred; or (iii) if trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Boston Stock Exchange,
the Commission or any governmental authority having jurisdiction over such
matters; or (iv) if trading of any of the securities of the Company shall
have been suspended, or if any of the securities of the Company shall have
been delisted, on any exchange or in any over-the-counter market; or (v) if
the United States shall have become involved in a war or major hostilities,
or if there shall have been an escalation in an existing war or major
hostilities, or a national emergency shall have been declared in the United
States; or (vi) if a banking moratorium shall have been declared by any state
or federal authority; or (vii) if a moratorium in foreign exchange trading
shall have been declared; or (viii) if the Company shall have sustained a
material or substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (ix) if there
shall have been such a material adverse change in the conditions or prospects
of the Company, or if there shall have been such a material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere, as in the Representative's judgment would make it inadvisable to
proceed with the offering, sale and/or delivery of the Securities.
b. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 10(a), the
Company shall promptly reimburse and indemnify the Representative for all of
its actual out-of-pocket expenses, including the fees and disbursements of
counsel for the Underwriters (less amounts previously paid pursuant to
Section 5(c) above); provided, however, that the Representative will refund
to the Company any unaccounted-for portion of any amounts already advanced by
the Company to the Representative pursuant to Section 5(c) hereof.
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted by the Representative, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition
of this Agreement by it to be performed or satisfied (including, without
limitation, pursuant to Section 6 or Section 12) then, the Company shall
promptly reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses, including the fees and disbursements of counsel for
the Underwriters (less amounts previously paid pursuant to Section 5(c)
above); provided, however, that the Representative will refund to the Company
any unaccounted-for portion of any amounts already advanced by the Company to
the Representative pursuant to Section 5(c) hereof. In addition, the Company
shall remain liable for all Blue Sky counsel fees and disbursements, expenses
and filing fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to
44
AyurCore, Inc.
Underwriting Agreement
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section 6, Section
10 or Section 12 hereof) to purchase the Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Common Stock to be purchased on such date,
the non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds
10% of the total number of Common Stock, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters (or, if such
default shall occur with respect to any Option Securities to be purchased on
an Option Closing Date, the Underwriters may at the Representative's option,
by notice from the Representative to the Company, terminate the Underwriters'
obligation to purchase Option Securities from the Company on such date).
No action taken pursuant to this Section 11 shall relieve
any defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven (7) days in order
to effect any required changes in the Registration Statement or Prospectus or
in any other documents or arrangements.
12. Default by the Company. If the Company shall fail at
the Closing Date or at any Option Closing Date, as applicable, to sell and
deliver the number of Securities which it is obligated to sell hereunder on
such date, then this Agreement shall terminate (or, if such default shall
occur with respect to any Option Securities to be purchased on an Option
Closing Date, the Underwriters may at the Representative's option, by notice
from the Representative to
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AyurCore, Inc.
Underwriting Agreement
the Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date) without any liability on the part
of any non-defaulting party other than pursuant to Section 5, Section 7 and
Section 10 hereof. No action taken pursuant to this Section 12 shall relieve
the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at Network 1 Financial Securities, Inc., The
Galleria, Building 2, ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Attention:
▇▇▇▇▇▇▇ ▇▇▇▇, President, with a copy to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. Notices to the Company shall
be directed to the Company at ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, M.D., President, with a copy to
Rubin, Baum, ▇▇▇▇▇, Constant & ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof,
and their respective successors, legal representatives and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof.
This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
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AyurCore, Inc.
Underwriting Agreement
If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
AYURCORE, INC.
By:
---------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written.
NETWORK 1 FINANCIAL SECURITIES, INC.
For itself and as Representative of the several
Underwriters named in Schedule A hereto.
By:
------------------------------------
Name:
Title:
47
AyurCore, Inc.
Underwriting Agreement
SCHEDULE A
TO THE UNDERWRITING AGREEMENT
Number of Shares
Names of Underwriters to be Purchased
Network 1 Financial Securities, Inc......
Total............................... 1,350,000
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48