_________ Units, each Unit Consisting of
Five Shares of Common Stock and
Five Redeemable Common Stock Purchase Warrants
Each to Purchase One Share
of
Delcath Systems, Inc.
UNDERWRITING AGREEMENT
------------ ---------
New York, New York
_________, 2003
Roan/▇▇▇▇▇▇ Associates, L.P.
as Representative of the several
Underwriters named in Schedule I
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Delcath Systems, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell ___________ units (the "Units"), each Unit comprised of five
shares ("Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock") and five Redeemable Common Stock Purchase Warrants each to
purchase one share of Common Stock (the "Warrants") in a public offering ( the
"Offering") under Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"). The Units, Shares and Warrants (together, referred to as the
"Firm Securities") and together with all or any part of the up to __________
[15% of Firm Units] additional Units subject to the overallotment option
described in Section 2(b) hereof (the "Overallotment Securities") are
hereinafter collectively referred to as the "Securities." This agreement
confirms the agreement by the underwriters named in Schedule I ("Underwriters")
to purchase, jointly and not severally, the Firm Securities from the Company
upon the terms and conditions contained herein. Roan/▇▇▇▇▇▇ Associates, L.P.,
shall act as managing underwriter and representative (the "Representative") of
the several underwriters.
The Company also proposes to issue and sell to the Representative, a
warrant (the "Underwriters' Unit Purchase Warrant") pursuant to the
Underwriters' Warrant Agreement (the "Underwriters' Warrant Agreement") for the
purchase of an aggregate of 10% of the number of Units being sold (not including
the Overallotment Securities) (the "Underwriters' Warrant Units"), as provided
in Section 2(d) hereof. The Securities, the Underwriters' Warrant Agreement and
Underwriters' Warrant Units are more fully described in the Registration
Statement (as defined in Subsection 1(a) hereof) and the Prospectus (as defined
in Subsection 1(a) hereof). Unless the context otherwise requires, all
references to the "Company" shall include all presently existing subsidiaries
and any entities acquired by the Company on or prior to the Closing Date
(defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel required hereunder shall cover any such subsidiaries and
acquired entities.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriters as of the date
hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
1
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2 (SEC File
No. 333-101661) including any related preliminary prospectus (each a
"Preliminary Prospectus"), for the registration of the offer and sale of the
Securities under the Securities Act, which registration statement and any
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Securities Act and the Rules and Regulations (as hereinafter
defined) of the Commission. The registration statement with respect to the
Securities, including any Preliminary Prospectus, copies of which have
heretofore been delivered to the Representative, has been prepared by the
Company in conformity with the requirements of the Securities Act and the Rules
and Regulations. Following execution of this Agreement, the Company will
promptly file (i) if the registration statement has been declared effective by
the Commission, (A) a Term Sheet (as defined in the Rules and Regulations)
pursuant to Rule 434 under the Act or (B) a final Prospectus under Rules 430A
and/or 424(b) under the Securities Act, in either case in form satisfactory to
the Representative or (ii) in the event the registration statement has not been
declared effective, a further amendment to said registration statement in the
form heretofore delivered to the Representative and will not, before the
registration statement becomes effective, file any other amendment thereto
unless the Representative shall have consented thereto after having been
furnished with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Rules and Regulations), is hereinafter called
the "Registration Statement" and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulation, is
hereinafter called the "Prospectus." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Securities Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Securities Act
and the Rules and Regulations, and neither the Preliminary Prospectus, the
Registration Statement nor the Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein and necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement became or becomes effective
and at all times subsequent thereto up to the Closing Date and each
Overallotment Closing Date (as hereinafter defined) and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all material statements which are required to be stated
therein in compliance with the Act and the Rules and Regulations, and conforms
in all material respects with the requirements of the Securities Act and the
Rules and Regulations; neither the Registration Statement, nor any amendment
thereto, at the time the Registration Statement or
2
such amendment was or is declared effective under the Securities Act, contained
or will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, not misleading, and the Prospectus at the time the Registration
Statement became or becomes effective, at the Closing Date and at any
Overallotment Closing Date, did not or will not contain an untrue statement of a
material fact or omit 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; provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with information supplied to the Company in writing by or on behalf
of the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly incorporated and is now, and at the
Closing Date and any Overallotment Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company has no subsidiaries and, other than as described in the Registration
Statement, the Company does not own, directly or indirectly, an interest in any
corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of its
properties or the character of its operations requires such qualification to do
business, except where the failure to so qualify could not reasonably be
expected to have a material adverse effect on the Company. The Company has all
requisite corporate power and authority, and has obtained any and all necessary
applications, approvals, orders, licenses, certificates, franchises and permits
of and from all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as described
in the Prospectus; the Company is and has been doing business in compliance with
all such authorizations, approvals, orders, licenses, certificates, franchises,
and permits and all federal, state, local and foreign laws, rules and
regulations except where the failure to comply could not reasonably be expected
to have a material adverse effect on the Company; and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision ruling or finding, could reasonably be expected to have a material
adverse effect on the condition, financial or otherwise, or the prospects,
value, operation, properties or business of the Company. The disclosures, if
any, in the Registration Statement concerning the effects of federal, state,
local, and foreign laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material respects and
do not omit to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, based upon the assumptions set forth
therein. The Company is not a party to or bound by any instrument, agreement or
other arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except as contemplated by this Agreement,
the Underwriters' Unit Purchase Warrant and as otherwise described in the
Prospectus. The Securities, the Underwriters' Unit Purchase Warrant and the
Underwriters' Warrant Units and all other securities issued or issuable by the
Company conform or, when issued and paid for, will conform in all respects to
all statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have been
3
duly authorized and validly issued and all outstanding shares of Common Stock
are fully paid and non-assessable; the holders of all outstanding securities
have no rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of any security
of the Company, or similar contractual rights granted by the Company to
subscribe for or purchase securities. The Securities, the Underwriters' Unit
Purchase Warrant and the Underwriters' Warrant Units to be issued and sold by
the Company hereunder, and upon payment therefor, are not and will not be
subject to any preemptive or other similar rights of any stockholder to
subscribe for or purchase securities, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof and thereof,
will be validly issued, and, with respect to the shares of Common Stock included
in the Securities, fully paid and non-assessable and will conform to the
descriptions thereof contained in the Prospectus, and the holders thereof will
not be subject to any liability solely as such holders. All corporate action
required to be taken for the authorization, issuance and sale of the Securities,
the Underwriters' Unit Purchase Warrant and the Underwriters' Warrant Units has
been duly and validly taken; and the certificates, if any, representing the
Securities will be in legally proper form. Upon the issuance and delivery
pursuant to the terms hereof of the Securities to be sold to the Underwriters by
the Company hereunder, the Underwriters will acquire title to such Securities
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever as a
result of any action taken or not taken by the Company.
(f) The financial statements of the Company, together with the
related notes thereto, included in the Registration Statement, the Preliminary
Prospectus and the Prospectus fairly present the financial position and the
results of operations 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 and the
Rules and Regulations, consistently applied throughout the periods involved
except as otherwise disclosed therein. Other than as described in the
Prospectus, there has been no material adverse change or development involving a
prospective change in the condition, financial or otherwise, or in the
prospects, value, operation, properties or business of the Company, whether or
not arising in the ordinary course of business, since the dates of the financial
statements included in the Registration Statement and the Prospectus. The
outstanding debt, the property, both tangible and intangible, the capitalization
and the business of the Company conform in all material respects to the
descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) 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 authorization; (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.
(h) ▇▇▇▇▇▇ LLP whose report is filed with the Commission as a part
of the Registration Statement, is an independent auditor as required by the Act
and the Rules and Regulations.
(i) Except for any taxes being duly contested by the Company, the
Company: (i) has paid all federal, state, local and foreign taxes for which it
is liable, including, but not limited to, payroll withholding taxes and taxes
payable under Chapters 21 through 24 of the
4
Internal Revenue Code of 1986 (the "Code"); (ii) has furnished all tax and
information returns it is required to furnish pursuant to the Code, and has
established adequate reserves for such taxes which are not due and payable; and
(iii) does not have knowledge of any tax deficiency or claims outstanding,
proposed or assessed against it.
(j) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business (but in no event less than $1,000,000 per occurrence
and $3,000,000 in the aggregate), including, but not limited to, personal injury
and product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
insured against by corporations in circumstances similar to those of the
Company.
(k) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or, to the knowledge of the
Company, threatened against, or involving the properties or business of the
Company which: (i) questions the validity of the capital stock of the Company or
this Agreement or of any action taken or to be taken by the Company pursuant to
or in connection with this Agreement; (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects); or (iii) could reasonably be expected to have a material adverse
effect on the condition, financial or otherwise, prospects, operation,
properties or business of the Company.
(l) The Company has full legal right, power and authority to enter
into this Agreement and the Underwriters' Warrant Agreement and to consummate
the transactions provided for in this Agreement, the Underwriters' Warrant
Agreement and the Warrant Agreement between the Company and its Transfer and
Warrant Agent (the "Transfer Agent Agreement") have each been duly authorized,
executed and delivered by the Company. Each of this Agreement and the
Underwriters' Warrant Agreement constitutes a legally valid and binding
agreement of the Company, subject to due authorization, execution and delivery
by the Representative on behalf of the Underwriters, enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law). Neither the Company's execution or delivery of this
Agreement, the Underwriter's Warrant Agreement or the Transfer Agent Agreement,
its performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, except as may not reasonably be expected to have a material adverse
effect on the Company, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any material lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to the terms
of: (i) the Certificate of Incorporation or By-Laws of the Company; (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; or (iii) any statute, judgment, decree, order, rule or regulation
5
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(m) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities, the performance of this
Agreement and the transactions contemplated hereby, except such as have been or
may be obtained under the Securities Act or may be required under state
securities or Blue Sky laws in connection with (i) the Underwriters' purchase
and distribution of the Firm Securities and Overallotment Securities to be sold
by the Company hereunder or (ii) the issuance and delivery of the Underwriters'
Unit Purchase Warrant or the Underwriters' Warrant Units.
(n) All agreements filed as exhibits to the Registration Statement
(or incorporated by reference to other filings by the Company pursuant to the
Securities Act or the Exchange Act) have been duly and validly authorized,
executed and delivered by the Company, and, assuming the due and valid
authorization, execution and delivery thereof by the parties thereto other than
the Company, constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with their respective terms (except as such
enforcebility may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
and contribution may be limited by applicable law). The descriptions contained
in the Registration Statement of material contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by the Rules and Regulations and there are no
material contracts, government grants, collaborative relationships, or other
documents which are required by the Securities Act or the Rules and Regulations
to be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required or have not
previously been filed, and the exhibits which have been filed are complete and
correct copies of the documents of which they purport to be copies.
(o) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business; or
(v) made any material changes in or affecting the general affairs, management,
financial operations, stockholders equity or results of operations of the
Company.
(p) No default exists in the due performance and observance of any
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which any of its property or assets (tangible or
intangible) is
6
subject or affected except where such default cannot reasonably be expected to
have a material adverse effect upon the Company.
(q) The Company is in compliance in all material respects with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours.
(r) The Company has not incurred any fines or penalties arising
under or as a result of the application of the provisions of the Securities Act
or the Exchange Act.
(s) Except as disclosed in the Prospectus, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Except as disclosed in the Prospectus, the Company does not
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA.
(t) The Company is not aware of any violation in any material
respect by it of any domestic or foreign laws, ordinances or governmental rules
or regulations to which it is subject.
(u) Except for registration rights for securities which are
disclosed in all material respects in the Prospectus under the section entitled
"Description of Capital Stock", no holders of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of the
Company exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
or to require the Company to file a registration statement under the Act.
(v) Except s may be disclosed in the Prospectus, neither the
Company, nor, to the Company's best knowledge, any of its employees, directors
or affiliates (within the meaning of the Rules and Regulations) has taken,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or otherwise.
(w) To its knowledge after reasonable investigation, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, or licenses and rights to the foregoing presently owned or held by
the Company are in dispute or are in any conflict with the right of any other
person or entity within the Company's current area of operations nor has the
Company received notice of any of the foregoing. Except as described in the
Prospectus, or as could not reasonably be expected to have a material adverse
effect upon the Company, its financial condition or operations, the Company: (i)
owns or has the right to use, free and clear of all liens, charges,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing; and (ii) is not obligated or under any
liability
7
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service ▇▇▇▇
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business.
(x) To its knowledge, the Company owns or has the unrestricted
right to use all material trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), patents, patent applications, inventions, designs, processes,
works of authorship, computer programs and technical data and information
(collectively herein "Intellectual Property") required for or incident to the
development, manufacture, operation and sale of all products and services
proposed to be sold by the Company, free and clear of and without violating any
right, lien, or claim of others, including without limitation, former employers
of its employees; provided, however, that the possibility exists that other
persons or entities, completely independently of the Company, or employees or
agents, could have developed trade secrets or items of technical information
similar or identical to those of the Company.
(y) The Company has taken security measures which management
believes to have been reasonable to protect the secrecy, confidentiality and
value of all the Intellectual Property material to its operations.
(z) Except as disclosed in the Prospectus, the Company has good
title to, or valid and enforceable leasehold estates in, all items of real and
personal property owned or leased by it free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than liens for taxes or
assessments not yet due and payable.
(aa) The Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or any other
arrangements, agreements, understandings, payments or issuances with respect to
the Company or any of its officers, directors, employees or affiliates that may
adversely affect the Underwriters' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD") except for this Agreement and
any other agreement between the Company and the Represntative.
(bb) The Firm Securities and the Overallotment Securities have
been approved for quotation on the Nasdaq SmallCap Stock Market, Inc. and the
Boston Stock Exchange, subject to official notice of issuance, and the Company
has received, prior to the Effective Date, written notification from the Nasdaq
Stock Market that it has withdrawn any outstanding notices regarding delisting
of the Company's Common Stock and that following the Closing of the Offering the
Company's Common Stock shall not be subject to delisting proceedings.
(cc) Neither the Company nor any of its respective officers,
employees, agents or any other person authorized to act on behalf of the
Company, has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) could reasonably be expected to subject the Company, or
any other such person to any material damage or penalty in any civil, criminal
or governmental litigation or
8
proceeding (domestic or foreign) or (b) could reasonably be expected to have a
materially adverse effect on the assets, business or operations of the Company.
The Company's internal accounting controls are sufficient to cause the Company
to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(dd) Except as set forth in the Prospectus or as not required to
be disclosed pursuant to the Rules and Regulations, no officer or director or to
the Company's knowledge, stockholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any such person or entity or the Company, has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold to the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, except with respect to the
beneficial ownership of not more than 1% of the outstanding shares of capital
stock of any publicly-held entity; or (ii) a beneficial interest in any contract
or agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Related Party
Transactions" or as not required to be disclosed pursuant to the Rules and
Regulations, there are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director, or
stockholder owning 5% or more of the Company's Common Stock, or any affiliate or
associate of any such person or entity.
(ee) Any certificate signed by any officer of the Company and
delivered to the Representative or to the Underwriters' Counsel (as hereinafter
defined) shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(ff) The Company has entered into an employment agreement with
each of ▇.▇. ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ as described in the Prospectus. The
Company has obtained or shall obtain prior to the Closing Date key person life
insurance with an insurer rated at least AA or better in the most recent
addition of "Best's Life Reports" in the amount of $_______ on the life of each
of Messrs. Koly and ▇▇▇▇▇▇▇▇▇▇▇▇. Such insurance shall be maintained in full
force and effect for a period of three years from the Closing Date. The Company
shall be the sole beneficiary of such policy.
(gg) No securities of the Company have been sold by the Company
since January 1, 2000 except as disclosed in the Registration Statement.
(hh) The minute books of the Company have been made available to
Underwriters' Counsel and contain a complete summary of all meetings and actions
of the Board of Directors and Stockholders of the Company since its date of
formation, except for minutes which have not yet been approved which have been
made available in draft form. The stock ledgers of the Company are correct and
accurate and reflect the record ownership of all owners of the Company's capital
stock. All persons who, to the Company's knowledge, are owners of more than 5%
of the Common Stock of the Company as set forth in the section of the Prospectus
entitled "Principal Stockholders" and all transactions between such shareholders
and the Company have been properly described in accordance with the Rules and
Regulations.
(ii) Except as disclosed in writing to the Representative, no
officer, or director of the Company nor any person who, to the Company's
knowledge, is the owner of more than
9
5% of the Common Stock of the Company has any affiliation or association with
any member of the NASD.
(jj) The Company shall use its best efforts to obtain (or continue
in effect if previously obtained) Directors and Officers' liability insurance
prior to the effective date of the Registration Statement in the face amount of
at least $2,000,000 per occurrence.
2. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
Each of the Underwriters, severally and not jointly, hereby represent
and warrants to the Company as follows:
(a) The Underwriter is duly formed and validly existing and in
good standing under the laws of its state of formation.
(b) The Underwriter is, and at the time of each Closing will be, a
member in good standing of the NASD.
(c) Sales of Securities will only be made in such jurisdictions in
which the Underwriter is a registered broker-dealer or where an applicable
exemption from such registration exists.
(d) The Underwriter has full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated herein
and this Agreement has been duly authorized, executed and delivered by the
Underwriter (or by the Representative on behalf of the Underwriter). This
Agreement constitutes a legally valid and binding agreement of the Underwriter
enforceable against the Underwriter in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND AGREEMENT TO
ISSUE UNDERWRITERS' PURCHASE WARRANT
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and each Underwriter
agrees, severally and not jointly, to purchase from the Company the respective
number of Firm Securities set forth in Schedule I hereto opposite its name,
subject to Section (b) hereof, at the price per Unit set forth below in Section
3(c).
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase severally, and not jointly, up to an additional
_________ Units [15% of Firm Units] (the "Overallotment Option"). The option
granted hereby will expire 45 days after the date of the Prospectus, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Underwriters through the
Representative to the Company, setting forth the number of Overallotment
Securities as to which the Underwriters are then exercising the option and the
time and date of payment and delivery for such Overallotment Securities. Any
such time
10
and date of delivery shall be determined by the Representative, but shall not be
later than seven full business days nor earlier than three full business days
after the exercise of said option, nor in any event prior to the Closing Date,
as defined in paragraph (c) below, unless otherwise agreed to between the
Representative and the Company. In the event such option is exercised, the
Underwriters shall purchase such number of Overallotment Securities then being
purchased which shall have been allocated to the Underwriters, and which such
shall have agreed to purchase, subject in each case to such adjustments as the
Underwriters in their discretion shall make to eliminate any sales or purchases
of fractional Securities. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Overallotment Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities and Overallotment Securities shall be made
at the offices of the Representative, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
or at such other place as shall be designated by the Representative for the
respective accounts of the several Underwriters. Such delivery and payment shall
be made at 10:00 a.m. New York City time on ______, 2003 or at such other time
and date as shall be designated by the Representative, but not more than three
(3) business days after the first day of trading of the Securities following the
effective date of the Registration Statement (such time and date of payment and
delivery being hereafter called "Closing Date"). In addition, in the event that
any or all of the Overallotment Securities are purchased by the Underwriters,
payment of the purchase price for, and delivery of certificates for such
Overallotment Securities shall be made at the above-mentioned office or at such
other place and at such time (such time and date of payment and delivery being
hereinafter called "Overallotment Closing Date") as shall be agreed upon by the
Underwriters and the Company on any Overallotment Closing Date as specified in
the notice from the Underwriters to the Company. Delivery of the certificates
for the Firm Securities and the Overallotment Securities, if any, shall be made
to the Underwriters against payment by the Underwriters of the purchase price
for the Firm Securities and the Overallotment Securities, if any, to the order
of the Company as the case may be by certified check in immediately available
funds, certificates for the Firm Securities and the Overallotment Securities, if
any, shall be in definitive, fully registered form, shall bear no restrictive
legends and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to
Closing Date or the Overallotment Closing Date, as the case may be. The
certificates for the Firm Securities and the Overallotment Securities, if any,
shall be made available to the Underwriters at the above-mentioned office or
such other place as the Underwriter may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the Overallotment Closing Date, as the case may be.
The purchase price of the Securities to be paid by the
Underwriters to the Company for the Securities purchased under clauses (a) and
(b) above will be $______ per Unit (which price is net of the Underwriters'
discount of 10% per Unit). The Company shall not be obligated to sell any
Securities hereunder unless all Firm Securities to be sold by the Company are
purchased hereunder. The Company agrees to issue and sell the Securities to the
Underwriters in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Representative, the Underwriters' Unit Purchase Warrant at a purchase price of
$_____ [165% of the Unit offering price] which Underwriters' Unit Purchase
Warrant shall entitle the holders thereof to purchase an aggregate of _______
Units, representing 10% of Firm Units. The Underwriters' Unit Purchase Warrant
shall not be exercisable for one year after the effective date
11
and will expire five years after the effective date of the Registration
Statement and will have an initial exercise price equal to one hundred - five
percent (165%) of the initial public offering price of the Units. The
Underwriters' Unit Purchase Warrant shall not be redeemable, provided, however,
the Warrants issuable upon exercise of the Underwriters' Unit Purchase Warrant
shall be redeemable upon the same terms as the Warrants sold to the public. The
Underwriters' Warrant Agreement and form of the Unit Purchase Warrant
Certificate shall be substantially in the form filed as an exhibit to the
Registration Statement. The Securities to be received by the Underwriters upon
exercise of the Underwriters' Unit Purchase Warrant shall be the same as
delivered to the public in the Offering. Payment for the Underwriters' Unit
Purchase Warrant shall be made on the Closing Date. The Company has reserved and
shall continue to reserve a sufficient number of Units, Shares and Warrants for
issuance upon exercise of the Underwriters' Unit Purchase Warrant. The
Underwriters' Unit Purchase Warrant will be restricted from sale, transfer,
assignment or hypothecation for a period of one year from the effective date of
the offering except to officers or partners (not directors) of the underwriter
and members of the selling group and/or their officers or partners in compliance
with NASD Rule 2710(c)(7)(A).
4. PUBLIC OFFERING OF THE SECURITIES. As soon after the Registration
Statement becomes effective and as the Representative deems advisable, but in no
event more than three (3) business days after such effective date of the
Registration Statement (the "Effective Date"), the Underwriters shall make a
public offering of the Securities (other than to residents of or in any
jurisdiction in which qualification of the Securities is required and has not
become effective) at the price and upon the other terms set forth in the
Prospectus and otherwise in compliance with the Rules and Regulations and the
rules of any governmental body or self-regulatory organization applicable to the
Offering. The Underwriter may allow such concessions and discounts upon sales to
other dealers as set forth in the Prospectus. The Underwriters may from time to
time increase or decrease the public offering price after distribution of the
Securities has been completed to such extent as the Representative, in its sole
discretion, deem advisable.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act: (i) before termination of the Offering of the Securities
by the Underwriters which the Underwriters shall not previously have been
advised and furnished with a copy; or (ii) to which the Underwriters shall have
objected; or (iii) which is not in compliance with the Securities Act, the
Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm by notice in
writing: (i) when the Registration Statement, becomes effective and, if the
provisions of Rule 430A promulgated under the Securities Act will be relied
upon, when the Prospectus has been filed in accordance with said Rule 430A and
when any post-effective amendment to the Registration Statement becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening of, any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution or proceeding for that purpose; (iii) of the
initiation by any state securities commission of any proceedings for the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the initiation, or the
12
threatening, of any proceeding for that purpose; (iv) of the receipt of any
comments from the Commission relating to the Registration Statement; and (v) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for additional information. If
the Commission or any state securities commission or regulatory authority shall
enter a stop order or suspend such qualification at any time, the Company will
make every reasonable effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the Effective Date.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the Offering of the Securities which
differs from the prospectus on file at the Commission at the time the
Registration Statement became or becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriters
or ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP ("Underwriters' Counsel") shall reasonably object.
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be required to qualify as
a foreign corporation or file a general consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriters agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Securities Act and the Exchange
Act, as now and hereafter amended, and by the Rules and Regulations, as from
time to time in force, so far as necessary to permit the continuance of sales of
or dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when the
Prospectus relating to the Securities is required to be delivered under the
Securities Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel, the Prospectus, as
then amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Securities Act, the Company will notify the
Underwriters promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Securities Act,
each such
13
amendment or supplement to be reasonably satisfactory to Underwriters' Counsel,
and the Company will furnish to the Underwriters a reasonable number of copies
of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Securities Act and Rule
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12 consecutive months after
the Effective Date.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Representative:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the Nasdaq Stock
Market or any securities exchange;
(iii) every press release of the Company and any future
subsidiaries which is released by the Company;
(iv) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective businesses which the
Representative may reasonably request; or
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
In lieu of providing copies of the materials described in this Section
4(h) to the Representative, the Company may advise the Representative that such
material has been filed electronically with the Commission.
(i) For at least two years following the completion of the
Offering, the Company will maintain a Transfer Agent and Warrant Agent, which
may be the same entity, and, if necessary under the same jurisdiction of
incorporation as the Company, as well as a Registrar (which may be the same
entity as the Transfer and Warrant Agent) for its Common Stock. Such
14
Transfer Agent and Warrant Agent, during such two-year period, shall be American
Stock Transfer & Trust Company or such other entity reasonably acceptable to the
Representative.
(j) The Company will furnish to the Underwriters or pursuant to
the Underwriters' direction, without charge, at such place as the Underwriters
may designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (one of which copies
will be manually executed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto, including
any prospectus prepared after the effective date of the Registration Statement,
in each case as soon as available and in such quantities as the Underwriters may
reasonably request.
(k) During the period commencing on the date hereof and ending 45
days hereafter, neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of the
Securities in substantially the manner, and subject to the provisions, set forth
under the caption "Use of Proceeds" in the Prospectus. No portion of the net
proceeds will be used directly or indirectly to acquire any securities
previously issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Securities Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Securities Act, the Exchange Act, and the Rules and
Regulations.
(n) The Company shall furnish to the Underwriters as early as
practicable prior to the Closing Date and the Overallotment Closing Date, if
any, but no later than two (2) full business days prior thereto, a copy of the
latest available unaudited consolidated interim financial statements of the
Company (which in no event shall be as of a date more than forty-five (45) days
prior to the date of the Registration Statement) which have been read by the
Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 6(j) hereof.
(o) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Representative's request; (ii) a list of holders of Securities upon the
Representatives' request; (iii) a list of, if any, the securities positions of
participants in the Depository Trust Company upon the Representative's request.
(p) For a period equal to the lesser of (i) five (5) years from
the date hereof, or (ii) the sale to the public of the Underwriters' Warrant
Units, the Company will not take any action or actions that may prevent or
disqualify the Company's use of Form SB-2 or, if applicable, Form S-3 (or other
appropriate form) for the registration under the Securities Act of the offer and
sale of the warrants and shares of Common Stock underlying the Underwriter's
warrant Units.
15
(q) For a period of five (5) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the Securities
on the Nasdaq SmallCap Stock Market and Boston Stock Exchange.
(r) Following the Effective Date and for a period of two (2) years
thereafter, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the Representative
may reasonably request after consultation with the Company in order to provide
for the resale of the Securities and the Warrants and Common Stock underlying
the Underwriter's Unit Warrant.
(s) During the period commencing on the date hereof until six
months from the date hereof, the Company shall not amend or alter any term of
any written employment agreement between the Company and any executive officer,
or alter or amend the amount of compensation payable to such employee during the
term of such written employment agreement, in a manner more favorable to such
employee, without the express written consent of the Representative.
(t) Until the completion of the distribution of the Securities and
the termination of the Overallotment Option period, the Company shall not
without the prior written consent of the Representative, which consent shall not
be unreasonably withheld, issue, directly or indirectly, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering contemplated hereby, other than releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations or as required by the Rules and
Regulations.
(u) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(v) Subsequent to the dates as of which information is given in
the Registration Statement and Prospectus and prior to the Closing Date or the
Overallotment Closing Date, except as disclosed in or contemplated by the
Registration Statement and Prospectus, (i) the Company will not have incurred
any material liabilities or obligations, direct or contingent, or entered into
any material transactions other than in the ordinary course of business; (ii)
there shall not have been any change in the capital stock, funded debt (other
than regular repayments of principal and interest on existing indebtedness) or
other securities of the Company, any material adverse change in the condition
(financial or other), business, operations, income, net worth or properties,
including any material loss or damage to the properties of the Company (whether
or not such loss is insured against), which could reasonably be expected to have
a material adverse affect the condition (financial or other), business,
operations, income, net worth or properties of the Company; and (iii) the
Company shall not pay or declare any dividend or other distribution on its
Common Stock or its other securities or redeem or repurchase any of its Common
Stock or other securities.
(w) Except as disclosed in or contemplated by the Registration
Statement and Prospectus, the Company, for a period of 12 months following the
Closing Date, shall not redeem any of its securities, and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived after
the Closing Date without obtaining the Representative's prior written consent,
which consent shall not be unreasonably withheld. The Representative shall
either approve or disapprove such contemplated redemption of securities or
dividend payment or distribution within ten (10) business days from the date the
Representative receives written notice of the
16
Company's proposal with respect thereto; a failure of the Representative to
respond within the ten (10) business day period shall be deemed approval of the
transaction.
(x) The Company maintains and will continue to maintain a system
of internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance 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) In connection with the redemption of the Warrants, the
Representative shall be entitled to a fee of a fee of 5% of the exercise price
for each Warrant exercised; provided, however, that the Representative will not
be entitled to receive such compensation in warrant exercise transactions in
which (i) the market price of Common Stock at the time of exercise is lower than
the exercise price of the warrants; (ii) the warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in the Prospectus, in documents
provided to holders of warrants at the time of exercise; (iv) the holder of the
Warrants has not confirmed in writing that the Representative solicited such
exercise; or (v) the solicitation of exercise of the Warrants was in violation
of Regulation M promulgated under the Securities Act. Payment of any fee to the
Representative hereunder shall be made by the Company within 10 days of the date
that any Warrant is properly exercised in accordance with its terms. The Company
hereby covenants and agrees that it not employee, retain or hire any other
person or broker dealer in connection with the redemption of the Warrants,
without the prior written consent of the Representative. The covenants and
agreements contained in this clause 5 (y) shall survive termination of this
Agreement.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on the Closing Date and the
Overallotment Closing Date (to the extent not paid at the Closing Date) all its
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement, including, without limitation: (i) the fees and expenses
of accountants and counsel for the Company; (ii) all costs and expenses incurred
in connection with the preparation, duplication, delivery to the Underwriter,
printing and filing of the Registration Statement and the Prospectus and any
amendments and supplements thereto and the printing, mailing and delivery of
this Agreement, the Selected Dealer Agreements, Agreement Between Underwriters,
and related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters in quantities as hereinabove
stated; (iii) the printing, engraving, issuance and delivery of the Securities
and Underwriters' Warrant Units including any transfer, issue or other taxes
payable thereon; (iv) disbursements and fees of Underwriters' Counsel in
connection with the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, which Underwriters' Counsel fees (exclusive
of filing fees and disbursements) shall not exceed $20,000, payable as follows:
(A) $10,000 were paid when the first "Blue Sky" filings were made and the
remainder will be paid on the Closing Date, and (B)
17
the amount of "Blue Sky" filing fees that were paid by the Company to
Underwriter's Counsel at the time application of the Offering under "Blue Sky"
laws was made; (v) the costs and expenses in connection with one information
meeting held in New York, New York, one tombstone advertisement in the Wall
Street Journal; (vi) fees and expenses of the Transfer and Warrant Agent; (vii)
the fees payable to the NASD and expenses of filing with the NASD; and (viii)
the fees and expenses incurred in connection with the listing of the Securities
on the Nasdaq Stock Market and Boston Stock Exchange. All fees and expenses
payable to the Underwriters hereunder shall be payable at the Closing Date or
Overallotment Closing Date, as applicable; provided, however, the Company shall
pay such fees and costs in advance of the Closing Date if requested by the
Underwriter. The Underwriters shall be responsible for all of its own costs of
counsel. Any expenses incurred by the Underwriter (excluding any fees payable to
the NASD) shall not exceed in the aggregate $5,000 without the prior written
consent of the Company.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 7, clauses (v),(vi) or (vii) of
Section 12(a) or Section 13, the Company shall reimburse and indemnify the
Underwriters for up to $100,000 out-of-pocket actual, documented expenses paid
to unaffiliated third parties and reasonably incurred in connection with the
transactions contemplated hereby including the fees and disbursements of counsel
for the Underwriters; provided, however, in the event that the Underwriter
cannot proceed with the Offering as a result of its inability to comply with
NASD net capital or other regulatory reasons, then the Company shall not be
required to reimburse the Underwriter for out-of-pocket expenses paid to
unaffiliated third parties. Any amounts payable pursuant to this Section 6 (b)
shall be reduced by any amount paid by the Company pursuant to Section 6(c)
below.
(c) The Company further agree that, in addition to the expenses
payable pursuant to subsection (a) of this Section 6, it will pay to the
Underwriters a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities.
The Company has advanced $45,000 to the Underwriters (the "Advance"), to be
applied against the non-accountable expense allowance payable to the
Underwriters on the Closing Date. Such Advance has been paid as follows: (i)
$35,000 was previously paid by the Company and (ii) $10,000 was paid to the
Representative on the printing of the initial "red ▇▇▇▇▇▇▇" prospectus. The
Company will pay the non-accountable expense allowance, less the Advance, on the
Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
In the event the Underwriters elect to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriters on the Overallotment Closing Date (by certified or bank cashier's
check or, at the Underwriters' election, by deduction from the proceeds of the
offering) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Overallotment
Securities. As required under NASD Rule 2710, other than payments made to
unaffiliated third parties, the Advance shall be refunded to the Company in the
event that the Offering is not consummated.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy in all
material respects of the representations and warranties of the Company herein as
of the Closing Date and the Overallotment Closing Date, if any, as if they had
been made on and as of the Closing Date or the Overallotment Closing Date, as
the case may be; the accuracy on and as of the Closing Date or Overallotment
Closing Date, if any, of the statements of officers of the Company made pursuant
to the provisions hereof; and the performance by the Company on and as of the
Closing Date and the Overallotment Closing Date, if any, of each of its material
covenants and obligations hereunder and to the following further conditions:
18
(a) The Registration Statement shall have be declared effective by
the Commission not later than 5:30 P.M., New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Underwriters, and, at the Closing Date and the Overallotment Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated to the knowledge of the Company
by the Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Underwriters' Counsel. If the Company has elected to rely upon Rule 430A of the
Rules and Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Underwriters of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, and the reasonable opinion of
its counsel is material or omits to state a fact which, in the Representative's
reasonable opinion, is material and is required to be stated therein or is
necessary to make the statements therein not misleading, or that the Prospectus,
or any supplement thereto, contains an untrue statement of fact which, in the
Representative's reasonable opinion, or the opinion of its counsel is material,
or omits to state a fact which, in the Representative's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) The Company's registration statement pursuant to the Exchange
Act on Form 8-A with respect to the Warrants contained in the Units (the "Form
8-A") has been declared effective by the Commission.
(d) At the Closing Date and the Overallotment Closing Date, the
Representative shall have received the favorable opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLC, securities counsel to the Company or other counsel reasonably acceptable to
the Representative, dated the Closing Date, or the Overallotment Closing Date,
as the case may be, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company: (A) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed could not reasonably be expected to have a
material adverse effect upon the Company; and (C) to counsel's knowledge, the
Company has not received any notice of proceedings relating to the revocation or
modification of any such license or qualification which revocation or
modification could reasonably be expected to have a material adverse effect upon
the Company.
19
(ii) The Registration Statement and the Prospectus and any
post-effective amendments or supplements thereto (other than the exhibits,
financial statements, schedules and other financial and statistical data
included therein, as to which no opinion need be rendered) comply as to form in
all material respects with the requirements of the Securities Act and the Rules
and Regulations and the conditions for use of a registration statement on Form
SB-2 have been satisfied by the Company.
(iii) To counsel's knowledge, except as described in the
Prospectus, the Company does not own an interest of a character required to be
disclosed in the Registration Statement in any corporation, partnership, joint
venture, trust or other business entity;
(iv) The Company has a duly authorized capitalization as set
forth in the Prospectus as of the date indicated therein, under the caption
"Capitalization." The Securities, the Underwriters' Unit Warrant and the
Underwriters' Warrant Units conform or upon issuance will conform in all
material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. The Securities to be sold by the
Company hereunder, the Underwriters' Unit Warrant to be sold by the Company
under the Underwriters' Unit Warrant Agreement and Underwriters' Warrant Units
have been duly authorized and, when issued paid for and delivered in accordance
with the terms hereof or thereof, will be validly issued, and conform or upon
issuance will conform to the description thereof contained in the Prospectus and
the Common Stock included in the Units, when issued paid for and delivered in
accordance with the terms hereof, will be fully paid and non-assessable; are not
subject to any preemptive or other similar rights of any stockholder of the
Company; that, to such counsel's knowledge, the holders of the Securities and
Underwriters' Warrant Units shall not be personally liable for the payment of
the Company's debts solely by reason of being such holders except as they may be
liable by reason of their own conduct or acts; and that the certificates
representing the Units, Underwriters' Unit Warrant and Underwriters' Warrant
Units are in legal form. Upon delivery of the Units to the Underwriters against
payment therefor as provided for in this Agreement, the Underwriters (assuming
they are bona fide purchasers within the meaning of the Uniform Commercial Code)
will acquire title to the Units, free and clear of all liens, encumbrances,
equities, security interests and claims.
(v) The Registration Statement and the Form 8-A have been
declared effective under the Act, and, if applicable, the filing of all pricing
information has been timely made in the appropriate form under Rule 430A, and,
to counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and to counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Securities Act;
(vi) To counsel's knowledge, (A) there are no material
contracts or other documents required to be described in the Registration
Statement and the Prospectus and filed as exhibits to the Registration Statement
other than those described in the Registration Statement and the Prospectus and
filed as exhibits thereto, and (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment thereto regarding
such material contracts or other documents to which the Company is a party or by
which it is bound, are accurate in all material respects and fairly represent
the information required to be shown by Form SB-2 and the Rules and Regulations;
(vii) This Agreement, the Underwriters' Warrant Agreement and
the Transfer Agent Agreement have each been duly and validly authorized,
executed and delivered by the Company, and assuming that each is a valid and
binding agreement of the parties other
20
than the Company, constitutes a legally valid and binding agreement of the
Company, enforceable as against the Company in accordance with their respective
terms (except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law or pursuant to public
policy).
(viii) Neither the execution or delivery by the Company of
this Agreement, the Underwriters' Warrant Agreement or the Transfer Agent
Agreement, nor its performance hereunder or thereunder, nor its consummation of
the transactions contemplated herein or therein, nor the issuance of the
Securities pursuant to this Agreement, conflicts with or will conflict with or
results or will result in any material breach or violation of any of the terms
or provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of any kind
whatsoever upon, any property or assets (tangible or intangible) of the Company
except to the extent such event could not reasonably be expected to have a
material adverse effect upon the Company pursuant to the terms of, (A) the
Certificate of Incorporation or By-Laws of the Company, (B) to the knowledge of
such counsel, any indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement that is material to the
Company to which the Company is a party or by which it is bound or to which its
properties or assets (tangible or intangible) are subject, or (C) to the
knowledge of such counsel, and except to the extent it would not have a material
adverse effect on the Company, any statute, judgment, decree, order, rule or
regulation applicable to the Company or any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body, having
jurisdiction over the Company or any of its respective activities or properties.
(ix) No consent, approval, authorization or order and no
filing with, any court, regulatory body, government agency or other body (other
than such as may be required under state securities laws, as to which no opinion
need be rendered) is required in connection with the issuance by the Company of
the Securities, the performance of this Agreement and the Underwriters' Warrant
Agreement by the Company, and the taking of any action by the Company
contemplated hereby or thereby, which has not been obtained;
(x) Except as described in the Prospectus, to the knowledge
of such counsel, the Company is not in breach of, or in default under, any
material term or provision of any indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement and, to the knowledge of counsel, the
Company is not in violation of any material term or provision of its Certificate
of Incorporation or By-Laws or in violation of any material franchise, license,
permit, judgment, decree, order, statute, rule or regulation material to the
Company's business;
(xi) The statements in the Prospectus under the captions
"DESCRIPTION OF BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," "SHARES ELIGIBLE FOR FUTURE SALE"
and "RISK FACTORS" have been reviewed by such counsel, and only insofar as they
refer to statements of law, descriptions of statutes, rules or regulations or
legal conclusions, are correct in all material respects;
(xii) To such counsel's knowledge, except as described in the
Prospectus or as could not reasonably be expected to have a material adverse
effect on the Company, no person, corporation, trust, partnership, association
or other entity holding securities
21
of the Company has the contractual right to include and/or register any
securities of the Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any security in such
registration statement; and
(xiii) Upon consummation of the transactions contemplated
hereby, the Securities will be eligible for listing on the Nasdaq SmallCap Stock
Market and Boston Stock Exchange.
In addition, such counsel shall state that such counsel has
participated in meetings and teleconferences with officers of the Company,
representatives of the independent public accountants for the Company and
representatives of the Underwriters at which the contents of the Registration
Statement, 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 and made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to the
attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the Prospectus as of the date of such
opinion contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need make no statement with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus or with
respect to statements or omissions made therein in reliance upon information
furnished in writing to the Company on behalf of any Underwriter expressly for
use in the Registration Statement or the Prospectus).
In rendering such opinion, such counsel may rely, (A) as to
matters involving the application of laws other than the laws of the United
States, the corporate laws of Delaware and New York to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws of such other jurisdictions, (B) as
to matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company; provided, that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested, and (C) upon the opinions of
(i) ___________________, as patent counsel to the Company with respect to patent
matters and (ii) __________________, as Food and Drug Act ("FDA") counsel with
respect to FDA matters. The form of the opinions of the aforementioned counsels
are attached hereto as Exhibits A and B, respectively. The opinions of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and, in their opinion, the Underwriters
and they are justified in relying thereon, or in the alternative, such opinions
may be addressed directly to the Underwriters.
(e) At the Overallotment Closing Date, if any, the Underwriters
shall have received the favorable opinion of counsel to the Company, each dated
the Overallotment Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of the
Overallotment Closing Date the statements made by such firm, in their opinion
delivered on the Closing Date.
22
(f) On or prior to each of the Closing Date and the Overallotment
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and other legal opinions (including, without limitation,
legal opinions related to patent, trademark or Food and Drug matters) as they
may reasonably require and request for the purpose of enabling them to review or
pass upon the matters referred to in subsection (d) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date and the Overallotment Closing Date,
if any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or the business activities of the Company, whether or not in the
ordinary course of business, from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus; (ii) except as may be
disclosed in the Registration Statement or the Prospectus, there shall have been
no transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which could reasonably
be expected to have a material adverse effect on the Company; (iii) the Company
shall not be in material default under any provision of any instrument relating
to any outstanding indebtedness for money borrowed, except as described in the
Prospectus; (iv) no material amount of the assets of the Company shall have been
pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (v) no action, suit or proceeding, at law or in equity, shall have
been pending or to its knowledge threatened against the Company, or affecting
any of its properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding could reasonably be expected to have a material
adverse effect on the business, operations, prospects or financial condition of
the Company, except as set forth in the Registration Statement and Prospectus;
and (vi) no stop order shall have been issued under the Securities Act and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(h) At the Closing Date and the Overallotment Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Overallotment Closing Date, as
the case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are, in all material respects, true and correct, as if made on and as
of the Closing Date or the Overallotment Closing Date, as the case may be, and
the Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or satisfied
at or prior to such Closing Date or Overallotment Closing Date, as the case may
be;
(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, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(i) By the Effective Date, the Representative shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
23
(j) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Underwriters, from ▇▇▇▇▇▇ LLP:
(i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Securities Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion the financial
statements included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the Rules and Regulations;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the
Company responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention that would lead
them to believe that (A) the unaudited financial statements of the Company
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Securities Act and
the Rules and Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company included
in the Registration Statement, or (B) at a specified date not more than five (5)
business days prior to the Effective Date of the Registration Statement, there
has been any change in the capital stock or long-term debt of the Company, or
any decrease in the stockholders' equity or net current assets or net assets of
the Company as compared with amounts shown in the financial statements included
in the Registration Statement, other than as set forth in or contemplated by the
Registration Statement and changes in the ordinary course of business, or, if
there was any change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from December 31, 2002, to a specified date
not more than five (5) business days prior to the Effective Date, there was any
decrease in net revenues, net earnings or increase in net loss per common share
of the Company, in each case as compared with the corresponding period beginning
January 1, 2001 other than as set forth in or contemplated by the Registration
Statement and changes or increases in the ordinary course of business, or, if
there was any such increase, setting forth the amount of such increase;
(iv) stating that they have compared specific dollar amounts,
numbers of Securities, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(v) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may reasonably request.
24
(k) At the Closing Date and the Overallotment Closing Date, if
any, the Underwriters shall have received from ▇▇▇▇▇▇ LLP, a letter, dated as of
the Closing Date, or Overallotment Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (j) of this Section, except that the specified date referred to
shall be a date not more than five (5) business days prior to Closing Date or
the Overallotment Closing Date, as applicable, and if the Company has elected to
rely on Rule 430A of the Rules and Regulations, to the further effect that they
have carried out procedures as specified in clause (iii) of Subsection (j) of
this Section with respect to certain amounts, percentages and financial
information as specified by the Underwriters and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (iii).
(l) On the Closing Date and the Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriters for their accounts
the appropriate number of Securities against payment therefor.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Overallotment Closing Date, if any, and no proceedings for that purpose shall
have been instituted or, to the Representative's knowledge or that of the
Company, shall be contemplated.
(n) On or prior to the Effective Date, the Company shall cause its
securities counsel to deliver to the Representative an opinion of counsel
advising the Representative of the ability of the Underwriters to participate in
secondary trading of the shares of Common Stock and Warrants.
(o) On or prior to the Effective Date, the Company shall have
received notification, in form and substance satisfactory to the Representative,
from the Nasdaq Stock Market that it has withdrawn any outstanding notices
regarding delisting of the Company's Common Stock and that following the Closing
of the Offering the Company's Common Stock shall not be subject to delisting
proceedings.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the Overallotment Closing Date, as
the case may be, is not so fulfilled, the Underwriters may terminate this
Agreement or, if the Underwriters so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters, including specifically each person who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, against any and all losses, claims, damages,
reasonable expenses or liabilities, joint or several (and actions in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriters or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries arising
25
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained (i) in any Preliminary Prospectus (except that the
indemnification contained in this paragraph with respect to any Preliminary
Prospectus shall not inure to the benefit of the Underwriters or to the benefit
of any controlling person the Underwriters on account of any loss, claim,
damage, liability or expense arising from the sale of the Firm Securities by the
Underwriters to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Securities Act, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, as amended and
supplemented, and such correction would have eliminated the loss, claim, damage,
liability or expense), the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
Securities of the Company issued or issuable upon exercise of the Underwriters'
Unit Purchase Warrant; or (iii) in any application or other document or written
communication (in this Section 8 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq Stock Market, Inc. or any other securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made),
unless in any case above such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to any Underwriters by or on behalf of such Underwriters, through Underwriters'
Counsel, directly or through the Representative, expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriters, severally but not jointly, hereby indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the Registration Statement, its agents and each other person, if any,
who controls the Company within the meaning of the Securities Act, to the same
extent as the foregoing indemnity from the Company to the Underwriters but only
with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto, any post-effective amendment, new registration statement or
prospectus, or in any application made in reliance upon, and in conformity with,
written information furnished to the Company with respect to the Underwriters by
or on behalf of such Underwriters, through Underwriters' counsel or the
Representative expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any post-effective amendment, new registration statement or
prospectus, or in any application, directly related to the transactions effected
by the Underwriters in connection with this Offering; provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto, in any post-effective amendment, new registration statement
or prospectus or in any such application. The Company acknowledges that the
statements with respect to the public offering of the Firm Securities set forth
under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriters expressly for use therein and any information furnished by or on
26
behalf of the Underwriters filed in any jurisdiction in order to qualify the
Securities under state securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriters for inclusion in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any post-effective amendment and the Underwriters hereby confirm
that such statements and information are true and correct in all material
respects on the date hereof and do not omit a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall be so on each Closing Date and Overallotment Closing Date.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 8, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it or they may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, the indemnifying party may assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice that the indemnifying party or parties have elected to assume the
defense thereof, or (iii) such indemnifying party or parties shall have
reasonably concluded, based on an opinion of counsel reasonably satisfactory to
the indemnifying party or parties, a copy of which has been delivered to the
indemnifying party or parties, that there may be defenses available to it or
them that are different from or additional to those available to one or all of
the indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 8 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided however, that
such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 8, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 8 provide for indemnification in such
case, or (ii) contribution under the Securities Act may be required on the part
of any indemnified party, then each indemnifying
27
party shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (A) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the untrue or alleged untrue statement or omission or alleged
omission that resulted in such losses, claims, damages, expenses or liabilities,
as well as any other relevant equitable considerations. In any case where the
Company is the contributing party and the Underwriters are the indemnified party
the relative benefits received by the Company on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts and commissions received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue or alleged untrue statement or omission or alleged omission.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Company within the meaning of the Securities Act, each
officer of the Company who has signed the Registration Statement, and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to this subparagraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
failure to give notice. The contribution agreement set forth above shall be in
addition to any liabilities which any indemnifying party may have at common law
or otherwise.
9. FINDERS. The Company and the Representative each represents that no
person has acted as a finder in connection with the transactions contemplated
herein and the Representative and the Company agree to indemnify, on the terms
set forth in Section 8 hereof, each other with respect to any claim for a
finder's fee in connection with the Offering.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of
28
the Company submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements at the Closing Date and the Overallotment Closing
Date, if any, and such representations, warranties and agreements of the Company
and the indemnity agreements contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriters, the Company, or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
11. EFFECTIVE DATE.
This Agreement shall become effective no later than 10:00 a.m. New York
City Time, on the next full business day following the date on which the
Registration Statement becomes effective, or at such earlier time as the
Representative, in its discretion, shall release the Securities for the sale to
the public. For purposes of this Section 11, the Securities to be purchased
hereunder shall be deemed to have been so released for sale upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing such
Securities for offering or the release by the Representative for publication of
the first newspaper advertisement which is subsequently published relating to
the Securities.
12. TERMINATION; SUBSTITUTION OF UNDERWRITERS
(a) The Representative shall have the right to terminate this
Agreement if: (i) trading in securities generally on the New York Stock Exchange
or the Nasdaq National Market or in the over-the-counter market, or trading in
any securities of the Company on any 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 of the
United States; (iii) the United States shall have become engaged in hostilities,
there shall have been a significant escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States; (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions of (or the effect
of international conditions on the financial markets in the United States shall
be such) as to make it, in the responsible judgment of the Representative,
impracticable or inadvisable to proceed with the public offering or delivery of
the Securities on the terms and in the manner contemplated in the Prospectus;
(v) any materially adverse change shall have occurred in the reasonable
judgement of the Representative, in the financial condition, business,
prospects, or obligations of the Company; (vi) the Company cannot expeditiously
proceed with the Offering, including without limitation, as a result of actions
taken or not taken by the Company; or (vii) any representations, warranties or
covenants of the Company are not materially correct or with which the Company
cannot comply.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 12 and 13 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 6(b) shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
(c) If any Underwriter or Underwriters shall default in its or
their obligations to purchase Units hereunder and the aggregate numbers of Units
which such defaulting Underwriter or Underwriters agreed but failed to purchase
does not exceed twenty percent (20%) of the total number of Units underwritten,
the other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Units which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters shall so default and the aggregate number of Units with respect to
which such default or defaults occur is more than twenty percent (20%)
29
of the total number of Units underwritten and arrangements satisfactory to the
Underwriters and the Company for the purchase of such Units by other persons are
not made within forty-eight (48) hours after such default, this Agreement shall
terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the Units of a defaulting Underwriter
or Underwriters as provided in this Section 12, (i) the Company shall have the
right to postpone the Closing Date for a period of not more than five (5) full
business days in order that the Company may effect whatever changes may thereby
be made necessary in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Units to be
purchased by the remaining Underwriters or substituted Underwriters shall be
taken as the basis of their underwriting obligation for all purposes of this
Agreement. Nothing herein contained shall relieve any defaulting Underwriter of
its liability to the Company or the other Underwriters for damages occasioned by
its default hereunder. Any termination of this Agreement pursuant to this
Section 12 shall be without liability on the part of any non-defaulting
Underwriters or the Company, except for expenses to be paid or reimbursed
pursuant to Section 6 and except for the provisions of Section 8.
13. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or the Overallotment Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Overallotment Securities to be purchased on the Overallotment Closing Date,
the Underwriters may at the Underwriters' option, by notice from the
Underwriters to the Company, terminate the Underwriters' obligations to purchase
Securities from the Company on such date) without any liability on the part of
any non-defaulting party other than pursuant to Section 6 and Section 8 hereof.
No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
14. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Roan/▇▇▇▇▇▇ Associates, L.P., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Notices to the Company shall be directed to the Company at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Mr. ▇.▇. ▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLC, Four Stamford Plaza, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the several Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
30
16. GOVERNING LAW/CONSTRUCTION/JURISDICTION.
(a) This Agreement shall be construed in accordance with the laws
of the State of Delaware, without giving effect to conflict of laws.
(b) The Company and the Underwriters (a) agree that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York, (b)
waive any objection which they may have now or hereafter to the venue of any
such suit, action or proceeding, and (c) irrevocably consent to the jurisdiction
of the New York State Supreme Court, County of New York and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Company and the Underwriters further agree to accept and
acknowledge service of any and all process which may be served in any suit,
action or proceeding in the New York State Supreme Court or the United States
District Court for the Southern District of New York, and agree that service of
process upon them mailed by certified mail to their respective addresses shall
be deemed in every respect effective service of process upon them in any such
suit, action or proceeding. In the event of litigation between the parties
arising hereunder, the prevailing party shall be entitled to costs and
reasonable attorney's fees.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
18. WAIVER. The waiver by either party of the breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
19. ASSIGNMENT. Neither party hereto may transfer or assign this
Agreement without prior written consent of the other party.
20. TITLES AND CAPTIONS. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
21. PRONOUNS AND PLURALS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
22. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
[remainder of page left blank- signature page appears next]
31
If the foregoing correctly sets forth our understanding, please so
indicate in the space provided below for that purpose, whereupon this letter and
your acceptance shall constitute a binding agreement among us.
Very truly yours,
DELCATH SYSTEMS, INC.
By:________________________________
Name: ▇.▇. ▇▇▇▇
Title: Chief Executive Officer
Confirmed and accepted as of the date first above written
ROAN/▇▇▇▇▇▇ ASSOCIATES, L.P.,
as Representative of the Underwriters
BY: ▇▇▇▇▇▇/▇▇▇▇▇▇▇ SECURITIES CORP.,
General Partner
By:_____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
32
SCHEDULE I
Underwriters
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Roan/▇▇▇▇▇▇ Associates, L.P.
SCHEDULE II
Warrant Agent
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American Stock Transfer & Trust Company