1,500,000 Shares
PHARMAPRINT INC.
Common Stock
UNDERWRITING AGREEMENT
February ___, 1998
CIBC Oppenheimer Corp.
As Representative of the Several Underwriters
CIBC ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
On behalf of the Several
Underwriters named on
Schedule I attached hereto
Ladies and Gentlemen:
PharmaPrint Inc., a Delaware corporation (the "COMPANY"), proposes to sell
to you and the other underwriters named on Schedule I to this Agreement (the
"UNDERWRITERS"), for whom you are acting as representative (the
"REPRESENTATIVE"), an aggregate of 1,500,000 shares (the "FIRM SHARES") of the
Company's Common Stock, $0.001 par value (the "COMMON STOCK"). In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 225,000 shares (the "OPTION SHARES") of Common Stock from it for the
purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the "SHARES."
The Company also proposes to issue to the Representative and Cruttenden
▇▇▇▇ Incorporated, in their respective individual capacities, the warrants
referred to in Section 1(c) to purchase up to an aggregate of 75,000 shares of
Common Stock.
1. SALE AND PURCHASE OF THE SHARES.
On the basis of the representations, warranties and agreements contained
in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at $_____ per share (the "INITIAL PRICE"), the number of Firm
Shares set forth opposite the name of such Underwriter on Schedule I to
this Agreement.
(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares
at the Initial Price. The number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the Representative to
eliminate fractions) of the total number of Option Shares to be purchased
by the Underwriters as such Underwriter is purchasing of the Firm Shares.
Such option may be exercised only to cover over-allotments in the sales of
the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time on or before 12:00 noon, New York City time, on the
business day before the Firm Shares Closing Date (as defined below), and
only once thereafter within 30 days after the date of this Agreement, in
each case upon written or telegraphic notice, or verbal or telephonic
notice confirmed by written or telegraphic notice, by the Representative to
the Company no later than 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the time
and date (if other than the Firm Shares Closing Date) of such purchase.
(c) On the Firm Shares Closing Date, the Company agrees to issue to
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. for an aggregate price of $75.00 (for its own
account and not as the representative of the several Underwriters),
warrants (the "WARRANTS") to purchase an aggregate of 75,000 shares of
Common Stock (the "WARRANT SHARES") at a price per Warrant Share equal to
120% of the price to the public in the offering by the Underwriters of the
Firm Shares. The Warrants will be exercisable at any time and from time to
time on or after the first anniversary of the Effective Date (as defined
below) up to the fifth anniversary thereof. Each Warrant shall be
substantially identical to the form of Warrant filed as an exhibit to the
Registration Statement (as defined below).
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares to
the Representative for the respective accounts of the Underwriters, and payment
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (same day) funds to the Company, shall take place at the
offices of CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp., at CIBC Oppenheimer Tower, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., New York City time
(or at such other place and time as may be agreed upon by the Representative and
the Company), (a) on the third (3rd) full business day following the first day
that Firm Shares are traded or (b) if this Agreement is executed and delivered
after 4:30 p.m. New York time, the fourth (4th) full business day following the
day that this Agreement is executed and delivered or (c) at such other time and
date not later than seven (7) full business days following the first day that
Firm Shares are traded as the Representative and the Company may determine (or
at such time and date to which payment and delivery shall have been postponed
pursuant to SECTION 10), such time and date of payment and delivery being herein
called the "FIRM SHARES CLOSING DATE;" PROVIDED, HOWEVER, that if the Company
has not made available to the Representative copies of the Prospectus within the
time provided in SECTION 6(A), the Representative may, in its sole discretion,
postpone the Firm Shares Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representative.
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In the event the option with respect to the Option Shares is exercised,
delivery by the Company of the Option Shares to the Representative for the
respective accounts of the Underwriters and payment of the purchase price by
certified or official bank check or checks payable in New York Clearing House
(same day) funds to the Company shall take place at the offices of CIBC
▇▇▇▇▇▇▇▇▇▇▇ Corp. specified above (or such other place as may be agreed upon by
the Representative and the Company) at the time and on the date (which may be
the same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in SECTION 1(B) (such time and date of
delivery and payment are called the "OPTION SHARES CLOSING DATE"). The Firm
Shares Closing Date and the Option Shares Closing Date are each called,
individually, a "CLOSING DATE" and, together, the "CLOSING DATES."
Certificates evidencing the Shares shall be registered in such names and
shall be in such denominations as the Representative shall request at least two
full business days before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as described in SECTION
1(B) and shall be made available to the Representative for checking and
packaging, at such place as is designated by the Representative, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The Company
has prepared in conformity with the requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT"), and the published rules and regulations
thereunder (the "RULES") adopted by the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form SB-2 (No. 333-41129), including a
preliminary prospectus relating to the Shares, and has filed with the Commission
the Registration Statement (as hereinafter defined) and such amendments thereof
as may have been required to the date of this Agreement. Copies of such
Registration Statement (including all amendments thereof) and of the related
preliminary prospectus have heretofore been delivered by the Company to you.
The term "PRELIMINARY PROSPECTUS" means any preliminary prospectus (as described
in Rule 430 of the Rules) included at any time as a part of the Registration
Statement. The Registration Statement as amended at the time and on the date it
becomes effective (the "EFFECTIVE DATE"), including all exhibits and
information, if any, deemed to be part of the Registration Statement pursuant to
Rule 424(b) and Rule 430A of the Rules, is called the "REGISTRATION STATEMENT."
The term "PROSPECTUS" means the prospectus in the form first used to confirm
sales of the Shares (whether such prospectus was included in the Registration
Statement at the time of effectiveness or was subsequently filed with the
Commission pursuant to Rule 424(b) of the Rules).
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representative
deems advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each preliminary
prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Underwriter as follows:
(a) On the Effective Date the Registration Statement complied, and on
the date of the Prospectus, on the date any post-effective amendment to the
Registration Statement shall become effective, on the date any supplement
or amendment to the Prospectus is filed with the Commission and on each
Closing Date, the Registration Statement and the Prospectus (and any
amendment thereof or supplement thereto) will comply, in all material
respects, with the applicable provisions of the Securities Act and the
Rules and the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the rules and regulations of the Commission thereunder; the
Registration Statement did not, as of the Effective Date, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and on the other dates referred to above neither the
Registration Statement nor the Prospectus, nor any amendment thereof or
supplement thereto, will contain any untrue statement of a material fact or
will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. When any
related preliminary prospectus was first filed with the Commission (whether
filed as part of the Registration Statement or any amendment thereto or
pursuant to Rule 424(a) of the Rules) and when any amendment thereof or
supplement thereto was first filed with the Commission, such preliminary
prospectus as amended or supplemented complied in all material respects
with the applicable provisions of the Securities Act and the Rules and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty as to the paragraphs with respect to
stabilization and passive market making on the inside front cover page of
the Prospectus and the statements contained under the caption
"Underwriting" in the Prospectus. The Company acknowledges that the
statements referred to in the previous sentence constitute the only
information furnished in writing by the Representative on behalf of the
several Underwriters, or by any other Underwriter, specifically for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus.
(b) All contracts and other documents required to be filed as
exhibits to the Registration Statement have been filed with the Commission
as exhibits to the Registration Statement.
(c) The financial statements of the Company (including all notes and
schedules thereto) included in the Registration Statement and Prospectus
present fairly the financial position, the results of operations and cash
flows and the stockholders' equity and the other information purported to
be shown therein of the Company 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,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of the results for such periods have been
made. The selected and summary
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financial data included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis consistent
with the audited financial statements presented therein.
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports are filed with the Commission
as a part of the Registration Statement, are and, during the periods
covered by their reports, were independent public accountants as required
by the Securities Act and the Rules.
(e) The Company's reincorporation from California to Delaware has
been completed with no adverse effect upon the business, assets, or
operations of the Company, and the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Delaware. Other than PharmaPrint B.V., the Company has no
subsidiary or subsidiaries and does not control, directly or indirectly,
any corporation, partnership, joint venture, association or other business
organization. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location
of its assets or properties (owned, leased or licensed) or the nature of
its business makes such qualification necessary except for such
jurisdictions where the failure to so qualify would not have a material
adverse effect on the assets or properties, business, results of operations
or financial condition of the Company. Except as disclosed in the
Registration Statement and the Prospectus, the Company does not own, lease
or license any asset or property or conduct any business outside the United
States of America. The Company has all requisite corporate power and
authority, and has and is in compliance with the requirements and
conditions of, all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all governmental or
regulatory bodies or any other person or entity, to own, lease and license
its assets and properties and conduct its businesses as now being conducted
and as described in the Registration Statement and the Prospectus except
for such authorizations, approvals, consents, orders, material licenses,
certificates and permits the failure to so obtain would not have a material
adverse effect upon the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company;
no such authorization, approval, consent, order, license, certificate or
permit contains a materially burdensome restriction other than as disclosed
in the Registration Statement and the Prospectus; and the Company has all
such corporate power and authority, and such authorizations, approvals,
consents, orders, licenses, certificates and permits to enter into, deliver
and perform this Agreement and the Warrants and to issue and sell the
Shares and the Warrant Shares (except as may be required under the
Securities Act and state and foreign Blue Sky laws).
(f) (i) To the Company's knowledge, the Company owns or possesses
exclusive rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights
that are necessary to conduct its business as now conducted and as
described in the Registration Statement and Prospectus; except as set forth
in the Registration Statement and the Prospectus, the expiration of any
patents, patent rights, licenses, trade secrets, trademarks, service marks,
trade names or copyrights would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company; except as described in
5
paragraph (viii) below, the Company has not received any notice of, and
has no knowledge of, any infringement of or conflict with asserted
rights of the Company by others with respect to any patent, patent
rights, licenses, inventions, trade secrets, know-how, trademarks,
service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others by the Company with respect to
any patent, patent rights, licenses, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company;
(ii) The Company has consulted with its patent counsel regarding
the persons who should be named as inventors on its pending patent
applications, and all such applications name all persons who should be
named as inventors therein under applicable laws and regulations;
(iii) All employees of the Company and all consultants to the
Company who perform material work for the Company have assigned to the
Company all rights to all inventions and works of authorship created by
them in the course and scope of their employment or engagement by the
Company;
(iv) The Company has conducted a diligent and thorough search
for, and has found no prior art that would reasonably be expected to
prevent the issuance of patents on the claims set forth in the Company's
pending patent applications or support an interference or invalidation
proceeding with respect to any patent issued on the Company's pending
patent applications.
(v) The Company is not aware of any other research or
development efforts that duplicate or are comparable to the PharmaPrint
Process as described in the Prospectus.
(vi) The Company's pending patent applications have been properly
prepared and filed in a timely manner so as to obtain the benefit of any
priority claimed from previously filed patent applications, include all
information and disclosures required under applicable law and regulations,
and are being diligently pursued by the Company.
(vii) All information submitted to the US Patent and
Trademark Office (the "USPTO") and any foreign or international patent
examining authority in connection with the Company's pending patent
applications and prosecution thereof is accurate, and the Company has not
made any material misrepresentation or concealed any material information
from the USPTO or any other patent examining authority in any such
applications or prosecution thereof.
(viii) The Company is not aware of any asserted or unasserted
claim or demand of any right in or to any of the patent rights of the
Company, including but not limited to a claim or demand of a shopright,
joint ownership, inventorship, or
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misappropriation, except for the claim by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the Company's
former Senior Vice President for Research and Development, that he is a
co-inventor of the inventions that are the subject of the Company's
pending patent applications, which claim the Company has examined in
good faith with its patent counsel and its counsel retained for purposes
of its dispute with ▇▇. ▇▇▇▇▇▇▇ and believes to be without merit.
(ix) The Company has not sublicensed or otherwise transferred any
patent, trade secret, or other intellectual property.
(x) The Company has kept confidential and otherwise protected as
trade secret the techniques processes used in applying the PharmaPrint
Process described in the Prospectus.
(xi) All of the Company's subcontractors have entered into
confidentiality agreements prohibiting the use or disclosure of the
Company's trade secrets for any purpose other than work on behalf of the
Company.
(g) The Company has good title to each of the items of personal
property that are reflected in the financial statements referred to in
SECTION 4(C) or are referred to in the Registration Statement and the
Prospectus as being owned by it and valid and enforceable leasehold
interests in each of the items of real and personal property that are
referred to in the Registration Statement and the Prospectus as being
leased by it, in each case free and clear of all liens, encumbrances,
claims, security interests and defects, other than those described in the
Registration Statement and the Prospectus and those which do not and will
not have a material adverse effect upon the assets or properties, business,
results of operations or financial condition of the Company.
(h) Except as set forth in the Registration Statement and Prospectus,
there is no litigation or other dispute resolution proceeding or
governmental or other proceeding or investigation pending or, to the
Company's best knowledge, threatened (and the Company does not know of any
basis therefor) against the Company or any of its officers, directors,
employees or agents, or involving the assets, properties or business of,
the Company which would materially adversely affect the value or the
operation of any such assets or properties or the business, results of
operations, prospects or condition (financial or otherwise) of the Company.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described
therein, (i) there has not been any material adverse change in the assets
or properties, business, results of operations, prospects or condition
(financial or otherwise), of the Company, whether or not arising from
transactions in the ordinary course of business; (ii) the Company has not
sustained any material loss or interference with its assets, businesses or
properties (whether owned or leased) from fire, explosion, earthquake,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or any court or legislative or other governmental action,
order or decree; and (iii) since the date of the latest balance sheet
included in the Registration Statement and the Prospectus, except as
reflected
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therein, the Company has not (a) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money,
except such liabilities or obligations incurred in the ordinary course
of business, (b) entered into any transaction not in the ordinary course
of business or (c) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire
any shares of its stock.
(j) There is no document or contract of a character required to be
described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required. Each agreement listed in the Exhibits to the Registration
Statement, other than items 10.6 and 10.7, is in full force and effect and
is valid and enforceable by and against the Company in accordance with its
terms, assuming the due authorization, execution and delivery thereof by
each of the other parties thereto. Neither the Company, nor to the best of
the Company's knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under any such
agreement, and no event has occurred which with notice or lapse of time or
both would constitute such a default, in any such case which default or
event would have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition (financial or
otherwise) of the Company. No default exists, and, to the Company's
knowledge, no event has occurred which with notice or lapse of time or both
would constitute a default, in the due performance and observance of any
term, covenant or condition, by the Company of any other agreement or
instrument to which the Company is a party or by which it or its properties
or business may be bound or affected which default or event would have a
material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company.
(k) The Company is not in violation of any term or provision of its
charter or by-laws or of any franchise, license, permit, judgment, decree,
order, statute, law, rule or regulation, where the consequences of such
violation would have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition (financial or
otherwise) of the Company.
(l) Neither the execution, delivery and performance of this Agreement
and the Warrants by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares and the Warrants) will give
rise to a right to terminate or accelerate the due date of any payment due
under, or conflict with or result in the breach of any term or provision
of, or constitute a default (or an event which with notice or lapse of time
or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation applicable to the
Company or violate any provision of
8
the charter or by-laws of the Company, except for such consents or
waivers which have already been obtained and are in full force and
effect.
(m) The Company has an authorized and outstanding capital stock as
set forth under the caption "Description of Capital Stock" in the
Prospectus. All of the outstanding shares of Common Stock have been duly
and validly issued and are fully paid and nonassessable and none of them
was issued in violation of any preemptive or other similar right. The
Company has reserved and kept available for the exercise of the Warrants
such number of authorized but unissued shares as are sufficient to permit
the exercise in full of the Warrants. The Shares, when issued and sold
pursuant to this Agreement, and the Warrant Shares, when issued and sold
pursuant to the Warrants, will be duly and validly issued, fully paid and
nonassessable and free of any pledge, lien, security interest, encumbrance,
claim or equitable interest, and none of them will be issued in violation
of any preemptive, co-sale, registration, first refusal, or other similar
right. The certificates for the Shares are in due and proper form and the
holders of the Shares, Warrants, and the Warrant Shares, after making
payment therefor, will not be subject to personal liability by reason of
being such holders. Except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other right
calling for the issuance of, and there is no commitment, plan or
arrangement to issue, any share of stock of the Company or any security
convertible into, or exercisable or exchangeable for, such stock. The
Common Stock, the Shares and the Warrants conform in all material respects
to all statements in relation thereto contained in the Registration
Statement and the Prospectus.
(n) No holder of any security of the Company has the right (which has
not been waived) to have any security owned by such holder included in the
Registration Statement or to demand registration of any security owned by
such holder during the period ending 180 days after the date of this
Agreement. Each director and executive officer of the Company has
delivered to the Representative his enforceable written agreement that he
will not, for a period of 180 days (except with respect to an aggregate of
200,000 shares owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 120 days)
after the date of this Agreement, offer for sale, sell, distribute, grant
any option for the sale of, or otherwise dispose of, directly or
indirectly, or exercise any registration rights with respect to, any shares
of Common Stock (or any securities convertible into, exercisable for, or
exchangeable for any shares of Common Stock) owned by him, without the
prior written consent of the Representative.
(o) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Agreement and the Warrants and the issuance and sale of the Shares, the
Warrants and the Warrant Shares by the Company. This Agreement has been,
and the Warrants on the Firm Shares Closing Date will be, duly and validly
authorized, executed and delivered by the Company and constitute and will
constitute legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except (A)
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles and (B)
to the extent that rights to indemnity or
9
contribution under this Agreement may be limited by Federal and state
securities laws or the public policy underlying such laws.
(p) The Company is not involved in any labor dispute nor, to the
knowledge of the Company, is any such dispute threatened, which dispute
would have a material adverse effect on the assets or properties, business,
results of operations, prospects or condition (financial or otherwise) of
the Company.
(q) No transaction has occurred between or among the Company and any
of its officers or directors or any affiliate or affiliates of any such
officer or director that is required to be described in and is not
described in the Registration Statement and the Prospectus.
(r) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of any of the Shares.
(s) The Company has filed all federal, state, local and foreign tax
returns which are required to be filed through the date hereof, or has
received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material
and have become due.
(t) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
prudent for its business and consistent with insurance coverage maintained
by similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism, products
liability for clinical trials, errors and omissions, and all other risks
customarily insured against, all of which insurance is in full force and
effect; the Company has not been refused any insurance coverage sought or
applied for; and the Company does not have any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially
and adversely affect the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(u) The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and is
approved for inclusion in the Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or the
inclusion of the Common Stock in the Nasdaq National Market, nor has the
Company received any notification that the Commission or the Nasdaq
National Market is contemplating terminating such registration or approval,
other than as set forth in letters from Nasdaq to the Company dated
November , 1997 and December 24, 1997 related to the Company's failure
to meet listing standards. If the offering contemplated by this Agreement
is completed, the
10
Company will meet the listing standards for the Nasdaq National Market
and the issues addressed in the Nasdaq letters described above will be
resolved.
(v) The Company has been advised by counsel concerning the Investment
Company Act of 1940, as amended (the "1940 ACT"), and the rules and
regulations thereunder, and the Company has in the past conducted, and the
Company intends in the future to conduct, its affairs in such a manner as
to ensure that it is not and will not become an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
1940 Act and such rules and regulations.
(w) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are
to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses,
the Prospectus, the Registration Statement and other materials, if any,
permitted by the Act.
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
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 authorization, and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(y) The Company has conducted and is conducting its businesses in
compliance with all applicable federal, state, local and foreign statutes,
laws, rules, regulations, ordinances, codes, decisions, decrees, directives
and orders, except where the failure to do so would not, singly or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), assets or properties, business, results of operations, or
prospects of the Company.
(z) The Company has complied with all provisions of Florida
H.B. 1771, codified as Section 517.075 of the Florida statutes, and all
regulations promulgated thereunder relating to issuers doing business with
Cuba.
(aa) Except as described in the Prospectus, to the Company's
knowledge, there are no rulemaking or similar proceedings before any
federal, state, local or foreign government or regulatory bodies which
involve or affect the Company which, if the subject of an action
unfavorable to the Company would have a material adverse effect on the
condition (financial or otherwise), assets or properties, business, results
of operations, or prospects of the Company.
(bb) To the knowledge of the Company, no officer, director, employee,
or consultant of the Company is in violation of any non-competition,
non-disclosure, confidentiality or other similar agreement with any party
other than the Company, and no such person is expected to be in violation
thereof as a result of the business conducted or expected
11
to be conducted by the Company as described in the Prospectus or such
person's performance of his obligations to the Company.
(cc) (i) The Company has completed the pharmaprinting, as defined in
the Prospectus, of six of the seven Initial Products described in its U.S.
License Agreement with American Home Products ("AHP") (excluding garlic),
and is currently conducting process validation and formulation activities
for these six Initial Products. The pharmaprinting for the seventh of the
seven Initial Products, garlic, is expected to be completed in February
1998.
(ii) The Company has no reason to believe that it may be unable
to (A) meet its goal of achieving a National Launch Date, as defined
in its U.S. License Agreement with AHP, no later than July 1998, and
(B) perform all of its obligations under its U.S. License Agreement
with AHP, its Foreign License Agreement with AHP and its Supply
Agreement with AHP (the "AHP Agreements").
(iii) The Company has received no indication from AHP of any
intention of terminating or attempting to modify, in whole or part,
the AHP Agreements or the relationship between AHP and the Company.
(dd) (i) The Company's License Agreement with USC, as amended by
amendments No. 1 and 2 thereto (the "USC License Agreement") is in full
force and effect and has not been further modified or breached by USC. The
Company has received no indication from USC of any intention of terminating
or attempting to modify, in whole or part, the USC License Agreement or the
relationship between USC and the Company.
(ii) The Company has not sublicensed or otherwise transferred any
of its rights under the USC License Agreement.
(iii) Pursuant to the USC License Agreement, the Company has
exclusive commercial rights to USC's interests in the Company's patent
applications, any patents that issue thereon, the PharmaPrint Process
as described in the Prospectus, and the Company's technologies, for
purposes of the Company's entire business as described in the
Prospectus.
(iv) The Company has not surrendered any rights to any patent or
country under the USC License Agreement.
(v) The Company is in compliance with the USC License Agreement,
and all previous instances of noncompliance have been cured or waived.
(vi) For purposes of the Company's agreements with USC, ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is, and for at least the last year has been, an
employee of the Company, not USC, and any inventions he makes or has
made within the past year within the scope of his employment with the
Company belong to the Company, not USC.
12
(vii) The Research Agreement between the Company and USC was
never expanded in scope beyond mistletoe as described in the original
version of the agreement and has been terminated. No further work is
being conducted under the Research Agreement, and the Company has no
further payment obligations to USC thereunder.
(ee) The Company has participated in meetings with representatives of
the US Food and Drug Administration with responsibility for the regulation
of botanical pharmaceuticals and dietary supplements. The FDA has
cooperated with the Company and the Company has no reason to anticipate
regulatory difficulties in connection with any of its product development
plans, other than those common to all similar pharmaceutical development.
(ff) The Company's contract relationships are in good standing and the
Company has no reason to believe that any of its subcontractors may cease
working with the Company on substantially the same terms as have prevailed
to date.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 6(a) of this Agreement.
(b) The Registration Statement shall have become effective not later
than 2:00 p.m., California time, on the date following the date of
execution and delivery of this Agreement, and no order preventing or
suspending the use of any preliminary prospectus or the Prospectus shall
have been or shall be in effect and no order suspending the effectiveness
of the Registration Statement or the qualification of the Shares for sale
in any jurisdiction shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the Commission, and any requests
for additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have been
complied with to the satisfaction of the Representative.
(c) The representations and warranties of the Company contained in
this Agreement and in the certificates delivered pursuant to SECTION 5(D)
shall be true and correct when made and on and as of each Closing Date as
if made on such date and the Company shall have performed all covenants and
agreements and satisfied all the conditions contained in this Agreement
required to be performed or satisfied by it at or before such Closing Date.
(d) You shall have received on each Closing Date a certificate of the
Company, dated the Closing Date signed by the Chief Executive Officer and
Chief Financial Officer of the Company, to the effect that, and you shall
be satisfied that:
13
(i) The representations and warranties of the Company in this
Agreement and the Warrants are true and correct, as if made on and as
of the Closing Date and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Act and the Rules and Regulations, and in all
material respects conformed to the requirements of the Act and the
Rules and Regulations, the Registration Statement, and any amendment
or supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto,
did not and does not include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not
been any (a) present or prospective material adverse change in the
condition (financial or otherwise), earnings, operations, business or
prospects of the Company, (b) any transaction that is material to the
Company, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material
to the Company, entered into or committed to by the Company other than
as described in the Registration Statement and the Prospectus, (d) any
change in the capital stock of the Company, (e) any change in the
outstanding indebtedness of the Company that is material to the
Company or is out of the ordinary course of business of the Company,
(f) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company, other than as described in the
Registration Statement and the Prospectus, or (g) any loss or damage
(whether or not insured) to the property of the Company which has been
sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings,
operations, business or prospects of the Company.
(e) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any (i) present
or prospective change in the condition (financial or otherwise), earnings,
operations, properties, assets, business or prospects of the Company from
that set forth in the Registration Statement or Prospectus, which, in your
sole judgment, is material and adverse to the Company and that makes it, in
your sole judgment, impracticable or
14
inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus; (ii) any transaction that is material to
the Company entered into or committed to by the Company other than as
described in the Registration Statement and the Prospectus; or (iii) any
material obligation, contingent or otherwise, directly or indirectly,
incurred by the Company other than as described in the Registration
Statement and the Prospectus.
(f) You shall have received on each Closing Date a letter from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, Independent Auditors ("▇▇▇▇▇▇▇▇"), addressed to
the Underwriters, dated such Closing Date (in each case, the "BRING DOWN
LETTER"), confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the applicable published Rules and based upon the procedures
described in a letter delivered to you concurrently with the execution
of this Agreement (herein called the "ORIGINAL LETTER"), but carried out
to a date not more than five (5) business days prior to the Closing Date
(i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date,
(ii) stating that there were not any material increases in the current
liabilities and long-term liabilities of the Company or any material
decreases in net income or in working capital or the stockholders'
equity in the Company, as compared with the amounts shown on the
Company's audited balance sheet for the fiscal year ended March 31, 1997
and the six months ended September 30, 1997 included in the Registration
Statement; and (iii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter that are
necessary to reflect any changes in the facts described in the Original
Letter since its date, or to reflect the availability of more recent
financial statements, data or information. The Bring Down Letter shall
not disclose any change in the condition (financial or otherwise),
earnings, operations, properties, assets, business or prospects of the
Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it,
in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. The
Original Letter from ▇▇▇▇▇▇▇▇ shall be addressed to or for the use of
the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the Rules, (ii) set forth their opinion with respect to their
examination of the balance sheet of the Company as of March 31, 1997 and
related statements of operations, equity and cash flows for the twelve
(12) months ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) state that ▇▇▇▇▇▇▇▇ has
performed the procedures set out in Statement of Accounting Standards
No. 71 ("SAS 71") for a review of interim financial information and
providing the report of ▇▇▇▇▇▇▇▇ as described in SAS 71 on the financial
statements for the six-month period ended September 30, 1997 (the
"INTERIM STATEMENTS"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Interim Statements
in order for them to be in compliance with generally accepted accounting
principles consistently applied across the periods presented, (v) state
that nothing came to their attention that caused them to believe that
the financial statements included in the Registration Statement and
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Rules and that any adjustments
thereto have not been properly applied to the historical amounts in the
compilation of such statements, (vi) state that they have performed
certain procedures
15
agreed upon with the Representative as a result of which they determined
that certain information of an accounting, financial or statistical
nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company)
set forth in the Registration Statement and the Prospectus and
reasonably specified by the Representative agrees with the accounting
records of the Company; and (vii) address other matters agreed upon by
▇▇▇▇▇▇▇▇ and you. In addition, you shall have received from ▇▇▇▇▇▇▇▇ a
letter addressed to the Company and made available to you for the use of
the Underwriters stating that their review of the Company's system of
internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of March 31, 1997, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(g) The Representative shall have received on each Closing Date from
Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇ LLP, counsel for the Company,
an opinion, addressed to the Representative and the other Underwriters and
dated such Closing Date, and stating in effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware. To such counsel's knowledge, the Company has no subsidiary,
other than PharmaPrint B.V., and does not control, directly or
indirectly, any corporation, partnership, joint venture, association
or other business organization. The Company is duly qualified and in
good standing as a foreign corporation in California.
(ii) The Company has all requisite corporate power and authority
to own, lease and license its assets and properties and conduct its
business as now being conducted and as described in the Registration
Statement and the Prospectus; and the Company has all requisite
corporate power and authority to enter into, deliver and perform this
Agreement and the Warrants.
(iii) The Company has authorized, issued and outstanding
capital stock as set forth in the Registration Statement and the
Prospectus under the heading "Description of Capital Stock -- Common
Stock;" the certificates evidencing the Shares are in proper legal
form and have been duly authorized for issuance by the Company; all of
the outstanding shares of Common Stock of the Company have been duly
and validly authorized and have been duly and validly issued and are
fully paid and nonassessable and, to such counsel's knowledge, none of
them was issued in violation of any preemptive, co-sale, registration,
first refusal, or other similar right. The Warrant Shares have been
duly authorized and reserved by the Company. The Shares when issued
and sold pursuant to this Agreement and the Warrant Shares, when
issued and sold pursuant to the Warrants, will be validly issued,
fully paid and nonassessable and none of them will have been issued in
violation of or subject to any preemptive, co-sale, registration,
first refusal, or other similar right provided by applicable law or
the Company's charter or bylaws or otherwise known to such counsel.
To the best of such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus, there is no
16
outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any share of
stock of the Company or any security convertible into, exercisable
for, or exchangeable for stock of the Company. The Common Stock,
the Shares and the Warrants conform in all material respects to the
descriptions thereof contained in the Registration Statement and
the Prospectus.
(iv) All necessary corporate action has been validly taken by the
Company to authorize the execution, delivery and performance of this
Agreement, the execution, delivery and performance of the Warrants and
the issuance and sale of the Shares, the Warrants and the Warrant
Shares. This Agreement has been validly authorized, executed and
delivered by the Company (and the Warrants will have been validly
executed and delivered by the Company when paid for on the Firm Shares
Closing Date) and this Agreement constitutes the valid and binding
obligation of the Company (and the Warrants when so executed and
delivered will constitute the valid and binding obligation of the
Company), enforceable against the Company in accordance with their
respective terms except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding at
law or in equity) and (B) to the extent that rights to indemnity or
contribution under this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
(v) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares, Warrants and Warrant
Shares) will give rise to a right to terminate or accelerate the due
date of any payment due under, or conflict with or result in the
breach of any term or provision of, or constitute a default (or any
event that with notice or lapse of time, or both, would constitute a
default) under, or require consent or waiver under, or result in the
execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company pursuant to the terms of any
indenture, mortgage, deed trust, note or other agreement or instrument
that has been filed as an Exhibit to the Registration Statement and to
which the Company is a party or by which it or any of its properties
or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation of which such counsel is
aware or violate any provision of the charter or by-laws of the
Company.
(vi) To such counsel's knowledge, no default exists, and no event
has occurred which with notice or lapse of time, or both, would
constitute a default, in the due performance and observance of any
agreement or instrument filed as an exhibit to the Registration
Statement, where the consequences of such default would have a
material and adverse effect on the assets, properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Company.
17
(vii) To such counsel's knowledge, the Company is not in
violation of any term or provision of its charter or by-laws or any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation would have a
material and adverse effect on the assets or properties, businesses,
results of operations, prospects or condition (financial or otherwise)
of the Company.
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the performance
of this Agreement or the Warrants by the Company or the consummation
by the Company of the transactions contemplated hereby or thereby,
except such as have been obtained under the Securities Act and such as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the several
Underwriters.
(ix) Except as discussed in the Registration Statement and
Prospectus, to such counsel's knowledge, there is no litigation or
governmental or other proceeding or investigation, before any court or
administrative authority pending or threatened against, or involving
the assets, properties or businesses of, the Company which would have
a material adverse effect upon the assets or properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Company.
(x) The statements in the Prospectus under the captions, "Risk
Factors--Dependence on AHP" and "-- Potential Adverse Effects of
Shares Eligible for Future Sale;" "Management--Limitation of Liability
and Indemnification Matters," "--Employment and Personal Service
Agreements," and "--1995 Stock Option Plan;" "Certain Transactions,"
and "Description of Capital Stock," insofar as such statements
constitute a summary of documents referred to therein or matters of
law, are fair summaries in all material respects and accurately
present the information called for with respect to such documents and
matters. All contracts and other documents of which such counsel is
aware which are required to be filed as exhibits to, or described in,
the Registration Statement have been so filed with the Commission or
are fairly described in the Registration Statement, as the case may
be.
(xi) The Registration Statement as of its effective date, and the
Prospectus and each amendment or supplement thereto (except for the
financial statements and notes and schedules thereto and other
financial and statistical data included therein or excluded therefrom,
as to which such counsel expresses no opinion) appeared on their face
to be appropriately responsive in all material respects to the
requirements of the Securities Act and the Rules.
(xii) The Registration Statement has become effective under
the Securities Act, any required filing of the Prospectus, pursuant to
Rule 424(b) has been made in the manner and within the time required
by Rule 424(b), and to such
18
counsel's knowledge no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are threatened, pending or
contemplated.
(xiii) The Company is not an "investment company" or a person
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
To the extent deemed advisable by such counsel, they may rely as to
matters of fact on certificates and representations of responsible
officers of the Company and public officials and on the opinions of
other counsel satisfactory to the Representative as to matters which
are governed by laws other than the laws of the Commonwealth of
Pennsylvania, the General Corporation Law of the State of Delaware and
the federal laws of the United States; provided that such counsel
shall state that in their opinion the Underwriters and they are
justified in relying on such other opinions. Copies of such
certificates and other opinions shall be furnished to the
Representative and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has acted as
outside corporate legal counsel to the Company and participated in
conferences with officers and other representatives of the Company,
representatives of the Representative and representatives of the
independent certified public accountants of the Company, at which
conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed 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 Registration Statement and the Prospectus (except as specified in
the foregoing opinion), on the basis of the foregoing, no facts have
come to the attention of such counsel which lead such counsel to
believe that the Registration Statement (except with respect to the
financial statements and notes and schedules thereto and other
financial and statistical data included therein or excluded therefrom,
as to which such counsel need express no belief) at the time it became
effective and at all times subsequent thereto up to and on the Closing
Date 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, or that the Prospectus as
amended or supplemented (except with respect to the financial
statements and notes and schedules thereto and other financial and
statistical data included therein or excluded therefrom, as to which
such counsel need make no statement) on the date thereof contained any
untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(h) The Representative shall have received on each Closing Date from
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP ("P&E"), patent counsel for the Company, an opinion,
addressed to the Representatives and the other Underwriters and dated such
Closing Date, and stating in effect that:
19
(i) The Company's patent applications "Pharmaceutical Grade
Botanical Drugs," U.S. Patent Application No. 08/838,198, filed April
15, 1997 (the "Broad Process Application"), and international
counterpart thereof, and 11 patent applications filed October 23, 1997
with the United States Patent and Trademark Office (the "PTO")
entitled "Pharmaceutical Grade: (1) Saw Palmetto, (2) St. John's
Wort, (3) Echinacea, (4) Valerian, (5) Ginseng, (6) Black Cohosh, (7)
Agnus Castus, (8) Garlic, (9) Ginkgo Biloba, (10) Bilberry, and (11)
Milk Thistle" (the "SPECIFIC APPLICATIONS") (the Broad Process
Application and the Specific Applications referred to herein as the
"P&E Filed Applications") (i) have been properly prepared and filed in
a timely manner so as to obtain the benefit of any priority claimed
from previously filed United States patent applications, and
(ii) include all information and disclosures required under applicable
law and regulations, and all of the Applications are being diligently
pursued by the Company.
(ii) To the best of P&E's knowledge, all information submitted to
the PTO and to any foreign or international patent examining authority
in the P&E Filed Applications and U.S. patent application Nos.
08/774,500 and 08/796,487 entitled "Mistletoe Extract and Method" and
U.S. patent application No. 08/632,273 entitled "Pharmaceutical Grade
Botanical Drugs" (collectively, together with the P&E Filed
Applications, the "Applications") and in connection with prosecution
thereof is accurate, and neither P&E nor, again to P&E's knowledge,
the Company made any material misrepresentation or concealed any
material information from the PTO or any other patent examining
authority in any of the Applications, or in connection with the
prosecution thereof.
(iii) To the best of P&E's knowledge, the Company has
provided such firm with references and background materials related to
its technologies and the application of these technologies to specific
botanical materials, some of which may constitute prior art to one or
more of the Applications. In addition, P&E has received prior art
cited by the United States Patent and Trademark Office in connection
with the Applications and issued U.S. patents and prior art identified
by the European Patent Office acting as the International Search
Agency for PCT applications corresponding to United States patent
application No. 08/422,438 filed in the United States Patent Office on
April 14, 1995 and No. 08/838,198 filed on April 15, 1997, the
prosecution of said applications for which P&E took over the
responsibility, on behalf of the Company. P&E has diligently reviewed
these materials and believes that these materials constitute prior art
that, as properly understood, described correctly and distinguished
should not defeat the patentability of the claims now pending in any
of the Applications under 35 U.S.C. Sections 102 or 103 or themselves
result in invalidation of any such claims of any patent Licensed to
the Company or any patent that might issue on any of the
Applications. Furthermore, all material prior art as defined in
37 C.F.R. Section 56(b) known to P&E has been disclosed to the PTO.
20
(iv) Claim 1 of the Broad Process Application, as well as each
claim listed in paragraph vii below, each in substantially its current
form, is patentable over all prior art of which P&E is currently aware
and the application of the process of those claims to specific
botanical compositions as described in the claims of The Specific
Applications, is patentable over all prior art of which P&E is
currently aware.
(v) The PharmaPrint Process, as described in the Registration
Statement and Prospectus, is disclosed in and covered by the present
claims of the P&E Filed Applications; conversely, the P&E Filed
Applications cover the use of the PharmaPrint Process, as so
described, in connection with both the Company's proposed dietary
supplement and pharmaceutical products.
(vi) P&E has not searched for, and nothing has come to P&E's
attention to lead P&E to believe that there currently is any process
by which a competitor to the Company is producing or offering for sale
botanical compositions in which the bioactive components and their
bioactivity was determined, composition of bioactive components was
quantified and standardized without practicing the invention of one or
more of the pending claims of the P&E Filed Applications.
(vii) Issuance of the pending claims identified in the
following table will satisfy the patent coverage condition to the
obligation of AHP to pay royalties to the Company on net sales of the
specified products pursuant to the AHP Agreements.
COVERED PRODUCT PATENT APPLICATION SERIAL NUMBER
08/838,198 FILED APRIL 15, 1997, CLAIMS
Saw Palmetto " claims 3, 4, 35
St. John's Wort " claims 3, 4, 37
Valerian " claims 3, 4, 39
Echinacea " claims ▇, ▇, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ " claims 3, 4, 22
Ginseng " claims 3, 4, 23
Garlic " claims 3, 4, 20
Black Cohosh " claims 3, 4, 14
Agnus Castus " claims 3, 4, 11
Bilberry " claims 3, 4, 13
21
Milk Thistle " claims 3, 4, 30
Ginger " claims 3, 4, 21
(viii) To P&E's knowledge, each of the patent applications and
patents identified herein before is exclusively Licensed to the
Company with the right to sublicense same and, to P&E's knowledge,
except as set forth in the Prospectus, no other entity or individual
has any right in any of the Applications or any patent that may be
issued therefrom.
(ix) The statements in the Registration Statement and the
Prospectus under the captions "Risk Factors -- Dependence on AHP,"
"Risk Factors -- Dependence on Patents and Other Proprietary Rights;
Uncertainty of Patent Protection and Proprietary Rights," "Business --
PharmaPrint Process," and "Business -- Intellectual Property"
(collectively, the "Patent Paragraphs"), in each case insofar as such
statements constitute matters of fact, law or conclusions thereunder
related to patents and patent applications of the Company, are as of
the date of the Prospectus, correct in all material respects and
present fairly the information purported to be shown and do not
contain any untrue statement of material fact required to be stated
therein.
(x) Except as set forth in the next sentence, P&E is currently
unaware of: (i) any judicial proceedings pending or threatened
related to patents Licensed to the Company or to the Applications; or
(ii) any notice of infringement of asserted rights of others directed
to the Company or any notice to the Company challenging the validity,
scope or enforceability of any of the patents Licensed to the Company
or any of the Applications; (iii) any basis to know that the Company's
practice of its PharmaPrint Process, as described in the Registration
Statement and Prospectus and the Applications, will infringe upon or
otherwise violate any patent rights of others; and (iv) any
infringement by others of patent rights Licensed to the Company. P&E
has been advised by the Company that, in a pending action, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Ph.D., the Company's former Group Senior Vice President of
Research and Development, has made claims against the Company
asserting ownership rights in the Company's patent applications.
However, based on interactions with the Company and its employees and
information received from the Company in preparing the P&E Filed
Applications, it is our belief and opinion that ▇▇. ▇▇▇▇▇▇▇ is not an
inventor of the inventions set forth in any of the claims of the P&E
Filed Applications and should not be named as an inventor in any of
the P&E Filed Applications. P&E has no knowledge that the Company
does not own or possess sufficient patent and proprietary rights, to
license and enforce all material patents and patent applications
should they issue to patent with the claims now pending therein.
In addition, although P&E shall state that although it has not
independently verified the accuracy, completeness or fairness of the
statements contained in the
22
Registration Statement and the Prospectus other than as specifically
stated herein, nothing has come to P&E's attention that leads P&E to
believe that the Patent Paragraphs of the Registration Statement,
at the time the Registration Statement became effective or at the
date hereof, contained or contain an untrue statement of a material
fact or omitted or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Patent Paragraphs of the Prospectus, as of
the date of the Prospectus or at the date hereof, contained or
contain an untrue statement of a material fact or omitted or omit
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.
(i) The Representative shall have received on each Closing Date from
Kleinfeld, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, regulatory counsel for the Company, an opinion,
addressed to the Representative and the other Underwriters and dated such
Closing Date, and stating in effect that the statements in the Prospectus
under the captions "Risk Factors -- Government Regulation: No Assurance of
Regulatory Approval" and "Business -- Government Regulation," insofar as
such statements constitute summaries of documents referred to therein or
matters of law, are fair summaries in all material respects and accurately
present the information called for with respect to such documents and
matters.
(j) The Shares shall have been approved for inclusion in the Nasdaq
National Market.
(k) The Company shall have executed and delivered the Warrants.
(l) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request (including certificates of
officers of the Company) as to the accuracy of the representations and
warranties of the Company herein, as to the performance by the Company of
its obligations hereunder and as to the other conditions concurrent and
precedent to the obligations of the Underwriters hereunder.
(m) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representative and its counsel
and the Underwriters shall have received from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP a
favorable opinion, addressed to the Representative and dated such Closing
Date, with respect to the Shares, the Registration Statement and the
Prospectus, and such other related matters, as the Representative may
reasonably request, and the Company shall have furnished to ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP such documents as they may reasonably request for the purpose
of enabling them to pass upon such matters.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) The Company shall prepare the Prospectus in a form approved by
the Representative and file such Prospectus pursuant to Rule 424(b) under
the Securities Act
23
not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule 430A under
the Securities Act, and shall promptly advise the Representative (i) when
any amendment to the Registration Statement shall have become effective,
(ii) of any request by the Commission for any amendment of the Registration
Statement or the Prospectus or for any additional information, (iii) of the
prevention or suspension of the use of any preliminary prospectus or the
Prospectus or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (iv) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The
Company shall not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished the
Representative a copy for its review prior to filing and shall not file any
such proposed amendment or supplement to which the Representative
reasonably objects. The Company shall use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act and the Rules, any event
occurs as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the
Securities Act or the Rules, the Company promptly shall prepare and file
with the Commission, subject to the second sentence of SECTION 6(A), an
amendment or supplement which shall correct such statement or omission or
an amendment which shall effect such compliance.
(c) The Company shall make generally available to its security
holders and to the Representative as soon as practicable, but not later
than 45 days after the end of the 12-month period beginning at the end of
the fiscal quarter of the Company during which the Effective Date occurs
(or 90 days if such 12-month period coincides with the Company's fiscal
year), an earning statement (which need not be audited) of the Company,
covering such 12-month period, which shall satisfy the provisions of
Section 11(a) of the Securities Act or Rule 158 of the Rules.
(d) The Company shall furnish to the Representative and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including all exhibits thereto and amendments thereof) and to
each other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Securities
Act or the Rules, as many copies of any preliminary prospectus and the
Prospectus and any amendments thereof and supplements thereto as the
Representative may reasonably request.
24
(e) The Company shall cooperate with the Representative and its
counsel in endeavoring to qualify the Shares for offer and sale under the
laws of such jurisdictions as the Representative may designate and shall
maintain such qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the Company shall not
be required in connection therewith, as a condition thereof, to qualify as
a foreign corporation or to execute a general consent to service of process
in any jurisdiction or subject itself to taxation as doing business in any
jurisdiction.
(f) For a period of five years after the date of this Agreement, the
Company shall supply to the Representative, and to each other Underwriter
who may so request in writing, copies of such financial statements and
other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock and
to furnish to the Representative a copy of each annual or other report it
shall be required to file with the Commission.
(g) Without the prior written consent of the Representative, for a
period of 180 days after the date of this Agreement, the Company shall not
issue, sell, or register under the Securities Act or register or qualify
under any state blue sky law (for offer or sale by the Company or any
stockholder), or otherwise dispose of, directly or indirectly, any equity
securities of the Company (or any securities convertible into or
exercisable or exchangeable for equity securities of the Company), except
for the issuance of the Shares pursuant to the Registration Statement and
the issuance of shares in private placement transactions without
registration under the Securities Act within such 180-day period,
(i) pursuant to the Company's existing stock option plan, (ii) upon
exercise of the Warrants or warrants outstanding on the date hereof, or
(iii) in connection with institutional or bank financing, merger or
acquisition transactions, or joint venture or strategic relationships,
other than under Regulation S or Rule 144A under the Securities Act.
(h) On or before completion of this offering, the Company shall make
all filings required under applicable securities laws and by the Nasdaq
National Market (including any required registration under the Exchange
Act) and use its best efforts cause the Shares to be approved for trading
on the Nasdaq National Market.
(i) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will maintain a 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.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Stock has been or is likely to
be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written
25
notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(l) The Company will refrain from investing the proceeds of the sale
of the Shares in such a manner as to cause the Company to become an
"investment company" within the meaning of the 1940 Act.
(m) The Company will furnish to you as early as practicable before
each Closing Date but not later than two business days prior thereto, a
copy of the latest available unaudited interim consolidated financial
statements, if any, of the Company that have been read by the Company's
independent certified public accountants as stated in their letter to be
furnished pursuant to SECTION 5(F).
(n) On the Closing Date, the Company will sell the Warrants to the
Representatives.
(o) The Company shall pay, or reimburse if paid by the
Representative, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses
incident to the public offering of the Shares and the performance of the
obligations of the Company under this Agreement including those relating
to: (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the
Registration Statement and the Prospectus, and the printing, filing and
distribution of this Agreement; (ii) the preparation and delivery of
certificates for the Shares to the Underwriters and the Warrants to the
Representative; (iii) the registration or qualification or exemption of the
Shares for offer and sale under the securities or Blue Sky laws of the
various jurisdictions referred to in Section 6(e), including the reasonable
fees and disbursements of counsel for the Underwriters in connection with
such registration and qualification or exemption and the preparation,
printing, distribution and shipment of preliminary and supplementary Blue
Sky memoranda; (iv) the furnishing (including costs of shipping and
mailing) to the Representative and to the Underwriters of copies of each
preliminary prospectus, the Prospectus and all amendments or supplements to
the Prospectus, and of the several documents required by this Section to be
so furnished, as may be reasonably requested for use in connection with the
offering and sale of the Shares by the Underwriters or by dealers to whom
Shares may be sold; (v) the filing fees of the National Association of
Securities Dealers, Inc. in connection with its review of the terms of the
public offering; (vi) the furnishing (including costs of shipping and
mailing) to the Representative and to the Underwriters of copies of all
reports and information required by Section 6(f); (vii) inclusion of the
Shares for quotation on the Nasdaq National Market; and (viii) all transfer
taxes, if any, with respect to the sale and delivery of the Shares by the
Company to the Underwriters. In addition, whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, the
Company shall pay, or reimburse if paid by the Representative, all
out-of-pocket costs and expenses incurred by the
26
Underwriters in connection with the transactions contemplated by this
Agreement or in contemplation of performing their obligations hereunder
and not otherwise payable by the Company pursuant hereto, including,
without limitation, road show costs, marketing costs, and fees and
disbursements of counsel for the Underwriters.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and each of the agents, employees, officers and directors of
any of them against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or
any of them, may become subject under the Securities Act, the Exchange Act
or other federal or state law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based upon (i) any breach of any representation, warranty, or agreement of
the Company herein contained, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus or any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein 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, and agrees to reimburse each indemnitee for any legal
or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, or liabilities;
provided, however, that such indemnity shall not inure to the benefit of
any Underwriter (or any person controlling such Underwriter) on account of
any losses, claims, damages or liabilities arising from the sale of the
Shares to any person by such Underwriter if such untrue statement or
omission or alleged untrue statement or omission was made in such
preliminary prospectus, the Registration Statement or the Prospectus, or
such amendment or supplement, in reliance upon and in conformity with
information furnished in writing to the Company by the Representative on
behalf of any Underwriter specifically for use therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, each director of the Company, and each officer of
the Company who signs the Registration Statement, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only insofar
as such losses, claims, damages or liabilities arise out of or are based
upon (i) any breach of any representation, warranty, or agreement of the
Underwriter herein contained, or (ii) any untrue statement or omission or
alleged untrue statement or omission which was made in any preliminary
prospectus, the Registration Statement or the Prospectus, or
27
any amendment thereof or supplement thereto, contained in the last
paragraph of the Prospectus cover page, in the paragraphs relating to
stabilization and passive market making on the inside front cover page
of the Prospectus and the statements contained under the caption
"Underwriting" in the Prospectus and agrees to reimburse each indemnitee
for any legal or other expenses reasonably incurred by it in connection
with investigating or defending any such loss, claim, damage, or
liabilities; provided, however, that the obligation of each Underwriter to
indemnify the Company (including any controlling person, director or
officer thereof) shall be limited to the net proceeds received by the
Company from such Underwriter.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in SECTION 7(A) or 7(B) shall be available to
any party who shall fail to give notice as provided in this SECTION 7(C) if
the party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was prejudiced by the failure to
give such notice but the omission so to notify such indemnifying party of
any such action, suit or proceeding shall not relieve it from any liability
that it may have to any indemnified party for contribution or otherwise
than under this Section. In case any such action, suit or proceeding shall
be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and the approval by
the indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses, except as
provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the
defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party has been authorized in writing by the
indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such
action (in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party) or
(iii) the indemnifying parties shall not have employed counsel to assume
the defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any action,
suit, proceeding or claim effected without its written consent.
8. CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in SECTION 7(A) is
due in accordance with
28
its terms but for any reason is held to be unavailable from the Company, the
Company and the Underwriters shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but
after deducting any contribution received by the Company from persons other
than the Underwriters, such as persons who control the Company within the
meaning of the Securities Act, officers of the Company who signed the
Registration Statement and directors of the Company, who may also be liable
for contribution) to which the Company and one or more of the Underwriters
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares or, if such allocation is not permitted
by applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in SECTION 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts but before deducting expenses)
received by the Company, as set forth in the table on the cover page of the
Prospectus, bear to (y) the underwriting discounts received by the
Underwriters, as set forth in the table on the cover page of the Prospectus.
The relative fault of the Company or the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this SECTION 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this SECTION 8, (i) in no case shall any Underwriter (except as
may be provided in the Agreement Among Underwriters) be liable or responsible
for any amount in excess of the underwriting discount applicable to the
Shares purchased by such Underwriter hereunder, and (ii) the Company shall be
liable and responsible for any amount in excess of such underwriting
discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this SECTION 8, each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each
case to clauses (i) and (ii) in the immediately preceding sentence of this
SECTION 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against
another party or parties under this Section, notify such party or parties
from whom contribution may be sought,
29
but the omission so to notify such party or parties from whom
contribution may be sought shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its written consent. The Underwriter's obligations to contribute
pursuant to this SECTION 8 are several in proportion to their respective
underwriting commitments and not joint.
9. TERMINATION. This Agreement may be terminated with respect to the
Shares to be purchased on a Closing Date by the Representative by notifying the
Company at any time
(a) in the absolute discretion of the Representative at or before any
Closing Date: (i) if the Company shall have failed, refused or been unable
to perform any agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be
fulfilled is not fulfilled, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, properties,
assets, business or business prospects of the Company from that set forth
in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse, (ii) if the Company shall have sustained a
material adverse change in its patent position or patent prospects or a
loss by strike, fire, flood, earthquake, accident or other calamity of such
character as to interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured, (iii) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Representative will in the future materially disrupt,
the securities markets; (vi) if there has occurred any new outbreak or
material escalation of hostilities or other calamity or crisis the effect
of which on the financial markets of the United States is such as to make
it, in the judgment of the Representative, inadvisable to proceed with the
offering; (v) if there shall be such a material adverse change in general
financial, political or economic conditions or the effect of domestic or
international conditions on the financial markets in the United States is
such as to make it, in the judgment of the Representative, inadvisable or
impracticable to market the Shares; (vi) if additional restrictions not in
force generally on the date hereof shall have been imposed upon trading in
securities generally or trading in the Shares has been suspended by the
Commission or trading generally on the New York Stock Exchange, Inc. or on
the American Stock Exchange, Inc. has been suspended or limited, or minimum
or maximum ranges for prices for securities shall have been fixed, or
maximum ranges for prices for securities have been required, by said
exchanges or by order of the Commission, the National Association of
Securities Dealers, Inc., or any other governmental or regulatory
authority; or (vii) if a banking moratorium has been declared by any state
or federal authority, or
(b) at or before any Closing Date, that any of the conditions
specified in SECTION 5 shall not have been fulfilled when and as required
by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) the Company will
reimburse the Underwriters for all out-of-pocket costs and expenses (including
road show costs, marketing costs, and the reasonable fees and
30
disbursements of their counsel) incurred by them in connection with the
proposed purchase and sale of the Shares or in contemplation of performing
their obligations hereunder and (z) no Underwriter who shall have failed or
refused to purchase the Shares agreed to be purchased by it under this
Agreement, without some reason sufficient hereunder to justify cancellation
or termination of its obligations under this Agreement, shall be relieved of
liability to the Company or to the other Underwriters for damages occasioned
by its failure or refusal.
10. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under SECTION 9) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representative may find one or more substitute underwriters to
purchase such Shares or make such other arrangements as the Representative may
deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representative, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date, then
each of the nondefaulting Underwriters shall be obligated to purchase such
Shares on the terms herein set forth in proportion to their respective
obligations hereunder; provided, that in no event shall the maximum number
of Shares that any Underwriter has agreed to purchase pursuant to SECTION 1
be increased pursuant to this SECTION 10 by more than one-ninth of such
number of Shares without the written consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to an additional business day within which it
may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representative to purchase such Shares upon
the terms set forth in this Agreement.
In any such case, either the Representative or the Company shall have the
right to postpone the applicable Closing Date for a period of not more than five
business days in order that necessary changes and arrangements (including any
necessary amendments or supplements to the Registration Statement or Prospectus)
may be effected by the Representative and the Company. If the number of Shares
to be purchased on such Closing Date by such defaulting Underwriter or
Underwriters shall exceed 10% of the Shares that all the Underwriters are
obligated to purchase on such Closing Date, and none of the nondefaulting
Underwriters or the Company shall make arrangements pursuant to this Section
within the period stated for the purchase of the Shares that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company and without liability on the part
of the Company, except in both cases as provided in SECTIONS 6(O), 7, 8 and 9.
The provisions of this Section shall not in any way affect the liability of any
defaulting Underwriter to the Company or
31
the nondefaulting Underwriters arising out of such default. A substitute
underwriter hereunder shall become an Underwriter for all purposes of this
Agreement.
11. MISCELLANEOUS. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in SECTIONS 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of SECTIONS 6(O), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the Underwriters and
the Company and their respective successors and assigns, and, to the extent
expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and mailed or
delivered or by telephone or telegraph if subsequently confirmed in writing, (a)
if to the Representative, to CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp., CIBC Oppenheimer Tower, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel,
and (b) if to the Company, to its agent for service as such agent's address
appears on the cover page of the Registration Statement.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflict of laws.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among
us.
Very truly yours,
PHARMAPRINT INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
Confirmed:
CIBC ▇▇▇▇▇▇▇▇▇▇▇ CORP.
32
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I
annexed hereto.
By CIBC ▇▇▇▇▇▇▇▇▇▇▇ CORP.
By: _______________________________
Name: ______________________________
Title: _____________________________
33
SCHEDULE I
NUMBER OF
NAME FIRM SHARES TO
---- BE PURCHASED
--------------
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.
---------------
Total: ----------
ANNEX A
The Company agrees to indemnify CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp., its employees,
directors, officers, agents, affiliates and each person, if any, who controls it
within the meaning of either Section 20 of the Securities Exchange Act of 1934
or Section 15 of the Securities Act of 1933 (each such person, including CIBC
▇▇▇▇▇▇▇▇▇▇▇ Corp., is referred to as "Indemnified Party") from and against any
losses, claims, damages and liabilities, joint or several (including all legal
or other expenses reasonably incurred by any Indemnified Party in connection
with the preparation for or defense of any threatened or pending claim, action
or proceeding, whether or not resulting in any liability) ("Damages"), to which
such Indemnified Party, in connection with its services or arising out of its
engagement hereunder, may become subject under any applicable Federal or state
law or otherwise, including but not limited to liability (i) caused by or
arising out of an untrue statement or an alleged untrue statement of a material
fact or the omission or the alleged omission to state a material fact necessary
in order to make a statement not misleading in light of the circumstances under
which it was made, (ii) caused by or arising out of any act or failure to act or
(iii) arising out of CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.'s engagement or the rendering by any
Indemnified Party of its services under this Agreement; provided, however, that
the Company will not be liable to the Indemnified Party hereunder to the extent
that any Damages are found in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from the gross negligence, bad faith or
willful misconduct of the Indemnified Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. on the other, but also the relative fault of the
Company and the Indemnified Party as well as any relevant equitable
considerations, subject to the limitation that in no event shall the total
contribution of all Indemnified Parties to all such Damages exceed the total
amount of fees actually received and retained by CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.
hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or
of the commencement of any action in respect of which indemnity may be sought,
the Indemnified Party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of fees and expenses of
such counsel), provided that the Indemnified Party shall have the right to
control its defense if, in the opinion of its counsel, the Indemnified Party's
defense is unique or separate to it as the case may be, as opposed to a defense
pertaining to the Company. In any event, the Indemnified Party shall have the
right to retain counsel reasonably satisfactory to the Company, at the Company's
expense, to represent the Indemnified Party in any claim or action in respect of
which indemnity may be sought and agrees to cooperate with the Company and the
Company's counsel in the defense of such claim or action, it being understood,
however, that the Company shall not, in connection with any one such claim or
action or separate but, substantially similar or related claims or action in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys, for all the Indemnified Parties unless the defense of one Indemnified
Party is unique or separate from that of another Indemnified Party subject to
the same claim or action. In the event that the Company does not promptly
assume the defense of a claim or action, the Indemnified Party shall have the
right to employ counsel reasonably satisfactory to the Company, at the Company's
expense, to defend such claim or action. The omission by an Indemnified Party
to promptly notify the Company of the receipt or commencement of any claim or
action in respect of which indemnity may be sought will relieve the Company from
any liability the Company may have to such Indemnified Party only to the extent
that such a delay in notification materially prejudices the Company's defense of
such claim or action. The Company shall not be liable for any settlement of any
such claim or action effected without its written consent, which shall not be
unreasonably withheld or delayed. Any obligation pursuant to this Exhibit I
shall survive the termination or expiration of this Agreement.
2