_________ Shares
FOCAL, INC.
Common Stock
($.001 Par Value)
UNDERWRITING AGREEMENT
_______, 1997
▇▇▇▇▇▇ BROTHERS INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇, INC.
PACIFIC GROWTH EQUITIES, INC.
As Representatives of the several
Underwriters named in Schedule 1,
C/▇ ▇▇▇▇▇▇ BROTHERS INC.
Three World ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Focal, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several underwriters named in Schedule 1 hereto (the
"Underwriters") _________ shares (the "Firm Shares") of the Company's Common
Stock, $.001 par value per share (the "Common Stock"). In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional _______ shares of Common Stock on the terms and for the purposes
set forth in Section 2 (the "Option Shares"). The Firm Shares and the Option
Shares, if purchased, are hereinafter collectively called the "Shares." This
is to confirm the agreement concerning the purchase of the Shares from the
Company by the Underwriters.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1 (File No. 333-_____)
with respect to the Shares has (i) been prepared by the Company in conformity
with the requirements of the United States Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the United States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities Act. If any
post-effective amendment
to such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent such amendment
has been declared effective by the Commission. Copies of such registration
statement and all amendments thereto, including post-effective amendments, if
any, have been delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement,
"Effective Time" means the date and the time as of which such registration
statement, or the most recent post-effective amendment thereto or any related
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations ("Rule 462(b)"), if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such registration
statement or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by the Company
with the consent of the Representatives pursuant to Rule 424(a) of the Rules
and Regulations; "Registration Statement" means such registration statement,
as amended at the Effective Time, including all information contained in the
final prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations in accordance with Section 5 hereof and deemed to be a
part of the registration statement as of the Effective Time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations; if the Company has
filed or files a registration statement under Rule 462(b) to register
additional shares (a "Rule 462(b) Registration Statement"), then the term
"Registration Statement" shall be deemed to include such registration
statement; and "Prospectus" means such final prospectus, as first filed with
the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or the
effectiveness of the Registration Statement, and no proceeding for any such
purpose has been initiated or, to the best of the Company's knowledge,
threatened by the Commission.
(b) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and do not
and will not, as of the applicable effective date (as to the Registration
Statement and any amendment thereto) contain an 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 and as of the
applicable filing date (as to a prospectus and any amendment or supplement
thereto) include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; PROVIDED that
the Company makes no representation or warranty as to information contained
in or omitted from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to the Company
through the Representatives by or on behalf of any Underwriter specifically
for inclusion therein. There is no contract or document required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, is duly qualified to do
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business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such qualification, and has all power and authority
necessary to own or hold its properties and to conduct the business in which
it is engaged; the Company has no subsidiaries, and it does not own directly
or indirectly an equity interest in any other entity.
(d) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus. There are no preemptive rights or other rights to subscribe for
or to purchase, or, upon consummation of the offering to which this Agreement
relates, any restriction upon the voting or transfer of, any shares of
capital stock pursuant to the Company's Articles of Incorporation, Bylaws or
other governing documents or any agreement or other instrument to which the
Company is a party or by which it may be bound, except pursuant to the
Company's stock option and employee stock purchase plans described in the
Prospectus.
(e) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and non-assessable and not be subject to any
preemptive rights; and the Shares will conform to the description thereof
contained in the Prospectus.
(f) The Company has full right, power and authority to enter
into this Agreement and to perform and discharge its obligations hereunder,
and this Agreement has been duly authorized, executed and delivered by the
Company and constitutes the valid and legally binding agreement of the
Company enforceable in accordance with its terms, except as rights to
indemnification may be limited by federal or state securities laws and except
for the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the rights of creditors generally.
(g) The execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby
will not conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor will such actions result in
any violation of the provisions of the Certificate of Incorporation or Bylaws
or other organizational documents of the Company, as amended, or any statute
or any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its properties or assets; and
except for the registration of the Shares under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under the Exchange Act and applicable blue sky, state or foreign
securities laws in connection with the purchase and distribution of the
Shares by the Underwriters, no consent, approval, authorization or order of,
or filing or registration with, any such
3
court or governmental agency or body is required for the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby.
(h) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company owned or to be owned by such person or to include such securities for
registration in a registration statement filed by the Company under the
Securities Act; and the Company is not required to include any such
securities in the securities being registered pursuant to the Registration
Statement, nor is it required to file any registration statement for the
registration of any securities of any person or register any such securities
pursuant to any other registration statement filed by the Company under the
Securities Act for a period of at least 180 days after the Effective Date.
(i) The Company has not sold or issued any shares of Common
Stock during the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A under, or Regulations D or S of,
the Securities Act, other than shares issued pursuant to the 1992 Incentive
Stock Plan, the 1997 Director Option Plan and the 1997 Employee Stock
Purchase Plan (collectively, the "Stock Option and Purchase Plans").
(j) The Company has not sustained, since the date of the
latest audited financial statements included in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and since such date there has not been any
change in the capital stock or long-term debt of the Company or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, otherwise than
as set forth or contemplated in the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or included
in the Prospectus present fairly the financial condition and results of
operations of the Company, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
(l) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who
have delivered the initial letter referred to in Section 7(g) hereof, are
independent public accountants as required by the Securities Act and the
Rules and Regulations.
(m) The Company has good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not
4
materially interfere with the use made and proposed to be made of such
property by the Company; and all real property and buildings held under lease
by the Company are held by it under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the Company.
(n) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is required by its contractual relations,
or as is adequate for the conduct of its business and the value of its
properties and as is customary for companies engaged in similar businesses in
similar industries.
(o) Except as described in the Prospectus, the Company owns or
possesses adequate rights to use all material patents (or foreign
equivalents), patent applications, trademarks, service marks, trade names,
trademark registrations, service ▇▇▇▇ registrations, copyrights and licenses,
both in the United States and outside the United States, necessary for the
conduct of its business as currently conducted and as contemplated to be
conducted in the Prospectus and has no reason to believe that the conduct of
its business will conflict in any material respect with, and has not received
any notice of any material claim of conflict with, any such rights of others.
(p) Except as described in the Prospectus, there are no legal
or governmental proceedings pending to which the Company is a party or of
which any property or assets of the Company are the subject which, if
determined adversely to the Company, could have a material adverse effect on
the consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company (a "Material Adverse
Effect"), and to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(q) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and Regulations
which have not been described in the Prospectus or filed as exhibits to the
Registration Statement.
(r) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, which is required to
be described in the Prospectus but is not so described.
(s) No labor disturbance by the employees of the Company
exists or, to the knowledge of the Company, is imminent which could be
expected to have a Material Adverse Effect.
(t) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as
5
defined in ERISA) for which the Company would have any liability; the Company
has not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan"
or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the "Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(u) The Company has filed all federal, state and local income
and franchise tax returns (or the foreign equivalents thereof) required to be
filed through the date hereof or has requested extensions thereof and has
paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company which has had (nor does the Company have any
knowledge of any tax deficiency which, if determined adversely to the
Company, could have) a Material Adverse Effect.
(v) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be disclosed
in the Prospectus, the Company has not (i) issued or granted any securities
(except pursuant to the exercise of any options or warrants that are
disclosed in the Prospectus), (ii) incurred any material liability or
obligation, direct or contingent, other than liabilities and obligations
which were incurred in the ordinary course of business, (iii) entered into
any transaction not in the ordinary course of business or (iv) declared or
paid any dividend on its capital stock.
(w) The Company (i) makes and keeps accurate books and
financial records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary
to permit preparation of its financial statements and to maintain
accountability for its financial and corporate books and records and
financial accounts, (C) access to its assets is permitted only in accordance
with management's authorization and (D) the reported accountability for its
assets is compared with existing assets at reasonable intervals.
(x) The Company is not (i) in violation of its Certificate of
Incorporation or Bylaws, as amended, (ii) in default in any material respect,
and no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a party
or by which it is bound or to which any of its properties or assets is
subject or (iii) in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its property or
assets may be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its business.
(y) Neither the Company, nor any director, officer, agent,
employee or other person associated with or acting on behalf of the Company,
has used any corporate funds for
6
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any unlawful bribe, rebate, payoff, influence
payment, kickback or other payment.
(z) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic
wastes, medical wastes, hazardous wastes or hazardous substances by the
Company (or, to the knowledge of the Company, any of its predecessors in
interest) at, upon or from any of the property now or previously owned or
leased by the Company in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial
action under any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or remedial action which
would not have, or could not reasonably be expected to have, singularly or in
the aggregate with all such violations and remedial actions, a Material
Adverse Effect; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into
the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by the Company or with respect to which the Company has knowledge,
except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have, or could not reasonably be expected
to have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a Material
Adverse Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with respect
to environmental protection.
(aa) The Company is not an "investment company" within the
meaning of such term under the United States Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.
(ab) Except as disclosed in the Prospectus, there are no
business relationships or related-party transactions of the nature required
to be disclosed in the Prospectus pursuant to Item 404 of Regulation S-K
under the Securities Act.
(ac) Neither the Company nor any of its affiliates have taken,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares.
(ad) The Shares have been approved for inclusion on the Nasdaq
National Market ("Nasdaq"), subject only to official notice of issuance.
(ae) The Company believes that it has satisfied all applicable
regulatory requirements for marketing FOCALSEAL-L in Europe.
7
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell _________ Firm
Shares to the several Underwriters, and each of the Underwriters, severally
and not jointly, agrees to purchase the number of the Firm Shares appearing
opposite that Underwriter's name in Schedule 1 hereto. The respective
purchase obligations of the Underwriters with respect to the Firm Shares
shall be rounded among the Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Company hereby grants to the Underwriters an option
to purchase up to _______ Option Shares. Such option is granted solely for
the purpose of covering over-allotments in the sale of Firm Shares and is
exercisable as provided in Section 4 hereof. Option Shares shall be
purchased severally for the account of the Underwriters in proportion to the
number of Firm Shares set forth opposite the name of such Underwriters in
Schedule 1 hereto. The respective purchase obligations of each Underwriter
with respect to the Option Shares shall be adjusted by the Representatives so
that no Underwriter shall be obligated to purchase Option Shares other than
in 100 share quantities. The price of both the Firm Shares and any Option
Shares shall be $____ per share.
The Company shall not be obligated to deliver any of the Shares to
be delivered on the First Delivery Date or the Second Delivery Date (as
hereinafter defined), as the case may be, except upon payment for all of the
Shares to be purchased on such Delivery Date as provided herein.
3. OFFERING OF SHARES BY THE UNDERWRITERS. Upon authorization by
the Representatives of the release of the Firm Shares, the several
Underwriters propose to offer the Firm Shares for sale upon the terms and
conditions set forth in the Prospectus.
4. DELIVERY OF AND PAYMENT FOR THE SHARES. Delivery of and
payment for the Firm Shares shall be made at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ at 10:00 A.M., East Coast time, on the third full business day
following the date of this Agreement (or on the fourth full business day if
the pricing of the Firm Shares should take place after 4:30 p.m., East Coast
time) or at such other date or place as shall be determined by agreement
between the Representatives and the Company. This date and time are
sometimes referred to as the "First Delivery Date." On the First Delivery
Date, the Company shall deliver or cause to be delivered certificates
representing the Firm Shares to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company of the
purchase price by certified or official bank check or checks payable in New
York Clearing House (next-day) funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Firm Shares shall be registered in such names and in such
denominations as the Representatives shall request in writing not less than
two full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Firm
Shares, the Company shall make the certificates representing the Firm
8
Shares available for inspection by the Representatives in New York, New York,
not later than 2:00 p.m., East Coast time, on the business day prior to the
First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement, the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set
forth the aggregate number of Option Shares as to which the option is being
exercised, the names in which the Option Shares are to be registered, the
denominations in which the Option Shares are to be issued and the date and
time, as determined by the Representatives, when the Option Shares are to be
delivered; PROVIDED, HOWEVER, that this date and time shall not be earlier
than the First Delivery Date nor earlier than the second business day after
the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been
exercised. The date and time the Option Shares are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Shares shall be made at the
place specified in the first sentence of the first paragraph of this Section
4 (or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 a.m., East Coast time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver
or cause to be delivered the certificates representing the Option Shares to
the Representatives for the account of each Underwriter against payment to or
upon the order of the Company of the purchase price by certified or official
bank check or checks payable in New York Clearing House (next-day) funds.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Option Shares shall be registered
in such names and in such denominations as the Representatives shall request
in the aforesaid written notice. For the purpose of expediting the checking
and packaging of the certificates for the Option Shares, the Company shall
make the certificates representing the Option Shares available for inspection
by the Representatives in New York, New York, not later than 2:00 p.m., East
Coast time, on the business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees:
(a) To prepare the Prospectus in the form required by the
Securities Act and reasonably acceptable to the Representatives and to file
such Prospectus pursuant to Rule 424(b) under the Securities Act not later
than 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(a)(3) under the Securities Act; to notify the
Representatives and their counsel of, and provide thereto, any request by the
Commission for any amendment of or supplement to the Registration Statement
or the Prospectus or for supplemental information; to make no further
amendment or any supplement to the Registration Statement or to the
Prospectus prior to the last Delivery Date except as permitted herein; to
advise the Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has
9
been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives with
copies thereof; to file, if the Company elects to rely upon Rule 462(b), a
Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) and to pay the applicable fees in accordance with Rules 111 and
3(a) of the Rules and Regulations by the earlier of (i) 10.00 p.m., New York
time on the date of this Agreement or (ii) the time confirmations are sent or
given, as specified by Rule 462(b); to advise the Representatives, promptly
after it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of
the following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto; and (ii) each Preliminary Prospectus,
the Prospectus and any amended or supplemented Prospectus; and, if the
delivery of a prospectus is required at any time after the Effective Time in
connection with the offering or sale of the Shares or any other securities
relating thereto and if at such time any events shall have occurred as a
result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the Securities Act, to
notify the Representatives and, upon their request, to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of an
amended or supplemented Prospectus which will correct such statement or
omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required
by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement, Rule 462(b) Registration Statement or supplement to
the Prospectus or any Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the
10
Representatives and counsel for the Underwriters and obtain the consent of
the Representatives to the filing, which consent shall not be unreasonably
withheld;
(f) As soon as practicable after the Effective Date to make
generally available to the Company's shareholders and to deliver to the
Representatives in accordance with Rule 158 of the Rules and Regulations an
earnings statement of the Company (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations and
covering a period of at least twelve consecutive months beginning after the
Effective Date;
(g) For a period of five years following the Effective Date,
to furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange or Nasdaq, as the case may be, upon which the Common
Stock may be listed or traded pursuant to requirements of or agreements with
such exchange or to the Commission pursuant to the Exchange Act or any rule
or regulation of the Commission thereunder, except for any portion of such
report furnished to such exchange or to the Commission for which Confidential
Treatment has been requested;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as the Representatives
may request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Shares; PROVIDED that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction;
(i) For a period of 180 days from the date of the Prospectus,
not to, directly or indirectly, offer for sale, sell or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock (other than the Shares and shares
issued pursuant to the Stock Option and Purchase Plans), or sell or grant
options, rights or warrants with respect to any shares of Common Stock (other
than the grant of options pursuant to the Stock Option and Purchase Plans),
without the prior written consent of ▇▇▇▇▇▇ Brothers Inc.; and to cause each
officer, director, shareholder and optionholder of the Company to furnish to
the Representatives, prior to the First Delivery Date, a letter or letters,
in form and substance satisfactory to counsel for the Underwriters, pursuant
to which each such person shall agree not to, directly or indirectly, offer
for sale, sell or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of Common
Stock or other securities of the Company for a period of 180 days from the
date of the Prospectus, without the prior written consent of ▇▇▇▇▇▇ Brothers
Inc.;
(j) Prior to the Effective Date, to apply for the listing of
the Shares on the Nasdaq National Market and to complete such listing as of
the date hereof;
11
(k) To apply the net proceeds from the sale of the Shares
being sold by the Company as set forth in the Prospectus;
(l) To take such steps as shall be necessary to ensure that
the Company shall not become an "investment company" within the meaning of
such term under the United States Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
6. EXPENSES. The Company agrees to pay (a) the costs incident to
the authorization, issuance, sale and delivery of the Shares and any taxes
payable in that connection; (b) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement
and any amendments and exhibits thereto; (c) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus, all as provided in this Agreement; (d) the costs of producing and
distributing this Agreement, the Agreement Among Underwriters and any other
related documents in connection with the offering, purchase, sale and
delivery of the Shares; (e) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms
of sale of the Shares; (f) any applicable Nasdaq listing or other fees; (g)
the fees and expenses of qualifying the Shares under the securities laws of
the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum (including related fees and
expenses of counsel to the Underwriters related thereto); and (h) all other
costs and expenses incident to the performance of the obligations of the
Company under this Agreement; PROVIDED that, except as provided in this
Section 6 and in Section 11, the Underwriters shall pay their own costs and
expenses, including the costs and expenses of their counsel, any transfer
taxes on the Shares which they may sell and the expenses of advertising any
offering of the Shares made by the Underwriters.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The respective
obligations of the several Underwriters hereunder are subject to the
accuracy, as of the date hereof and on each Delivery Date (as if made on such
date), of the representations and warranties of the Company, the agreements
of the Company and to each of the following additional terms and conditions:
(a) The Prospectus shall have been filed in a timely manner
with the Commission in accordance with Section 5(a); the Registration
Statement and all post-effective amendments thereto shall have become
effective, all filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made, and no such filings shall have been made
without the consent of the Representatives, which consent shall not have been
unreasonably withheld; if the Company has elected to rely on Rule 462(b), the
Rule 462(b) Registration Statement shall have become effective not later than
the earlier of (i) 10:00 p.m., New York Time on the date of this Agreement or
(ii) the time confirmations are sent or given as specified in Rule 462(b); no
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued, and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the
12
Registration Statement or the Prospectus or otherwise shall have been
disclosed to you and complied with to your satisfaction.
(b) No Underwriter shall have been advised by the Company or
shall have discovered and disclosed to the Company on or prior to such
Delivery Date that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains an untrue statement of fact which,
in your opinion or in the opinion of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., counsel for the Underwriters, is material or omits to state a
fact which, in your opinion or the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Shares, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to you and your counsel, and
the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.
(d) On each Delivery Date, there shall have been furnished to
you the written opinion of Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the
Company, addressed to the Underwriters and dated such Delivery Date, in form
and substance reasonably satisfactory to the Representatives and their
counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such
qualification and has all corporate power and authority necessary to
own or hold its properties and conduct the businesses in which it is
engaged; and the Company has no subsidiaries.
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the outstanding shares of capital
stock of the Company, including the Shares, have been duly and validly
authorized and issued, are fully paid and non-assessable and conform
to the description thereof contained in the Prospectus; and there are
no preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any of the Shares pursuant
to the Company's Certificate of Incorporation or Bylaws, as amended,
or any agreement or other instrument known to such counsel;
(iii) To such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company is a party or of which any
property or assets of the Company is the subject which, if determined
adversely to the Company, might have a Material Adverse
13
Effect; and, to such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(iv) The Registration Statement and all post effective
amendments thereto, if any, have been declared effective (or in the
case of any Rule 462(b) Registration Statement, has become effective)
under the Securities Act, the Prospectus has been filed with the
Commission pursuant to the subparagraph of Rule 424(b) of the Rules
and Regulations specified in such opinion on the date specified
therein and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to such counsel's
knowledge, no proceeding for that purpose is pending or threatened by
the Commission;
(v) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company (other
than the financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and the
Rules and Regulations;
(vi) The statements made in the Prospectus under the
headings "Description of Capital Stock", "Shares Eligible For Future
Sale", and "Business - Strategic Alliances" and in the Registration
Statement in Items 14 and 15, insofar as such statements constitute
summaries of statutes, regulations, contracts, proceedings, documents
or transactions, are fair, complete and accurate summaries thereof,
and insofar as such statements constitute statements of law or legal
conclusions, fairly present the information presented therein;
(vii) To such counsel's knowledge, there are no
contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the
Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statement;
(viii) This Agreement has been duly authorized, executed
and delivered by the Company;
(ix) The issue and sale of the Shares being delivered on
such Delivery Date by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor will such actions
result in any violation of the provisions of the Certificate of
Incorporation or Bylaws of the Company, as such documents may be
amended from time to time, or any statute or
14
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or
assets; and, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required and have been
obtained under the Exchange Act and applicable blue sky, state or
foreign securities laws in connection with the purchase and
distribution of the Shares by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby;
(x) Except as described in the Prospectus, to such
counsel's knowledge, there are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement
under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to include such securities for
registration in a registration statement filed by the Company under
the Securities Act; and the Company is not required to include any
such securities in the securities being registered pursuant to the
Registration Statement, nor is it required to file any registration
statement for the registration of any securities of any person or
register any such securities pursuant to any other registration
statement filed by the Company under the Securities Act for a period
of 180 days after the Effective Date; and
(xi) The Company is not an "investment company" within the
meaning of such term under the United States Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
In rendering such opinion, such counsel may state that its opinion
is limited to matters governed by the Federal laws of the United States of
America, the laws of the State of California and the General Corporation Law
of the State of Delaware. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and dated
such Delivery Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that (x) such counsel has acted as general
counsel to the Company on a regular basis in connection with securities laws
matters and other matters, including the preparation of the Registration
Statement and (y) based on the foregoing, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statement,
as of the Effective Date, or any amendment thereto, contains or contained any
untrue statement of a material fact or omits 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, or any amendment or
supplement thereto, contains or contained any untrue statement of a material
fact or omits or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
15
(e)(I) On each delivery date, the Company shall have
furnished to the Representatives an opinion of ▇▇▇▇▇▇, Golden & ▇▇▇▇▇▇▇, LLP,
United States patent counsel for the Company, addressed to the Underwriters
and dated such Delivery Date in form and substance reasonably satisfactory to
the Representatives to the effect that:
(i) The statements in the Registration Statement and
Prospectus under the caption "Risk Factors -- Uncertainties Related to
Patents and Proprietary Technology" and "Business - Patents and
Proprietary Rights", are accurate statements or summaries of the
matters set forth therein, and that such counsel is not aware of any
facts which would form a basis for a belief that any of the other
statements in this section are untrue or misleading.
(ii) No facts have come to the attention of such counsel
which would form a basis for the belief that (a) the Registration
Statement or any amendment thereto or (b) the Prospectus, as amended
or supplemented, contain any untrue statement of a material fact or
matter of law with respect to the patent position of the Company, or
omit to state any material fact or matter of law relating to the
patent position of the Company, which is necessary to make the
statements contained therein not misleading.
(iii) The Company has obtained assignment documents from
the named inventors for each of its United States patent applications,
and to the inventions described and claimed therein and to any foreign
applications filed for such inventions, and has caused these
assignments to be recorded in the United States Patent and Trademark
Office.
(iv) The Company has valid license rights to the patents and
patent applications listed in Schedule A to such counsel's opinion.
(v) To the best of such counsel's knowledge, the Company
has complied with the duty of candor and disclosure required by the
United States Patent and Trademark Office for each United States
patent application.
(vi) No facts have come to the attention of such counsel
that would form a basis for the belief that any of the United States
patents owned by or licensed to the Company are unenforceable or
invalid, and to the best of such counsel's knowledge, there is no
pending action, suit, proceeding or claim by others challenging the
patentability, validity or enforceability of any claim of any patents
owned or licensed by the Company in the United States or elsewhere.
(vii) Such counsel is not aware of any patents of others
in the United States or elsewhere which are or would be infringed by
the Company's specific current or proposed products or processes
referred to in the Prospectus; such counsel has no knowledge of any
pending or threatened action, suit, proceeding or
16
claim by others in the United States or elsewhere that the Company is
infringing or may infringe any patent which could result in any
material adverse effect on the Company.
(viii) Such counsel does not know of any contracts or
other documents relating to the proprietary information of the Company
or patents or patent applications in the United States or elsewhere
other than those described in the Registration Statement and the
Prospectus or identified on Schedule A.
(II) On each Delivery Date, the Company shall have
furnished to the Representatives an opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.,
regulatory counsel for the Company, addressed to the Underwriters and dated
such Delivery Date in form and substance reasonably satisfactory to the
Representatives and their counsel to the effect that:
(i) the statements in the Prospectus under the captions
"Risk Factors - Government Regulation; No Assurance of Regulatory
Approvals," "Risk Factors - Limited Manufacturing Experience" (third
and fourth paragraphs only), "Business - Products and Product
Development Programs; FOCALSEAL-L for lung surgery" (fourth and sixth
paragraphs only), "Business - Government Regulation," and "Business -
Manufacturing" (sixth paragraph only), and other references in the
Prospectus to those matters described in such sections, are accurate
and complete statements of the legal matters, documents and
proceedings set forth therein;
(ii) no facts have come to such counsel's attention which
cause such counsel to believe that the statements in the Prospectus
under the captions "Risk Factors - Government Regulation; No Assurance
of Regulatory Approvals," "Risk Factors - Limited Manufacturing
Experience" (third and fourth paragraphs only), "Business - Products
and Product Development Programs; FOCALSEAL-L for lung surgery"
(fourth and sixth paragraphs only), "Business - Government
Regulation," and "Business - Manufacturing" (sixth paragraph only),
and other references in the Prospectus to those matters described in
such sections, at the time the Registration Statement became
effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or as of the date hereof,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
(iii) such counsel has no actual knowledge of any
action, suit or proceeding pending or threatened by the FDA or other
federal regulatory authority, except in each case as described in the
Prospectus.
17
(f) The Representatives shall have received from Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Underwriters, such
opinion or opinions, dated such Delivery Date, with respect to the issuance
and sale of the Shares, the Registration Statement, the Prospectus and other
related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(g) At the time of execution of this Agreement, the
Representatives shall have received from Ernst & Young LLP a letter, in form
and substance satisfactory to the Representatives, addressed to the
Underwriters and dated the date hereof (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date hereof (or, with respect to matters
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings
of such firm with respect to the financial information and other matters
ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(h) With respect to the letter of Ernst & Young LLP referred
to in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial letter"), on
each Delivery Date the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
Underwriters and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus,
as of a date not more than five days prior to the date of the bring-down
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.
(i) On each Delivery Date, the Company shall have furnished to
the Representatives a certificate, dated such Delivery Date, of its Chairman
of the Board or its President and its Chief Financial Officer stating that:
(i) The representations and warranties of the Company
contained in this Agreement are true and correct as of such Delivery
Date, and the Company has complied with all agreements and satisfied
all conditions on its part to be complied with or satisfied prior to
such Delivery Date; and the conditions set forth in Sections 7(a) and
7(l) have been fulfilled; and
18
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date,
the Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
(j) You shall have been furnished such additional documents
and certificates as you or counsel for the Underwriters may reasonably
request.
(k) The letter agreements among you and officers, directors
and the stockholders and optionholders of the Company relating to
restrictions on sales of the Company's securities, delivered to you on or
prior to the date hereof, shall be in full force and effect on such Delivery
Date.
(l) (i) The Company shall not have sustained since the date of
the latest audited financial statements included in the Prospectus any loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (ii) since such date there shall not have
been any change in the capital stock or long-term debt of the Company or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity or
results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the Representatives,
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered on
such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(m) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market shall have been suspended or minimum prices shall
have been established on any such exchange or such market by the Commission,
by such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared by
Federal or state authorities, (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a
national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the
financial markets in the United States shall be such) as to make it, in the
judgment of a majority in interest of the Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the Shares
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
19
(n) Nasdaq shall have approved the Shares for listing, subject
only to official notice of issuance.
All such opinions, letters, evidence, certificates and documents
shall be in compliance with the provisions of this Agreement only if they are
satisfactory in form and substance to you and counsel for the Underwriters.
The Company shall furnish to you conformed copies of such opinions, letters,
evidence, certificates and documents in such number as you shall reasonably
request. If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, the Agreement and all
obligations of the Underwriters hereunder may be canceled at, or prior to,
each Delivery date, by you. Any such cancellation shall be without liability
of the Underwriters to the Company. Notice of such cancellation shall be
given to the Company in writing, or by telecopy or telephone confirmed in
writing.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each
Underwriter [(including any Underwriter in its role as a qualified independent
underwriter pursuant to the rules of the National Association of Securities
Dealers, Inc.)], its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action
in respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Shares), to which that
Underwriter, officer, employee or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment
or supplement thereto or (B) in any blue sky application or other document
prepared or executed by the Company (or based upon any written information
furnished by the Company) specifically for the purpose of qualifying any or
all of the Shares under the securities laws of any state or other
jurisdiction (any such application, document or information being hereinafter
called a Blue Sky Application"), (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to
make the statements therein not misleading or (iii) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with,
or relating in any manner to, the Shares or the offering contemplated hereby,
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered by clause
(i) or (ii) above (PROVIDED that the Company shall not be liable under this
clause (iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or
willful misconduct), and shall reimburse each Underwriter and each such
officer, employee or controlling person promptly upon demand for any legal or
other expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that
20
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any such amendment or supplement, or in any Blue Sky
Application, in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Underwriter or to any officer,
employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Securities Act or otherwise,
from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Company or any such director,
officer or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or in any amendment or supplement thereto, or in any Blue
Sky Application any material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of that Underwriter specifically for
inclusion therein, and shall reimburse the Company and any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person
in connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Underwriter may otherwise have to the Company or any such director,
officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 8 except to the extent it
has been materially prejudiced by such failure and, PROVIDED FURTHER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof
21
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
PROVIDED, HOWEVER, that the Representatives shall have the right to employ
counsel to represent jointly the Representatives and those other Underwriters
and their respective officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity
may be sought by the Underwriters against the Company under this Section 8
if, in the reasonable judgment of the Representatives, it is advisable for
the Representatives and those Underwriters, officers, employees and
controlling persons to be jointly represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall be paid by
the Company. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to
such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment of the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as
a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Underwriters on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriters on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company on the one hand, and the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Shares under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or
alleged
22
untrue statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative 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 contributions pursuant to this Section 8 were to be
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above
in this Section 8 shall be deemed to include, for purposes of this Section
8(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 8(d) are
several in proportion to their respective underwriting obligations and not
joint.
(e) The Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering of the
Shares by the Underwriters set forth on the cover page of, the legend
concerning over-allotments on the inside front cover page of and the
concession and reallowance figures appearing under the caption "Underwriting"
in, the Prospectus are correct and constitute the only information concerning
such Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Underwriters shall be obligated to
purchase the Shares which the defaulting Underwriter agreed but failed to
purchase on such Delivery Date in the respective proportions which the number
of the Firm Shares set opposite the name of each remaining non-defaulting
Underwriter in Schedule 1 hereto bears to the total number of the Firm Shares
set opposite the names of all the remaining non-defaulting Underwriters in
Schedule 1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting
Underwriters shall not be obligated to purchase any of the Shares on such
Delivery Date if the total number of Shares which the defaulting Underwriter
or Underwriters agreed but failed to purchase on such date exceeds 9.09% of
the total number of Shares to be purchased on such Delivery Date, and any
remaining non-defaulting Underwriter shall not be obligated to purchase more
than 110% of the number of Shares which it agreed to purchase on such
Delivery Date pursuant to the terms of Section 2. If the foregoing maximums
are exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Shares to be purchased on such Delivery Date.
If the remaining non-defaulting Underwriters or
23
other underwriters satisfactory to the Representatives do not elect to
purchase the shares which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such Delivery Date, this Agreement (or, with
respect to the Second Delivery Date, the obligation of the Underwriters to
purchase, and of the Company to sell, the Option Shares) shall terminate
without liability on the part of any non-defaulting Underwriter or the
Company, except that the Company will continue to be liable for the payment
of expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Shares
which a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company for damages caused by its default.
If other underwriters are obligated or agree to purchase the Shares of a
defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement,
the Prospectus or in any other document or arrangement.
10. TERMINATION. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Shares if, prior to
that time, any of the events described in Sections 7(l) or 7(m), shall have
occurred or if the Underwriters shall decline to purchase the Shares for any
reason permitted under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall
fail to tender the Shares for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company 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
or if the Underwriters shall not purchase the Shares for any reason permitted
pursuant to this Agreement, the Company will reimburse the Underwriters for
all reasonable out-of-pocket expenses (including fees and disbursements of
counsel) incurred by the Underwriters in connection with this Agreement and
the proposed purchase of the Shares, and upon demand (accompanied by
reasonable documentation of such expenses) the Company shall pay the full
amount thereof to the Representatives. If this Agreement is terminated
pursuant to Section 9 by reason of the default of one or more Underwriters,
the Company shall not be obligated to reimburse any defaulting Underwriter on
account of those expenses.
24
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by
mail, telex or facsimile transmission to ▇▇▇▇▇▇ Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department
(Fax: ▇▇▇-▇▇▇-▇▇▇▇), with a copy, in the case of any notice pursuant to
Section 8(c), to the Director of Litigation, Office of the General Counsel,
▇▇▇▇▇▇ Brothers Inc., Three World Financial ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇;
(b) if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in
the Registration Statement, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (Fax: ▇▇▇-▇▇▇-▇▇▇▇);
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company
shall be entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by the Representatives.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company and
their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any Underwriter within the meaning of
Section 15 of the Securities Act and (B) the indemnity agreement of the
Underwriters contained in Section 8(b) of this Agreement shall be deemed to
be for the benefit of directors of the Company, officers of the Company who
have signed the Registration Statement and any person controlling the Company
within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 13, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision
contained herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in
this Agreement or made by or on behalf on them, respectively, pursuant to
this Agreement, shall survive the delivery of and payment for the Shares and
shall remain in full force and effect, regardless of any investigation made
by or on behalf of any of them or any person controlling any of them.
15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
25
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of New York.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
26
If the foregoing correctly sets forth the agreement between the Company
and the Underwriters, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
FOCAL, INC.
By _______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, President and
Chief Executive Officer
Accepted:
▇▇▇▇▇▇ BROTHERS INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇, INC.
PACIFIC GROWTH EQUITIES, INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By ▇▇▇▇▇▇ BROTHERS INC.
By ____________________________
Authorized Representative
27
SCHEDULE 1
----------
Number of
Underwriters Firm Shares
------------ -----------
▇▇▇▇▇▇ Brothers Inc.............................................................
▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc..............................................................
Pacific Growth Equities, Inc....................................................
TOTAL