Number of Shares] ZARS Pharma, Inc. Common Stock UNDERWRITING AGREEMENT
Exhibit 1.1
[Number of Shares]
Common Stock
[Date]
▇▇▇▇▇ and Company, LLC
CIBC World Markets
As Representatives of the several Underwriters
c/o Cowen and Company, LLC
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
CIBC World Markets
As Representatives of the several Underwriters
c/o Cowen and Company, LLC
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Introductory. ZARS Pharma, Inc., a Delaware corporation (the “Company”), proposes to
sell, pursuant to the terms of this Agreement, to the several underwriters named in Schedule A
hereto (the “Underwriters,” or, each, an
“Underwriter”), an aggregate of [______] shares of common
stock, $0.01 par value (the “Common Stock”) of the Company.
The aggregate of [______] shares so
proposed to be sold is hereinafter referred to as the “Firm Stock”. The Company also proposes to
sell to the Underwriters, upon the terms and conditions set forth in Section 3 hereof, up to an
additional [______] shares of Common Stock (the “Optional Stock”). The Firm Stock and the Optional
Stock are hereinafter collectively referred to as the “Stock.” ▇▇▇▇▇ and Company, LLC (“Cowen”)
and CIBC World Markets are acting as representatives of the several Underwriters and in such
capacity are hereinafter referred to as the “Representatives.”
2. Representations and Warranties of the Company
The Company represents and warrants to the several Underwriters, as of the date hereof and as
of the Closing Date (as defined below), and agrees with the several Underwriters, that:
(a) A
registration statement of the Company on Form S-1 (File
No. 333-143633 including all
pre-effective amendments thereto, the “Initial Registration Statement”) in respect of the
Stock has been filed with the Securities and Exchange Commission (the “Commission”). The
Initial Registration Statement and any post-effective amendment thereto, each in the form
heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form and meet the
requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the rules
and regulations of the Commission thereunder (the “Rules and Regulations”). Other than (i)
a registration statement, if any, increasing the size of the offering filed pursuant to Rule
462(b) under the Securities Act and the Rules and Regulations (a “Rule 462(b) Registration
Statement”) and (ii) the Prospectus (as defined below) contemplated by this Agreement to be
filed pursuant to Rule 424(b) of the Rules and Regulations in accordance with Section 4(a)
hereof and (iii) any Issuer Free Writing Prospectus (as defined below), no other document
with respect to the offer and sale of the Stock has heretofore been filed with the
Commission. No stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose or pursuant to Section 8A of the
Securities Act has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the Rules and Regulations is hereinafter called a “Preliminary
Prospectus”). The various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, in each case including all exhibits thereto and including
(i) the information contained in the Prospectus filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations and deemed by virtue of Rules 430A under the Securities
Act to be part of the Initial
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Registration Statement at the time it became effective and (ii) the documents incorporated
by reference in the Rule 462(b) Registration Statement at the time the Rule 462(b)
Registration Statement became effective, are hereinafter collectively called the
“Registration Statements.” The final prospectus, in the form filed pursuant to and within
the time limits described in Rule 424(b) under the Rules and Regulations, is hereinafter
called the “Prospectus.”
(b) As of the Applicable Time (as defined below) and as of the Closing Date or the Option
Closing Date (as defined below), as the case may be, neither (i) the General Use Free
Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time, the
Pricing Prospectus (as defined below) and the information included on Schedule B hereto, all
considered together (collectively, the “General Disclosure Package”), (ii) any individual
Limited Use Free Writing Prospectus (as defined below), nor (iii) the bona fide electronic
road show (as defined in Rule 433(h)(5) of the Rules and Regulations that has been made
available without restriction to any person), when considered together with the General
Disclosure Package, included or will include any untrue statement of a material fact or
omitted or will 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 the Company makes no representations or warranties as to information
contained in or omitted from the Pricing Prospectus, in reliance upon, and in conformity
with, written information furnished to the Company through the Representatives by or on
behalf of any Underwriter specifically for inclusion therein, which information the parties
hereto agree is limited to the Underwriter’s Information as defined in Section 18. As used
in this paragraph (b) and elsewhere in this Agreement:
“Applicable Time” means 12:00 Noon, New York time, on the date of this Agreement or such other
time as agreed to by the Company and the Representatives.
“Pricing Prospectus” means the Preliminary Prospectus relating to the Stock that is included
in the Registration Statement immediately prior to the Applicable Time.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 under the Securities Act relating to the Stock in the form filed or required to be filed
with the Commission or, if not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g) under the Securities Act.
“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is
identified on Schedule B to this Agreement.
“Limited Use Free Writing Prospectuses” means any Issuer Free Writing Prospectus that is not a
General Use Free Writing Prospectus.
(c) No order preventing or suspending the use of any Preliminary Prospectus, any Issuer Free
Writing Prospectus or the Prospectus relating to the proposed offering of the Stock has been
issued by the Commission, and no proceeding for that purpose or pursuant to Section 8A of
the Securities Act has been instituted or threatened by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations, and did not contain an
untrue statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from any Preliminary
Prospectus, in reliance upon, and in conformity with, written information furnished to the
Company through the Representatives by or on behalf of any Underwriter specifically for
inclusion therein, which information the parties hereto agree is limited to the
Underwriter’s Information as defined in Section 18.
(d) At the respective times the Registration Statements and any amendments thereto became or
become effective and at the Closing Date, each Registration Statement and any amendments
thereto conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not 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 and
any amendments or supplements thereto, at the time the Prospectus or any amendment
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or supplement thereto was issued and at the Closing Date, conformed and will conform in all
material respects to the requirements of the Securities Act and the Rules and Regulations
and did not and 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 light of the
circumstances under which they were made, not misleading; provided, however, that the
foregoing representations and warranties in this paragraph (d) shall not apply to
information contained in or omitted from the Registration Statements or the Prospectus, or
any amendment or supplement thereto, in reliance upon, and in conformity with, written
information furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriter’s Information (as defined in Section 18). The Prospectus
contains or will contain all required information under Rule 430A.
(e) Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times
through the completion of the public offer and sale of the Stock or until any earlier date
that the Company notified or notifies the Representatives as described in Section 4(f), did
not, does not and will not include any information that conflicted, conflicts or will
conflict with the information contained in the Registration Statement, Pricing Prospectus or
the Prospectus, or included or would include an untrue statement of a material fact or
omitted or would omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances prevailing at the
subsequent time, not misleading.
(f) The Company has not, directly or indirectly, distributed and will not distribute any
offering material in connection with the offering and sale of the Stock other than any
Preliminary Prospectus, the Prospectus and other materials, if any, permitted under the
Securities Act and consistent with Section 4(b) below. The Company will file with the
Commission all Issuer Free Writing Prospectuses in the time and manner required under Rules
163(b)(2) and 433(d) of the Securities Act.
(g) At the time of filing the Initial Registration Statement, any 462(b) Registration
Statement and any post-effective amendments thereto, and at the date hereof, the Company was
not, and the Company currently is not, an “ineligible issuer,” as defined in Rule 405 of the
Rules and Regulations.
(h) The Company does not have any subsidiaries, as defined in Section 16, other than Zars
(UK) Limited, the Company’s 100% owned subsidiary in the United Kingdom (the “Company
Subsidiary”). Other than the Company Subsidiary, the Company does not own or control,
directly or indirectly, any interest in any corporation, partnership, limited liability
partnership, limited liability corporation, association or other entity. The Company and the
Company Subsidiary have been duly organized and are validly existing as corporations or
other legal entities in good standing (or the foreign equivalent thereof) under the laws of
their respective jurisdictions of organization. The Company and the Company Subsidiary are
duly qualified to do business and are in good standing as foreign corporations or other
legal entities in each jurisdiction in which their respective ownership or lease of property
or the conduct of their respective businesses requires such qualification and have all power
and authority (corporate or other) necessary to own or hold their respective properties and
to conduct the businesses in which they are engaged, except where the failure to so qualify,
be in good standing or have such power or authority would not (i) have, singularly or in
the aggregate, a material adverse effect on the condition (financial or otherwise), results
of operations, assets, business or prospects of the Company and the Company Subsidiary taken
as a whole, or (ii) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or to consummate any transactions contemplated by this
Agreement, the General Disclosure Package or the Prospectus (any such effect as described in
clauses (i) or (ii), a “Material Adverse Effect”).
(i) This Agreement has been duly authorized, executed and delivered by the Company.
(j) The Stock to be issued and sold by the Company to the Underwriters hereunder has been
duly and validly authorized and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued, fully paid and nonassessable and free of
any preemptive or similar rights and will conform to the description thereof contained in
the General Disclosure Package and the Prospectus.
(k) The Company has an authorized capitalization as set forth under the heading
“Capitalization” in the Pricing Prospectus, and all of the issued shares of capital stock of
the Company, have been duly and validly
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authorized and issued, are fully paid and non-assessable, have been issued in compliance
with federal and state securities laws, and conform to the description thereof contained in
the General Disclosure Package and the Prospectus. All of the Company’s options, warrants
and other rights to purchase or exchange any securities for shares of the Company’s capital
stock have been duly authorized and validly issued and were issued in compliance with
federal and state securities laws; the Stock to be issued and sold by the Company under the
Agreement has been duly authorized and, when issued, delivered and paid for in accordance
with the terms of the Agreement, will have been validly issued and will be fully paid and
non-assessable. None of the outstanding shares of Common Stock was issued in violation of
any preemptive rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding shares of
capital stock, options, warrants, preemptive rights, rights of first refusal or other rights
to purchase, or equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or the Company Subsidiary other than those described
above or accurately described in the General Disclosure Package. The description of the
Company’s stock option, stock bonus and other stock plans or arrangements, and the options
or other rights granted thereunder, as described in the General Disclosure Package and the
Prospectus, accurately and fairly present the information required to be shown with respect
to such plans, arrangements, options and rights.
(l) All the outstanding shares of capital stock (if any) of the Company Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable and, except to the
extent set forth in the General Disclosure Package or the Prospectus, are owned by the
Company directly or indirectly through one or more wholly-owned subsidiaries, free and clear
of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party.
(m) The execution, delivery and performance of this Agreement by the Company, the issue and
sale of the Stock by the Company, and the consummation of the transactions contemplated
hereby will not (with or without notice or lapse of time or both) conflict with or result in
a breach or violation of any of the terms or provisions of, constitute a default or a Debt
Repayment Triggering Event (as defined below) under, give rise to any right of termination
or other right or the cancellation or acceleration of any right or obligation or loss of a
benefit under, or give rise to the creation or imposition of any lien, encumbrance, security
interest, claim or charge upon any property or assets of the Company or any subsidiary
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or the Company Subsidiary is a party or by which the Company
or the Company Subsidiary is bound or to which any of the property or assets of the Company
or the Company Subsidiary is subject, nor will such actions result in any violation of the
provisions of the charter or by-laws (or analogous governing instruments, as applicable) of
the Company or the Company Subsidiary or any law, statute, rule, regulation, judgment, order
or decree of any court or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or the Company Subsidiary or any of their properties or
assets. A “Debt Repayment Triggering Event” means any event or condition that gives, or
with the giving of notice or lapse of time would give the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such indebtedness by
the Company of the Company Subsidiary.
(n) Except for the registration of the Stock under the Securities Act, the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and applicable state securities laws,
the National Association of Securities Dealers, Inc. and the NASDAQ Global Market in
connection with the purchase and distribution of the Stock by the Underwriters and the
listing of the Stock on the NASDAQ Global Market, no consent, approval, authorization or
order of, or filing, qualification or registration (each an “Authorization”) with, any
court, governmental or non-governmental agency or body, foreign or domestic, which has not
been made, obtained or taken and is not in full force and effect, is required for the
execution, delivery and performance of this Agreement by the Company, the offer or sale of
the Stock or the consummation of the transactions contemplated hereby; and no event has
occurred that allows or results in, or after notice or lapse of time or both would allow or
result in, revocation, suspension, termination or invalidation of any such Authorization or
any other impairment of the rights of the holder or maker of any such Authorization. All
corporate approvals (including those of stockholders) necessary for the Company to
consummate the transactions contemplated by this Agreement have been obtained and are in
effect.
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(o) Ernst & Young LLP, who have certified certain financial statements included in the
Registration Statements, the General Disclosure Package and the Prospectus, and have audited
the Company’s internal control over financial reporting and management’s assessment thereof,
is an independent registered public accounting firm as required by the Securities Act and
the Rules and Regulations and the Public Company Accounting Oversight Board (United States)
(the “PCAOB”).
(p) The financial statements, together with the related notes, included in the General
Disclosure Package, the Prospectus and in each Registration Statement fairly present the
financial position and the results of operations and changes in financial position of the
Company and the Company Subsidiary at the respective dates or for the respective periods
therein specified. Such statements and related notes have been prepared in accordance with
the generally accepted accounting principles in the United States (“GAAP”) applied on a
consistent basis throughout the periods involved except as may be set forth in the related
notes included in the General Disclosure Package. The financial statements, together with
the related notes, included in the General Disclosure Package and the Prospectus comply in
all material respects with the Securities Act and the Rules and Regulations thereunder. No
other financial statements or supporting schedules or exhibits are required by the
Securities Act or the Rules and Regulations thereunder to be included in the Registration
Statements, the General Disclosure Package, or the Prospectus. The summary and selected
financial data included in the General Disclosure Package, the Prospectus, and each
Registration Statement fairly present the information shown therein as at the respective
dates and for the respective periods specified and are derived from the consolidated
financial statements set forth in the Registration Statement, the Pricing Prospectus and the
Prospectus and other financial information. All information contained in the Registration
Statement, the General Disclosure Package and the Prospectus regarding “non-GAAP financial
measures” (as defined in Regulation G) complies with Regulation G and Item 10 of Regulations
S-K, to the extent applicable.
(q) Neither the Company nor the Company Subsidiary has sustained, since the date of the
latest audited financial statements included in the General Disclosure Package, any material
loss or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the General
Disclosure Package; and, since such date, there has not been any change in the capital stock
or long-term debt of the Company or the Company Subsidiary, or any material adverse changes,
or any development involving a prospective material adverse change, in or affecting the
business, assets, general affairs, management, financial position, prospects, stockholders’
equity or results of operations of the Company and the Company Subsidiary taken as a whole,
otherwise than as set forth or contemplated in the General Disclosure Package.
(r) Except as set forth in the General Disclosure Package, there is no legal or governmental
proceeding to which the Company or the Company Subsidiary is a party or of which any
property or assets of the Company or the Company Subsidiary is the subject, including any
proceeding before the United States Food and Drug Administration of the U.S. Department of
Health and Human Services (“FDA”) or comparable federal, state, local or foreign
governmental bodies (it being understood that the interaction between the Company and the
FDA and such comparable governmental bodies relating to the clinical development and product
approval process shall not be deemed proceedings for purposes of this representation), which
is required to be described in the Registration Statement, the General Disclosure Package or
the Prospectus and is not described therein, or which, singularly or in the aggregate, if
determined adversely to the Company or the Company Subsidiary, could reasonably be expected
to have a Material Adverse Effect; and to the best of the Company’s knowledge after
reasonable investigation and due diligence inquiry (“Knowledge”), no such proceedings are
threatened or contemplated by governmental authorities or threatened by others. The Company
is, and at all times has been, in material compliance with all applicable federal, state,
local and foreign laws, regulations, orders and decrees governing its business as prescribed
by the FDA, or any other federal, state or foreign agencies or bodies engaged in the
regulation of pharmaceuticals or biohazardous substances or materials, except where
noncompliance would not, singly or in the aggregate, have a Material Adverse Effect. All
preclinical and clinical studies conducted by or on behalf of the Company to support
approval for commercialization of the Company’s products have been conducted by the Company,
or to the Company’s Knowledge by third parties, in compliance with all applicable federal,
state or foreign laws, rules, orders and regulations, except for such failure or failures to
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be in compliance as could not reasonably be expected to have, singly or in the aggregate, a
Material Adverse Effect.
(s) The Company is, and at all times has been, in material compliance with all relevant
federal and state health care laws applicable to the Company or its business, including the
federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31
U.S.C. §§ 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the
Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), the
exclusion laws, SSA § 1128 (42 U.S.C. 1320a-7) and the regulations promulgated pursuant to
such laws and regulations, relating to the regulation of the business of the Company
(collectively, the “Health Care Laws”).
(t) Neither the Company nor the Company Subsidiary (i) is in violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) is in default in any
respect, and no event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject including, without limitation, those administered by
the FDA or by any foreign, federal, state or local governmental or regulatory authority
performing functions similar to those performed by the FDA) or (iii) is in violation in any
respect of any law, ordinance, governmental rule, regulation or court order, decree or
judgment to which it or its property or assets may be subject except, in the case of clauses
(ii) and (iii) of this paragraph (t), for any violations or defaults which, singularly or in
the aggregate, would not have a Material Adverse Effect.
(u) The Company and the Company Subsidiary possess all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings with, the
appropriate local, state, federal or foreign regulatory agencies or bodies (including,
without limitation, those administered by the FDA, by any foreign, federal, state or local
governmental or regulatory authority performing functions similar to those performed by the
FDA, or any other governmental entity engaged in the regulation of the Company products)
which are necessary or desirable for the ownership of their respective properties or the
conduct of their respective businesses as described in the General Disclosure Package and
the Prospectus (collectively, the “Governmental Permits”) except where any failures to
possess or make the same, singularly or in the aggregate, would not have a Material Adverse
Effect. The Company and the Company Subsidiary are in compliance with all such Governmental
Permits; all such Governmental Permits are valid and in full force and effect, except where
the validity or failure to be in full force and effect would not, singularly or in the
aggregate, have a Material Adverse Effect. All such Governmental Permits are free and clear
of any restriction or condition that are in addition to, or materially different from those
normally applicable to similar licenses, certificates, authorizations and permits. Neither
the Company nor any subsidiary has received notification of any revocation, modification,
suspension, termination or invalidation (or proceedings related thereto) of any such
Governmental Permit and to the Knowledge of the Company, no event has occurred that allows
or results in, or after notice or lapse of time or both would allow or result in: (i) any
violation of law or any permit or any failure to materially comply with any law or any term
or requirement of any Governmental Permit, or (ii) revocation, withdrawal, modification,
suspension, limitation, termination or invalidation (or proceedings related thereto ) of any
such Governmental Permit and the Company has no reason to believe that any such Governmental
Permit will not be renewed. The Company and the Company Subsidiary are members in good
standing of each Federal, state or foreign exchange, board of trade, clearing house or
association and self-regulatory or similar organization, in each case as necessary to
conduct their respective businesses as described in the General Disclosure Package and the
Prospectus.
(v) The operations of the Company and the Company Subsidiary, to their Knowledge, any third
party acting on their behalf, including, without limitation, the manufacture, import,
export, testing, development, processing, packaging, labeling, storage, marketing, and
distribution of all Company products, are and at all times have been in material compliance
with all applicable laws, permits, and orders including, without limitation, those
administered by the FDA. To the Knowledge of the Company and the Company Subsidiary, there
is no actual or threatened action by the FDA or any other governmental entity which has
jurisdiction over the operations, properties, products or processes of the Company or the
Company Subsidiary, or, to the Knowledge of the Company and the Company Subsidiary, any
third parties acting on
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their behalf. Neither the Company nor the Company Subsidiary has received notice of any
pending or threatened claim and has no Knowledge that any governmental entity is considering
such action or of any facts or circumstances that are likely to give rise to such action.
(w) Neither the Company nor the Company Subsidiary has received any FDA Form 483 notice of
inspectional observations, Warning Letters, Untitled Letters or similar correspondence or
notice from the FDA, or other governmental entity alleging or asserting noncompliance with
any applicable laws or permits, and to the Knowledge of the Company and the Company
Subsidiary, the FDA nor any governmental entity is considering such action.
(x) All studies, tests and preclinical and clinical trials being conducted by or on behalf
of the Company and the Company Subsidiary and that have been or will be submitted to
regulatory authorities, including the FDA, in connection with any permit (the “Company Study
and Trials”), are being or have been conducted in compliance in all material respects with
experimental protocols, procedures and controls pursuant to accepted professional scientific
standards and applicable local, state, federal and foreign laws, rules and regulations,
including the applicable requirements of Good Laboratory Practices or Good Clinical
Practices and the Federal Food, Drug, and Cosmetic Act and its implementing regulations,
including 21 CFR Parts 50, 54, 56, 58, and 312. The descriptions of the results of the
Company Studies and Trials are contained in the General Disclosure Package and Prospectus,
and are accurate in all material respects. Neither the Company nor the Company Subsidiary
has received any notices, correspondence, or other communications from the FDA or any
foreign, state or local governmental body exercising comparable authority requiring the
termination or suspension of any clinical trials conducted by, or on behalf of, the Company
or the Company Subsidiary or in which the Company or the Company Subsidiary has
participated, and to the Knowledge of the Company or the Company Subsidiary neither the FDA
nor any other governmental entity is considering such action.
(y) The manufacture of Company or Company Subsidiary products by, or on behalf of, the
Company and the Company Subsidiary are being conducted in compliance in all material
respects with all laws including FDA’s current Good Manufacturing Practice regulations at 21
CFR Part 210-211.
(z) Neither the Company nor the Company Subsidiary is the subject of any pending or, to the
Knowledge of the Company or the Company Subsidiary, threatened investigation by the FDA
pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities” Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any
amendments thereto. Neither the Company nor the Company subsidiary has committed any act,
made any statement, or failed to make any statement that would provide a basis for the FDA
to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery
and Illegal Gratuities” and any amendments thereto. Neither the Company nor the Company
Subsidiary, or any of their respective officers, employees or agents, has been convicted of
any crime or engaged in any conduct that could result in debarment or exclusion (i) under 21
U.S.C. Section 335a, or (ii) any similar state law. To the Knowledge of the Company and the
Company Subsidiary, no debarment or exclusionary claims, actions, proceedings or
investigations are pending or threatened against the Company or the Company Subsidiary, or
any of their respective officers, employees or agents.
(aa) Neither the Company nor the Company Subsidiary is or, after giving effect to the
offering of the Stock and the application of the proceeds thereof as described in the
General Disclosure Package and the Prospectus, will become an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations
of the Commission thereunder.
(bb) Neither the Company nor any of its officers, directors or affiliates has taken or will
take, directly or indirectly, any action designed or intended to stabilize or manipulate the
price of any security of the Company, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in, stabilization or manipulation of the
price of any security of the Company.
(cc) The Company and the Company Subsidiary own or possess the valid right to use all (i)
valid and enforceable patents, patent applications, trademarks, trademark registrations,
service marks, service ▇▇▇▇ registrations, Internet domain name registrations, copyrights,
copyright registrations, licenses, trade secret rights (“Intellectual Property Rights”) and
(ii) inventions, software, works of authorships, trade marks,
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service marks, trade names, databases, formulae, know how, Internet domain names and other
intellectual property (including trade secrets and other unpatented and/or unpatentable
proprietary confidential information, systems, or procedures) (collectively, “Intellectual
Property Assets”) necessary to conduct their respective businesses as currently conducted,
and as proposed to be conducted and described in the General Disclosure Package and the
Prospectus. There are no third parties who have or, to the Company’s Knowledge, will be
able to establish rights to any Intellectual Property Rights, except for the ownership
rights of the owners of Intellectual Property Rights that is licensed to the Company. To
the Company’s Knowledge, there is no infringement by third parties of any Intellectual
Property Rights. The Company and the Company Subsidiary have not received any opinion from
their legal counsel concluding that any activities of their respective businesses infringe,
misappropriate, or otherwise violate, valid and enforceable Intellectual Property Rights of
any other person, and have not received written notice of any challenge, which is to their
Knowledge still pending, by any other person to the rights of the Company and the Company
Subsidiary with respect to any Intellectual Property Rights or Intellectual Property Assets
owned or used by the Company or the Company Subsidiary. To the Knowledge of the Company,
the Company and the Company Subsidiary’ respective businesses as now conducted do not give
rise to any infringement of, any misappropriation of, or other violation of, any valid and
enforceable Intellectual Property Rights of any other person. All licenses for the use of
the Intellectual Property Rights described in the General Disclosure Package and the
Prospectus are valid, binding upon, and enforceable by or against the parties thereto in
accordance to its terms. The Company has complied in all material respects with, and is not
in breach nor has received any asserted or threatened claim of breach of any Intellectual
Property license, and the Company has no knowledge of any breach or anticipated breach by
any other person to any Intellectual Property license. Except as described in the General
Disclosure Package, no claim has been made against the Company alleging the infringement by
the Company of any patent, trademark, service ▇▇▇▇, trade name, copyright, trade secret,
license in or other intellectual property right or franchise right of any person. The
Company has taken all reasonable steps to protect, maintain and safeguard its Intellectual
Property Rights, including the execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this Agreement will not
result in the loss or impairment of or payment of any additional amounts with respect to,
nor require the consent of any other person in respect of, the Company’s right to own, use,
or hold for use any of the Intellectual Property Rights as owned, used or held for use in
the conduct of the business as currently conducted. The Company has taken all necessary
actions to obtain ownership of all works of authorship and inventions made by its employees,
consultants and contractors during the time they were employed by or under contract with the
Company and which relate to the Company’s business. All founders and key employees have
signed confidentiality and invention assignment agreements with the Company. To the
Company’s Knowledge, no employee of the Company is in or has ever been in violation of any
material term of any employment contract, patent disclosure agreement, invention assignment
agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or
any restrictive covenant to or with a former employer where the basis of such violation
relates to such employee’s employment with the Company, or actions undertaken by the
employee while employed with the Company. To the Company’s Knowledge (i) there is no patent
or patent application that contains claims that interfere with the issued or pending claims
of any of the Intellectual Property Rights; (ii) there is no material prior art that may
render unpatentable any patent or patent application owned by the Company that has not been
disclosed to the U.S. Patent and Trademark Office or any similar government agency in any
other jurisdiction; and (iii) all persons substantially involved in prosecution of any
patent or patent application before the U.S. Patent and Trademark Office or any similar
government agency in any other jurisdiction have upheld the duty of candor required by 37
C.F.R. §1.56 or similar authority in any other jurisdiction and have not intentionally
omitted or misrepresented any information material to patentability. There is no pending
or, to the Company’s Knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any Intellectual Property Rights, and the Company is
unaware of any facts which could form a reasonable basis for any such claim.
(dd) The Company and the Company Subsidiary have good and marketable title in fee simple to,
or have valid rights to lease or otherwise use, all items of real or personal property which
are material to the business of the Company and the Company Subsidiary taken as a whole, in
each case free and clear of all liens, encumbrances, security interests, claims and defects
that do not, singularly or in the aggregate, materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property by the
Company or the Company Subsidiary; and all of the leases and subleases material
9
to the business of the Company and the Company Subsidiary, considered as one enterprise, and
under which the Company or the Company Subsidiary holds properties described in the General
Disclosure Package and the Prospectus, are in full force and effect, and neither the Company
nor any subsidiary has any notice of any material claim of any sort that has been asserted
by anyone adverse to the rights of the Company or any subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased premises under any such
lease or sublease.
(ee) There is (A) no significant unfair labor practice complaint pending against the
Company, or the Company Subsidiary, nor to the Knowledge of the Company, threatened against
it or the Company Subsidiary, before the National Labor Relations Board, any state or local
labor relation board or any foreign labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Company or the Company Subsidiary, or, to the Knowledge
of the Company, threatened against it and (B) no labor disturbance by the employees of the
Company or the Company Subsidiary exists or, to the Company’s Knowledge, is imminent, and
the Company is not aware of any existing or imminent labor disturbance by the employees of
any of its or its subsidiaries principal suppliers, manufacturers, customers or contractors,
that could reasonably be expected, singularly or in the aggregate, to have a Material
Adverse Effect. The Company is not aware that any key employee or significant group of
employees of the Company or any subsidiary plans to terminate employment with the Company or
any such subsidiary.
(ff) No “prohibited transaction” (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986,
as amended from time to time (the “Code”)) or “accumulated funding deficiency” (as defined
in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other
than events with respect to which the thirty (30)-day notice requirement under Section 4043
of ERISA has been waived) has occurred or could reasonably be expected to occur with respect
to any employee benefit plan of the Company or the Company Subsidiary which could,
singularly or in the aggregate, have a Material Adverse Effect. Each employee benefit plan
of the Company or the Company Subsidiary is in compliance in all material respects with
applicable law, including ERISA and the Code. The Company and the Company Subsidiary have
not incurred and could not reasonably be expected to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from, any pension plan (as defined in
ERISA). Each pension plan for which the Company or the Company Subsidiary would have any
liability that is intended to be qualified under Section 401(a) of the Code is so qualified,
and nothing has occurred, whether by action or by failure to act, which could, singularly or
in the aggregate, cause the loss of such qualification.
(gg) The Company and the Company Subsidiary are in compliance with all foreign, federal,
state and local rules, laws and regulations relating to the use, treatment, storage and
disposal of hazardous or toxic substances or waste and protection of health and safety or
the environment which are applicable to their businesses (“Environmental Laws”). There has
been no storage, generation, transportation, handling, treatment, disposal, discharge,
emission, or other release of any kind of toxic or other wastes or other hazardous
substances by, due to, or caused by the Company or the Company Subsidiary (or, to the
Company’s Knowledge, any other entity for whose acts or omissions the Company or the Company
Subsidiary is or may otherwise be liable) upon any of the property now or previously owned
or leased by the Company or the Company Subsidiary, or upon any other property, in violation
of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which
would, under any law, statute, ordinance, rule (including rule of common law), regulation,
order, judgment, decree or permit, give rise to any liability; and there has been no
disposal, discharge, emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company or the Company Subsidiary has Knowledge. In
the ordinary course of business, the Company and the Company Subsidiary conduct periodic
reviews of the effect of Environmental Laws on their business and assets, in the course of
which they identify and evaluate associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or Governmental Permits issued thereunder,
any related constraints on operating activities and any potential liabilities to third
10
parties). On the basis of such reviews, the Company has reasonably concluded that such
associated costs and liabilities would not have, singularly or in the aggregate, a Material
Adverse Effect.
(hh) The Company and the Company Subsidiary each (i) have timely filed all necessary
federal, state, local and foreign tax returns, and all such returns were true, complete and
correct, (ii) have paid all federal, state, local and foreign taxes, assessments,
governmental or other charges due and payable for which it is liable, including, without
limitation, all sales and use taxes and all taxes which the Company or the Company
Subsidiary is obligated to withhold from amounts owing to employees, creditors and third
parties, and (iii) do not have any tax deficiency or claims outstanding or assessed or, to
its Knowledge, proposed against any of them, except those, in each of the cases described in
clauses (i), (ii) and (iii) of this paragraph (hh), that would not, singularly or in the
aggregate, have a Material Adverse Effect. The Company and the Company Subsidiary have not
engaged in any transaction which is a corporate tax shelter or which could be characterized
as such by the Internal Revenue Service or any other taxing authority. The accruals and
reserves on the books and records of the Company and the Company Subsidiary in respect of
tax liabilities for any taxable period not yet finally determined are adequate to meet any
assessments and related liabilities for any such period, and since December 31, 2006 the
Company and the Company Subsidiary have not incurred any liability for taxes other than in
the ordinary course.
(ii) The Company and the Company Subsidiary carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries. Neither the Company nor the Company
Subsidiary has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that would not have
a Material Adverse Effect. All policies of insurance owned by the Company or the Company
Subsidiary are, to the Company’s Knowledge, in full force and effect and the Company and the
Company Subsidiary are in compliance with the terms of such policies. Neither the Company
nor the Company Subsidiary has received written notice from any insurer, agent of such
insurer or the broker of the Company or the Company Subsidiary that any material capital
improvements or any other material expenditures (other than premium payments) are required
or necessary to be made in order to continue such insurance. None of the Company or the
Company Subsidiary insures risk of loss through any captive insurance, risk retention group,
reciprocal group or by means of any fund or pool of assets specifically set aside for
contingent liabilities other than as described in the General Disclosure Package.
(jj) The Company and the Company Subsidiary maintains a system of internal control over
financial reporting (as such term is defined in Rule 13a-15 of the General Rules and
Regulations under the Exchange Act (the “Exchange Act Rules”)) that complies with the
requirements of the Exchange Act and has been designed by the Company’s principal executive
officer and principal financial officer, or under their supervision, to provide reasonable
assurances that (i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP 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. The Company’s internal control over financial reporting is effective. Except
as described in the General Disclosure Package, since the end of the Company’s most recent
audited fiscal year, there has been (A) no material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and (B) no change in the
Company’s internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over financial
reporting. The Company’s internal control over financial reporting is, or upon consummation
of the offering of the Stock will be, overseen by the Audit Committee of the Board of
Directors of the Company (the “Audit Committee”) in accordance with the Exchange Act Rules.
The Company has not publicly disclosed or reported to the Audit Committee or to the Board,
and within the next 90 days the Company does not reasonably expect to publicly disclose or
report to the Audit Committee or the Board, a significant deficiency, material weakness,
change in internal control over financial reporting or fraud involving management or other
employees who have a significant role in the internal control over financial reporting (each
an “Internal Control Event”), any violation of, or failure
11
to comply with, the U.S. Securities Laws, or any matter which if determined adversely, would
have a Material Adverse Effect.
(kk) A member of the Audit Committee has confirmed to the Chief Executive Officer, Chief
Financial Officer or General Counsel that, except as set forth in the General Disclosure
Package, the Audit Committee is not reviewing or investigating, and neither the Company’s
independent auditors nor its internal auditors have recommended that the Audit Committee
review or investigate, (i) adding to, deleting, changing the application of or changing the
Company’s disclosure with respect to, any of the Company’s material accounting policies,
(ii) any matter which could result in a restatement of the Company’s financial statements
for any annual or interim period during the current or prior three fiscal years, or (iii)
any Internal Control Event.
(ll) The Company and the Company Subsidiary have made and keep books, records and accounts,
which, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company and the Company Subsidiary in all material respects.
(mm) The Company maintains disclosure controls and procedures (as such is defined in Rule
13a-15 of the Exchange Act Rules) that comply with the requirements of the Exchange Act;
such disclosure controls and procedures have been designed to ensure that information
required to be disclosed by the Company and the Company Subsidiary is accumulated and
communicated to the Company’s management, including the Company’s principal executive
officer and principal financial officer by others within those entities, such disclosure
controls and procedures are effective.
(nn) The minute books of the Company and the Company Subsidiary have been made available to
the Underwriters and counsel for the Underwriters, and such books (i) contain a complete
summary of all meetings and actions of the board of directors (including each board
committee) and shareholders of the Company (or analogous governing bodies and interest
holders, as applicable), and the Company Subsidiary since the time of its respective
incorporation or organization through the date of the latest meeting and action, and (ii)
accurately in all material respects reflect all transactions referred to in such minutes.
(oo) There is no franchise agreement, lease, contract, or other agreement or document
required by the Securities Act or by the Rules and Regulations to be described in the
General Disclosure Package and in the Prospectus or to be filed as an exhibit to the
Registration Statements which is not so described or filed therein as required; and all
descriptions of any such franchise agreements, leases, contracts, or other agreements or
documents contained in the General Disclosure Package and in the Prospectus are accurate and
complete descriptions of such documents in all material respects. Other than as described
in the General Disclosure Package, no such franchise agreement, lease, contract or other
agreement has been suspended or terminated for convenience or default by the Company or any
of the other parties thereto, and neither the Company nor the Company Subsidiary has
received notice of and the Company does not have Knowledge of any such pending or threatened
suspension or termination.
(pp) No relationship, direct or indirect, exists between or among the Company on the one
hand, and the directors, officers, stockholders (or analogous interest holders), customers
or suppliers of the Company or any of its affiliates on the other hand, which is required to
be described in the General Disclosure Package and the Prospectus and which is not so
described.
(qq) No person or entity has the right to require registration of shares of Common Stock or
other securities of the Company or the Company Subsidiary because of the filing or
effectiveness of the Registration Statements or otherwise, except for persons and entities
who have expressly waived such right in writing or who have been given timely and proper
written notice and have failed to exercise such right within the time or times required
under the terms and conditions of such right. Except as described in the General Disclosure
Package, there are no persons with registration rights or similar rights to have any
securities registered by the Company or the Company Subsidiary under the Securities Act.
(rr) Neither the Company nor the Company Subsidiary own any “margin securities” as that term
is defined in Regulation U of the Board of Governors of the Federal Reserve System (the
“Federal Reserve Board”), and none of the proceeds of the sale of the Stock will be used,
directly or indirectly, for the purpose of
12
purchasing or carrying any margin security, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Stock to be considered a “purpose credit”
within the meanings of Regulation T, U or X of the Federal Reserve Board.
(ss) Neither the Company nor the Company Subsidiary is a party to any contract, agreement or
understanding with any person that would give rise to a valid claim against the Company or
the Underwriters for a brokerage commission, finder’s fee or like payment in connection with
the offering and sale of the Stock or any transaction contemplated by this Agreement, the
Registration Statements, the General Disclosure Package or the Prospectus.
(tt) The exercise price of each option issued under the Company’s stock option or other
employee benefit plans has been no less than the fair market value of a share of common
stock as determined on the date of grant of such option. All grants of options were validly
issued and properly approved by the board of directors of the Company (or a duly authorized
committee thereof) in material compliance with all applicable laws and regulations and
recorded in the Company’s financial statements in accordance with GAAP and, to the Company’s
Knowledge, no such grants involved “back dating,” “forward dating” or similar practice with
respect to the effective date of grant.
(uu) Except as described in the General Disclosure Package and the Prospectus, no subsidiary
of the Company is currently prohibited, directly or indirectly, under any agreement or other
instrument to which it is a party or is subject, from paying any dividends to the Company,
from making any other distribution on such subsidiary’s capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from transferring any
of such subsidiary’s properties or assets to the Company or any other subsidiary of the
Company.
(vv) Since the date as of which information is given in the General Disclosure Package and
the Prospectus through the date hereof, and except as set forth in the Pricing Prospectus,
neither the Company nor the Company Subsidiary has (i) issued or granted any securities
other than options to purchase common stock pursuant to the Company’s stock option plan,
(ii) incurred any material liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course of business, (iii)
entered into any material transaction other than in the ordinary course of business or (iv)
declared or paid any dividend on its capital stock.
(ww) If applicable, all of the information provided to the Underwriters or to counsel for
the Underwriters by the Company, its officers and directors and the holders of any
securities (debt or equity) or options to acquire any securities of the Company in
connection with letters, filings or other supplemental information provided to NASD
Regulation Inc. pursuant to NASD Conduct rule 2710 or 2720 is true, correct and complete.
(xx) The Company is not a Passive Foreign Investment Company (“PFIC”) within the meaning of
Section 1296 of the United States Internal Revenue Code of 1966, and the Company is not
likely to become a PFIC.
(yy) No forward-looking statement (within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act) contained in either the General Disclosure Package or
the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith.
(zz) The Stock has been approved for listing subject to notice of issuance on the NASDAQ
Global Market (the “Exchange”). A registration statement has been filed on Form 8-A
pursuant to Section 12 of the Exchange Act, which registration statement complies in all
material respects with the Exchange Act.
(aaa) The Company has taken all necessary actions to ensure that, upon and at all times
after the effectiveness of the Registration Statements, it will be in compliance with all
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and all rules and regulations
promulgated thereunder or implementing the provisions thereof (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”)
that are then in effect and is actively taking steps to ensure that it will be in compliance
with other applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act not currently in effect upon it
and at all times after the effectiveness of such provisions.
13
(bbb) The Company has taken all necessary actions to ensure that, upon and at all times
after the Exchange shall have approved the Stock for listing it will be in compliance with
all applicable corporate governance requirements set forth in the rules of the Exchange that
are then in effect and is actively taking steps to ensure that it will be in compliance with
other applicable corporate governance requirements set forth in the rules of the Exchange
not currently in effect upon and all times after the effectiveness of such requirements.
(ccc) Neither the Company nor the Company Subsidiary nor, to the Company’s Knowledge, any
employee or agent of the Company or any subsidiary, has (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns from
corporate funds, (iii) violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended or (iv) made any other unlawful payment.
(ddd) There are no transactions, arrangements or other relationships between and/or among
the Company, any of its affiliates (as such term is defined in Rule 405 of the Rules and
Regulations) and any unconsolidated entity, including, but not limited to, any structured
finance, special purpose or limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability of or requirements for its
capital resources required to be described in the General Disclosure Package and the
Prospectus which have not been described as required.
(eee) There are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees of indebtedness by the Company or the
Company Subsidiary to or for the benefit of any of the officers or directors of the Company,
the Company Subsidiary or any of their respective family members, except as disclosed in the
Registration Statements, the General Disclosure Package and the Prospectus. All
transactions by the Company with office holders or control persons of the Company have been
duly approved by the board of directors of the Company, or duly appointed committees or
officers thereof, if and to the extent required under U.S. law.
(fff) The statistical and market related data included in the Registration Statement, the
General Disclosure Package and the Prospectus are based on or derived from sources that the
Company believes to be reliable and accurate, and such data agree with the sources from
which they are derived.
(ggg) The operations of the Company and the Company Subsidiary are and have been conducted
at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
applicable money laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before
any court or governmental agency, authority or body or any arbitrator involving the Company
or the Company Subsidiary with respect to the Money Laundering Laws is pending, or to the
Company’s Knowledge, threatened.
(hhh) Neither the Company nor the Company Subsidiary nor, to the Company’s Knowledge, any
director, officer, agent, employee or affiliate of the Company or the Company Subsidiary is
currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the offering, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose
of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.
(iii) Neither the Company nor any of its affiliates (within the meaning of NASD Conduct Rule
2720(b)(1)(a)) directly or indirectly controls, is controlled by, or is under common control
with, or is an associated person (within the meaning of Article I, Section 1(ee) of the
By-laws of the NASD) of, any member firm of the NASD, other than as described on Schedule C
hereof.
Any certificate signed by or on behalf of the Company and delivered to the Representatives or to
counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
14
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters, and the Underwriters
agree, severally and not jointly, to purchase from the Company the respective numbers of shares of
Firm Stock set forth opposite the names of the Underwriters in Schedule A hereto.
The purchase price per share to be paid by the Underwriters to the Company for the Stock will
be $[ ] per share (the “Purchase Price”).
The Company will deliver the Firm Stock to the Representatives for the respective accounts of
the several Underwriters, through the facilities of The Depository Trust Company or, at the
election of the Representatives, in the form of definitive certificates, in each such case, issued
in such names and in such denominations as the Representatives may direct by notice in writing to
the Company given at or prior to 12:00 Noon, New York time, on the second (2nd) full
business day preceding the Closing Date against payment of the aggregate Purchase Price therefor by
wire transfer in federal (same day) funds to an account at a bank acceptable to ▇▇▇▇▇ payable to
the order of the Company for the Firm Stock sold by them all at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., in San Francisco, California. Time shall be of the essence, and delivery at
the time and place specified pursuant to this Agreement is a further condition of the obligations
of each Underwriter hereunder. The time and date of the delivery and closing shall be at 10:00
A.M., New York time, on [ ], 2007, in accordance with Rule 15c6-1 of the Exchange Act. The
time and date of such payment and delivery are herein referred to as the “Closing Date”. The
Closing Date and the location of delivery of, and the form of payment for, the Firm Stock may be
varied by agreement between the Company and ▇▇▇▇▇.
The Company, in the event the Representatives elect to have the Underwriters take delivery of
definitive certificates instead of delivery from the Company of the certificates through the
facilities of The Depository Trust Company, shall make certificates for the Firm Stock available to
the Representatives for examination on behalf of the Underwriters in New York, New York at least
one (1) full business day prior to the Closing Date.
For the purpose of covering any over-allotments in connection with the distribution and sale
of the Firm Stock as contemplated by the Prospectus, the Underwriters may purchase all or less than
all of the Optional Stock. The price per share to be paid for the Optional Stock shall be the
Purchase Price. The Company agrees to sell to the Underwriters the number of shares of Optional
Stock specified in the written notice delivered by ▇▇▇▇▇ to the Company described below and the
Underwriters agree, severally and not jointly, to purchase such shares of Optional Stock. Such
shares of Optional Stock shall be purchased from the Company for the account of each Underwriter in
the same proportion as the number of shares of Firm Stock set forth opposite such Underwriter’s
name on Schedule A bears to the total number of shares of Firm Stock (subject to adjustment by
▇▇▇▇▇ to eliminate fractions). The option granted hereby may be exercised as to all or any part of
the Optional Stock at any time, and from time to time, not more than thirty (30) days subsequent to
the date of this Agreement. No Optional Stock shall be sold and delivered unless the Firm Stock
previously has been, or simultaneously is, sold and delivered. The right to purchase the Optional
Stock or any portion thereof may be surrendered and terminated at any time upon notice by ▇▇▇▇▇ to
the Company.
The option granted hereby may be exercised by written notice being given to the Company by
▇▇▇▇▇ setting forth the number of shares of the Optional Stock to be purchased by the Underwriters
and the date and time for delivery of and payment for the Optional Stock. Each date and time for
delivery of and payment for the Optional Stock (which may be the Closing Date, but not earlier) is
herein called the “Option Closing Date” and shall in no event be earlier than two (2) business days
nor later than five (5) business days after written notice is given. The Option Closing Date and
the Closing Date are herein called the “Closing Dates.”
The Company will deliver the Optional Stock to the Representatives for the respective accounts
of the several Underwriters in the case of the Company, through the facilities of The Depository
Trust Company or, at the election of the Representatives, in the form of definitive certificates,
in each such case, issued in such names and in such denominations as the Representatives may direct
by notice in writing to the Company given at or prior to 12:00 Noon, New York time, on the second
(2nd) full business day preceding the Option Closing Date against payment of the
aggregate Purchase Price therefor by wire transfer in federal (same day) funds to an account at a
bank acceptable to ▇▇▇▇▇ payable to the order of the Company at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., in San Francisco, California. Time shall be of the essence, and delivery at
the time and place specified pursuant to this Agreement is a further condition of the obligations
of each Underwriter hereunder. The Company, in the event the
15
Representatives elect to have the Underwriters take delivery of definitive certificates
instead of delivery from the Company of the certificates through the facilities of The Depository
Trust Company, shall make the certificates for the Optional Stock available to the Representatives
for examination on behalf of the Underwriters in New York, New York not later than 10:00 A.M., New
York Time, at least one (1) full business day prior to the Option Closing Date. The Option Closing
Date and the location of delivery of, and the form of payment for, the Optional Stock may be varied
by agreement between the Company and ▇▇▇▇▇.
The several Underwriters propose to offer the Stock for sale upon the terms and conditions set
forth in the Prospectus.
4. Further Agreements Of The Company
The Company agrees with the several Underwriters:
(a) To prepare the Rule 462(b) Registration Statement, if necessary, in a form approved by
the Representatives and file such Rule 462(b) Registration Statement with the Commission by
10:00 P.M., New York time, on the date hereof, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the
Rules and Regulations; to prepare the Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rules 430A, 430B or 430C of the Rules and Regulations and to file
such Prospectus pursuant to Rule 424(b) of the Rules and Regulations not later than the
second business (2nd) day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A of the Rules and
Regulations; to notify the Representatives immediately of the Company’s intention to file or
prepare any supplement or amendment to any Registration Statement or to the Prospectus and
to make no amendment or supplement to the Registration Statements, the General Disclosure
Package or to the Prospectus to which the Representatives shall reasonably object by notice
to the Company after a reasonable period to review; to advise the Representatives, promptly
after it receives notice thereof, of the time when any amendment to any Registration
Statement has been filed or becomes effective or any supplement to the General Disclosure
Package or the Prospectus or any amended Prospectus has been filed and to furnish the
Underwriters with copies thereof; to file promptly all material required to be filed by the
Company with the Commission pursuant to Rules 433(d) or 163(b)(2) of the Rules and
Regulations, as the case may be; to advise the Representatives, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus, any Issuer Free Writing
Prospectus or the Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or supplementing of
the Registration Statements, the General Disclosure Package or the Prospectus or for
additional information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus, any Issuer Free Writing
Prospectus or the Prospectus or suspending any such qualification, and promptly to use its
best efforts to obtain the withdrawal of such order.
(b) The Company represents and agrees that, unless it obtains the prior consent of the
Representatives, it has not made and will not, other than the final term sheet prepared and
filed pursuant to Section 4(c) hereof, make any offer relating to the Stock that would
constitute a “free writing prospectus” as defined in Rule 405 of the Rules and Regulations
unless the prior written consent of the Representatives has been received (each, a
“Permitted Free Writing Prospectus”); provided that the prior written consent of the
Representatives hereto shall be deemed to have been given in respect of the Issuer Free
Writing Prospectuses included in Schedule B hereto. The Company represents that it has
treated and agrees that it will treat each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus, comply with the requirements of Rules 164 and 433 of the Rules and
Regulations applicable to any Issuer Free Writing Prospectus, including the requirements
relating to timely filing with the Commission, legending and record keeping and will not
take any action that would result in an Underwriter or the Company being required to file
with the Commission pursuant to Rule 433(d) of the Rules and Regulations a free writing
prospectus prepared by or on behalf of such Underwriter that such Underwriter otherwise
would not have been
16
required to file thereunder. The Company will satisfy the condition in Rule 433 of the
Rules and Regulations to avoid a requirement to file with the Commission any electronic road
show.
(c) The Company will prepare a final term sheet (the “Final Term Sheet”) reflecting the
final terms of the Stock, in form and substance satisfactory to the Representatives, and
shall file such Final Term Sheet as an Issuer Free Writing Prospectus pursuant to Rule 433
of the Rules and Regulations prior to the close of business two (2) business days after the
date hereof; provided that the Company shall provide the Representatives with copies on any
such Final Term Sheet a reasonable amount of time prior to such proposed filing and will not
use or file any such document to which the Representatives or counsel to the Underwriters
shall reasonably object.
(d) If at any time prior to the expiration of nine (9) months after the later of (i) the
latest effective date of the Registration Statement or (ii) the date of the Prospectus, when
a prospectus relating to the Stock is required to be delivered (or in lieu thereof, the
notice referred to in Rule 173(a) of the Rules and Regulations) any event occurs or
condition exists as a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under which they
were made when the Prospectus is delivered (or in lieu thereof, the notice referred to in
Rule 173(a) of the Rules and Regulations), not misleading, or if it is necessary at any time
to amend or supplement any Registration Statement or the Prospectus, that the Company will
promptly notify the Representatives thereof and upon their request will prepare an
appropriate amendment or supplement in form and substance satisfactory to the
Representatives which will correct such statement or omission or effect such compliance and
will use its best efforts to have any amendment to any Registration Statement declared
effective as soon as possible. The Company will furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives may from time to time
reasonably request of such amendment or supplement. In case any Underwriter is required to
deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) of the Rules
and Regulations) relating to the Stock nine (9) months or more after the later of (i) the
latest effective date of the Registration Statement or (ii) the date of the Prospectus, the
Company upon the request of the Representatives and at the expense of such Underwriter will
prepare promptly an amended or supplemented Prospectus as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act and deliver to
such Underwriter as many copies as such Underwriter may request of such amended or
supplemented Prospectus complying with Section 10(a)(3) of the Securities Act.
(e) If the General Disclosure Package is being used to solicit offers to buy the Stock at a
time when the Prospectus is not yet available to prospective purchasers and any event shall
occur as a result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the General Disclosure Package
in order to make the statements therein, in the light of the circumstances then prevailing,
not misleading, or to make the statements therein not conflict with the information
contained in the Registration Statement then on file and not superseded or modified, or if
it is necessary at any time to amend or supplement the General Disclosure Package to comply
with any law, the Company promptly will prepare, file with the Commission (if required) and
furnish to the Underwriters and any dealers an appropriate amendment or supplement to the
General Disclosure Package so that the General Disclosure Package as so amended or
supplemented will not, in the light of the circumstances then prevailing, be misleading or
conflict with the Registration Statement then on file, or so that the General Disclosure
Package will comply with law.
(f) If at any time following issuance of an Issuer Free Writing Prospectus there occurred or
occurs an event or development as a result of which such Issuer Free Writing Prospectus
conflicted or will conflict with the information contained in the Registration Statement,
Pricing Prospectus or Prospectus and not superseded or modified or included or would include
an untrue statement of a material fact or omitted or would omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances prevailing at the subsequent time, not misleading, the Company
has promptly notified or will promptly notify the Representatives so that any use of the
Issuer Free Writing Prospectus may cease until it is amended or supplemented and has
promptly amended or will promptly amend or supplement, at its own expense, such Issuer Free
Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The
foregoing sentence does not apply to statements in or
17
omissions from any Issuer Free Writing Prospectus in reliance upon, and in conformity with,
written information furnished to the Company through the Representatives by or on behalf of
any Underwriter specifically for inclusion therein, which information the parties hereto
agree is limited to the Underwriter’s Information (as defined in Section 18).
(g) To furnish promptly to each of the Representatives and to counsel for the Underwriters a
signed copy of each of the Registration Statements as originally filed with the Commission,
and of each amendment thereto filed with the Commission, including all consents and exhibits
filed therewith.
(h) To deliver promptly to the Representatives in New York City such number of the following
documents as the Representatives shall reasonably request: (i) conformed copies of the
Registration Statements as originally filed with the Commission (in each case excluding
exhibits), (ii) each Preliminary Prospectus, (iii) any Issuer Free Writing Prospectus, (iv)
the Prospectus (the delivery of the documents referred to in clauses (i), (ii), (iii) and
(iv) of this paragraph (h) to be made not later than 10:00 A.M., New York time, on the
business day following the execution and delivery of this Agreement), (v) conformed copies
of any amendment to the Registration Statement (excluding exhibits), and (vi) any amendment
or supplement to the General Disclosure Package or the Prospectus (the delivery of the
documents referred to in clauses (v) and (vi) of this paragraph (h) to be made not later
than 10:00 A.M., New York City time, on the business day following the date of such
amendment or supplement).
(i) To make generally available to its shareholders as soon as practicable, but in any event
not later than sixteen (16) months after the effective date of each Registration Statement
(as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company
and the Company Subsidiary (which need not be audited) complying with Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option of the Company, Rule
158); and to furnish to its shareholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of income, shareholders’
equity and cash flows of the Company and the Company Subsidiary certified by independent
public accountants) and as soon as possible after each of the first three fiscal quarters of
each fiscal year (beginning with the first fiscal quarter after the effective date of such
Registration Statement), consolidated summary financial information of the Company and the
Company Subsidiary for such quarter in reasonable detail.
(j) To take promptly from time to time such actions as the Representatives may reasonably
request to qualify the Stock for offering and sale under the securities or Blue Sky laws of
such jurisdictions (domestic or foreign) as the Representatives may designate and to
continue such qualifications in effect, and to comply with such laws, for so long as
required to permit the offer and sale of Stock in such jurisdictions; provided that the
Company and the Company Subsidiary shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to file a general consent to
service of process in any jurisdiction.
(k) Upon request, during the period of five (5) years from the date hereof, to deliver to
each of the Underwriters, (i) as soon as they are available, copies of all reports or other
communications furnished to shareholders, and (ii) as soon as they are available, copies of
any reports and financial statements furnished or filed with the Commission or any national
securities exchange on which the Stock is listed. However, so long as the Company is
subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange
Act and is timely filing reports with the Commission on its Electronic Data Gathering,
Analysis and Retrieval system (“▇▇▇▇▇”), it is not required to furnish such reports or
statements to the Underwriters.
(l) That the Company will not, for a period of one hundred eighty (180) days from the date
of this Agreement, (the “Lock-Up Period”) without the prior written consent of ▇▇▇▇▇ and
CIBC, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, other than the Company’s sale of the Stock
hereunder and the issuance of restricted Common Stock or options to acquire Common Stock
pursuant to the Company’s employee benefit plans, qualified stock option plans or other
employee compensation plans as such plans are in existence on the date hereof and described
in the Prospectus and the issuance of Common Stock pursuant to the valid exercises of
options, warrants or rights
18
outstanding on the date hereof. The Company will cause each officer, director, shareholder,
optionholder and warrantholder to furnish to the Representatives, prior to the Closing Date,
a letter, substantially in the form of Exhibit A hereto, pursuant to which each such person
shall agree, among other things, not to directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of, or announce the intention to
otherwise dispose of, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, not to engage in any swap, hedge or similar
agreement or arrangement that transfers, in whole or in part, directly or indirectly, the
economic risk of ownership of Common Stock or any such securities and not to engage in any
short selling of any Common Stock or any such securities, during the Lock-Up Period, without
the prior written consent of ▇▇▇▇▇. The Company also agrees that during such period, other
than for the sale of the Stock hereunder, the Company will not file any registration
statement, preliminary prospectus or prospectus, or any amendment or supplement thereto,
under the Securities Act for any such transaction or which registers, or offers for sale,
Common Stock or any securities convertible into or exercisable or exchangeable for Common
Stock, except for a registration statement on Form S-8 relating to employee benefit plans.
The Company hereby agrees that (i) if it issues an earnings release or material news, or if
a material event relating to the Company occurs, during the last seventeen (17) days of the
Lock-Up Period, or (ii) if prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the sixteen (16)-day period beginning
on the last day of the Lock-Up Period, the restrictions imposed by this paragraph (l) or the
letter shall continue to apply until the expiration of the eighteen (18)-day period
beginning on the issuance of the earnings release or the occurrence of the material news or
material event. The Company will provide the Representatives and any co-managers and each
stockholder subject to the Lock-Up Period with prior notice (in accordance with Section 15
herein) of any such announcement that gives rise to an extension of the Lock-Up Period.
(m) To supply the Representatives with copies of all correspondence to and from, and all
documents issued to and by, the Commission in connection with the registration of the Stock
under the Securities Act or any of the Registration Statements, any Preliminary Prospectus
or the Prospectus, or any amendment or supplement thereto or document incorporated by
reference therein.
(n) Prior to the Closing Date, to furnish to the Representatives, as soon as they have been
prepared, copies of any unaudited interim consolidated financial statements of the Company
for any periods subsequent to the periods covered by the financial statements appearing in
the Registration Statements and the Prospectus.
(o) Prior to the Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the Representatives are
notified), without the prior written consent of the Representatives, unless in the judgment
of the Company and its counsel, and after notification to the Representatives, such press
release or communication is required by law.
(p) Until ▇▇▇▇▇ shall have notified the Company of the completion of the resale of the
Stock, that the Company will not, and will cause its affiliated purchasers (as defined in
Regulation M under the Exchange Act) not to, either alone or with one or more other persons,
bid for or purchase, for any account in which it or any of its affiliated purchasers has a
beneficial interest, any Stock, or attempt to induce any person to purchase any Stock; and
not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose
of creating actual, or apparent, active trading in or of raising the price of the Stock.
(q) Not to take any action prior to the Closing Date which would require the Prospectus to
be amended or supplemented pursuant to Section 4(d).
(r) To at all times comply with all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act in
effect from time to time and to file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 of the Rules and Regulations.
(s) To maintain, at its expense, a registrar and transfer agent for the Stock.
19
(t) To apply the net proceeds from the sale of the Stock as set forth in the Registration
Statement, the General Disclosure Package and the Prospectus under the heading “Use of
Proceeds,” and except as disclosed in the General Disclosure Package, the Company does not
intend to use any of the proceeds from the sale of the Stock hereunder to repay any
outstanding debt owed to any affiliate of any Underwriter. The Company shall manage its
affairs and investments in such a manner as not to be or become an “investment company”
within the meaning of the Investment Company Act and the rules and regulations thereunder.
(u) To use its best efforts to list, subject to notice of issuance, and to maintain the
listing of the Stock on the Exchange.
(v) To use its best efforts to do and perform all things required to be done or performed
under this Agreement by the Company prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Firm Stock and the Optional Stock.
(w) Upon request of any Underwriter, to furnish, or cause to be furnished, to such
Underwriter an electronic version of the Company’s trademarks, servicemarks and corporate
logo for use on the website, if any, operated by such Underwriter for the purpose of
facilitating the on-line offering of the Stock (the “License”); provided, however that the
License shall be used solely for the purpose described above, is granted without any fee and
may not be assigned or transferred.
5. Payment of Expenses. The Company agrees to pay, or reimburse if paid by any
Underwriter, whether or not the transactions contemplated hereby are consummated or this Agreement
is terminated: (a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the
registration of the Stock under the Securities Act and the Exchange Act; (c) the costs incident to
the preparation, printing and distribution of the Registration Statements, any Preliminary
Prospectus, any Issuer Free Writing Prospectus, the General Disclosure Package, the Prospectus, any
amendments, supplements and exhibits thereto and the costs of printing, reproducing and
distributing “Agreement Among Underwriters” between the Representatives and the Underwriters, the
Master Selected Dealers’ Agreement, the Underwriters’ Questionnaire, this Agreement and any closing
documents by mail, telex or other means of communications; (d) the fees and expenses (including
related fees and expenses of counsel for the Underwriters) incurred in connection with securing any
required review by the NASD of the terms of the sale of the Stock and any filings made with the
NASD; (e) any applicable listing or other fees; (f) the fees and expenses (including related fees
and expenses of counsel to the Underwriters) of qualifying the Stock under the securities laws of
the several jurisdictions as provided in Section 4(j)) and of preparing, printing and distributing
wrappers, Blue Sky Memoranda and Legal Investment Surveys; (g) the cost of preparing and printing
stock certificates; (h) all fees and expenses of the registrar and transfer agent of the Stock; (i)
the costs and expenses (including, without limitation, any damages or other amounts payable in
connection with the legal or contractual liability) associated with the reforming of any contracts
for sale of the Stock made by the Underwriters caused by a breach of the representation contained
in Section 2(c), (j) the costs and expenses of the Company relating to investor presentations on
any “road show” undertaken in connection with the marketing of the offering of the Stock,
including, without limitation, expenses associated with the preparation or dissemination of any
electronic road show, expenses associated with the production of road show slides and graphics,
fees and expenses of any consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expenses of the officers of the Company and
such consultants, including the cost of any aircraft chartered in connection with the road show,
and (k) all other costs and expenses incident to the offering of the Stock or the performance of
the obligations of the Company (including, without limitation, the fees and expenses of the
Company’s counsel and the Company’s independent accountants); provided that, except to the extent
otherwise provided in this Section 5 and in Sections 9 and 10, the Underwriters shall pay their own
costs and expenses, including the fees and expenses of their counsel, any transfer taxes on the
resale of any Stock by them and the expenses of advertising any offering of the Stock made by the
Underwriters.
6. Conditions of Underwriters’ Obligations. The respective obligations of the several
Underwriters hereunder are subject to the accuracy, when made and as of the Applicable Time and on
the Closing Date, of the representations and warranties of the Company contained herein, to the
accuracy of the statements of the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
20
(a) The Registration Statements have become effective under the Securities Act, and no stop
order suspending the effectiveness of any Registration Statement or any part thereof,
preventing or suspending the use of, any Preliminary Prospectus, the Prospectus or any
Permitted Free Writing Prospectus or any part thereof shall have been issued and no
proceedings for that purpose or pursuant to Section 8A under the Securities Act shall have
been initiated or threatened by the Commission, and all requests for additional information
on the part of the Commission (to be included in the Registration Statements or the
Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the
Representatives; the Rule 462(b) Registration Statement, if any, each Issuer Free Writing
Prospectus and the Prospectus shall have been filed with, the Commission within the
applicable time period prescribed for such filing by, and in compliance with, the Rules and
Regulations and in accordance with Section 4(a), and the Rule 462(b) Registration Statement,
if any, shall have become effective immediately upon its filing with the Commission; and the
NASD shall have raised no objection to the fairness and reasonableness of the terms of this
Agreement or the transactions contemplated hereby.
(b) None of the Underwriters shall have discovered and disclosed to the Company on or prior
to the Closing Date that any Registration Statement or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of counsel for the
Underwriters, is material or omits to state any fact which, in the opinion of such counsel,
is material and is required to be stated therein or is necessary to make the statements
therein not misleading, or that the General Disclosure Package, any Issuer Free Writing
Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue
statement of fact which, in the opinion of such counsel, is material or omits to state any
fact which, in the opinion of such counsel, is material and is necessary in order to make
the statements, in the light of the circumstances in which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to the authorization, form
and validity of each of this Agreement, the Stock, the Registration Statements, the General
Disclosure Package, each Issuer Free Writing Prospectus and the Prospectus and all other
legal matters relating to this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the Underwriters, and the
Company have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) ▇▇▇▇▇▇ Godward Kronish LLP shall have furnished to the Representatives such counsel’s
written opinion, as counsel to the Company, addressed to the Underwriters and dated the
Closing Date, substantially in the form set forth in Exhibit B.
(e) The Representatives shall have received from ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, regulatory
counsel for the Company, such counsel’s written opinion, addressed to the Underwriters and
dated the Closing Date, substantially in the form set forth in Exhibit C.
(f) The Representatives shall have received from ▇▇▇▇▇▇ North & Western LLP, patent counsel
for the Company, such counsel’s written opinion, addressed to the Underwriters and dated the
Closing Date, in substantially in the form set forth in Exhibit D.
(g) Holme
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP shall have furnished to the Representatives
such counsel’s written opinion, as Utah counsel for the Company and with respect to
matters regarding Utah law, addressed to the Underwriters and dated
the Closing Date, substantially in the form set forth in
Exhibit E.
(h) The Representatives shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.,
counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect
to such matters as the Underwriters may reasonably require, and the Company shall have
furnished to such counsel such documents as they request for enabling them to pass upon such
matters.
(i) At the time of the execution of this Agreement, the Representatives shall have received
from Ernst & Young LLP a letter, addressed to the Underwriters, executed and dated such
date, in form and substance satisfactory to the Representatives (i) confirming that they are
an independent registered accounting firm with respect to the Company and the Company
Subsidiary within the meaning of the Securities Act and the Rules and Regulations and PCAOB
and (ii) stating the conclusions and findings of such firm, of the type ordinarily included
in accountants’ “comfort letters” to underwriters, with respect to the financial statements
and certain financial information contained or incorporated by reference in the Registration
Statements, the General Disclosure Package and the Prospectus.
21
(j) On the effective date of any post-effective amendment to any Registration Statement and
on the Closing Date, the Representatives shall have received a letter (the “bring-down
letter”) from Ernst & Young LLP addressed to the Underwriters and dated the Closing Date
confirming, as of the date of the bring-down letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified financial
information is given in the General Disclosure Package and the Prospectus, as the case may
be, as of a date not more than three (3) business days prior to the date of the bring-down
letter), the conclusions and findings of such firm, of the type ordinarily included in
accountants’ “comfort letters” to underwriters, with respect to the financial information
and other matters covered by its letter delivered to the Representatives concurrently with
the execution of this Agreement pursuant to paragraph (h) of this Section 6.
(k) The Company shall have furnished to the Representatives a certificate, dated the Closing
Date, of its Chairman of the Board or President and its Chief Financial Officer stating that
(i) such officers have carefully examined the Registration Statement, the General Disclosure
Package, any Permitted Free Writing Prospectus and the Prospectus and, in their opinion, the
Registration Statements and each amendment thereto, as of their respective effective dates,
and as of the Closing Date did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the General Disclosure Package, as of the Applicable
Time and as of the Closing Date, any Permitted Free Writing Prospectus as of its date and as
of the Closing Date, the Prospectus and each amendment or supplement thereto, as of the
respective date thereof and as of the Closing Date, did not include any untrue statement of
a material fact and did not omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances in which they were made, not
misleading, (ii) since the effective date of the Initial Registration Statement, no event
has occurred which should have been set forth in a supplement or amendment to the
Registration Statements, the General Disclosure Package or the Prospectus, (iii) to the best
of their knowledge after reasonable investigation, as of the Closing Date, the
representations and warranties of the Company in this Agreement are true and correct and the
Company has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and (iv) there has not
been, subsequent to the date of the most recent audited financial statements included in the
General Disclosure Package, any material adverse change in the financial position or results
of operations of the Company and the Company Subsidiary, or any change or development that,
singularly or in the aggregate, would involve a material adverse change or a prospective
material adverse change, in or affecting the condition (financial or otherwise), results of
operations, business, assets or prospects of the Company and the Company Subsidiary taken as
a whole, except as set forth in the Prospectus.
(l) Since the date of the latest audited financial statements included in the General
Disclosure Package, (i) neither the Company nor the Company Subsidiary shall have sustained
any loss or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the General Disclosure Package, and
(ii) there shall not have been any change in the capital stock or long-term debt of the
Company or the Company Subsidiary, or any change, or any development involving a prospective
change, in or affecting the business, general affairs, management, financial position,
stockholders’ equity or results of operations of the Company and the Company Subsidiary,
otherwise than as set forth in the General Disclosure Package, the effect of which, in any
such case described in clause (i) or (ii) of this paragraph (k), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or inadvisable to
proceed with the sale or delivery of the Stock on the terms and in the manner contemplated
in the General Disclosure Package.
(m) No action shall have been taken and no law, statute, rule, regulation or order shall
have been enacted, adopted or issued by any governmental agency or body which would prevent
the issuance or sale of the Stock or materially and adversely affect or potentially
materially and adversely affect the business or operations of the Company; and no
injunction, restraining order or order of any other nature by any federal or state court of
competent jurisdiction shall have been issued which would prevent the issuance or sale of
the Stock or materially and adversely affect or potentially materially and adversely affect
the business or operations of the Company.
22
(n) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have
occurred in the Company’s corporate credit rating or the rating accorded the Company’s debt
securities by any “nationally recognized statistical rating organization,” as that term is
defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and
(ii) no such organization shall have publicly announced that it has under surveillance or
review (other than an announcement with positive implications of a possible upgrading), the
Company’s corporate credit rating or the rating of any of the Company’s debt securities.
(o) Subsequent to the execution and delivery of this Agreement there shall not have occurred
any of the following: (i) trading in securities generally on the New York Stock Exchange,
NASDAQ Global Market or the American Stock Exchange 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 materially limited, or minimum or maximum prices or maximum
range for prices shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal
or state authorities or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States, (iii) the United States
shall have become engaged in hostilities, or the subject of an act of terrorism, or there
shall have been an outbreak of or escalation in hostilities involving the United States, or
there shall have been a declaration of a national emergency or war by the United States or
(iv) there shall have occurred such a material adverse change in general economic, political
or financial conditions (or the effect of international conditions on the financial markets
in the United States shall be such) as to make it, in the judgment of the Representatives,
impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms
and in the manner contemplated in the General Disclosure Package and the Prospectus.
(p) The Exchange shall have approved the Stock for listing therein, subject only to official
notice of issuance and evidence of satisfactory distribution.
(q) ▇▇▇▇▇ shall have received on and as of the Closing Date satisfactory evidence of the
good standing of the Company and the Company Subsidiary in their respective jurisdictions of
organization and their good standing as foreign entities in such other jurisdictions as
▇▇▇▇▇ may reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate Governmental Authorities of such jurisdictions.
(r) ▇▇▇▇▇ shall have received the written agreements, substantially in the form of Exhibit A
hereto, from all officers, directors, shareholders, optionholders and warrantholders of the
Company.
(s) On or prior to the Closing Date, the Company shall have furnished to ▇▇▇▇▇ such further
certificates and documents as ▇▇▇▇▇ may reasonably request.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Underwriters.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless:
each Underwriter, its directors, officers, managers, members, employees,
representatives and agents and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter
Indemnified Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or several,
to which such Underwriter Indemnified Party may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, expense, liability, action,
investigation or proceeding arises out of or is based upon (A) any untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, any Issuer Free Writing Prospectus, any
23
“issuer information” filed or required to be filed pursuant to Rule 433(d) of the
Securities Act, any Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or (B) the omission or alleged omission to state in any
Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer information”
filed or required to be filed pursuant to Rule 433(d) of the Securities Act, any
Registration Statement or the Prospectus, or in any amendment or supplement thereto,
a material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each Underwriter Indemnified Party
promptly upon demand for any legal fees or other expenses reasonably incurred by
that Underwriter Indemnified Party in connection with investigating, or preparing to
defend, or defending against, or appearing as a third party witness in respect of,
or otherwise incurred in connection with, any such loss, claim, damage, expense,
liability, action, investigation or proceeding, as such fees and expenses are
incurred; provided, however, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, expense or liability arises out of
or is based upon an untrue statement or alleged untrue statement in, or omission or
alleged omission from any Preliminary Prospectus, any Registration Statement or the
Prospectus, or any such amendment or supplement thereto, or any Issuer Free Writing
Prospectus made in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for use therein, which information the parties hereto agree
is limited to the Underwriter’s Information (as defined in Section 18).
The indemnity agreement in this Section 7(a) is not exclusive and is in addition to each
other liability which the Company might have under this Agreement or otherwise, and shall
not limit any rights or remedies which may otherwise be available under this Agreement, at
law or in equity to any Underwriter Indemnified Party.
(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the
Company and its directors, its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (collectively the “Company Indemnified Parties” and
each a “Company Indemnified Party”) against any loss, claim, damage, expense or liability
whatsoever (or any action, investigation or proceeding in respect thereof), joint or
several, to which such Company Indemnified Party may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, expense, liability, action,
investigation or proceeding arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary Prospectus, any
Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) of the Securities Act, any Registration Statement or the Prospectus,
or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state
in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer information”
filed or required to be filed pursuant to Rule 433(d) of the Securities Act, any
Registration Statement or the Prospectus, or in any amendment or supplement thereto, a
material fact required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through the Representatives by or on behalf of
that Underwriter specifically for use therein, which information the parties hereto agree is
limited to the Underwriter’s Information as defined in Section 18, and shall reimburse the
Company Indemnified Parties for any legal or other expenses reasonably incurred by such
party in connection with investigating or preparing to defend or defending against or
appearing as third party witness in connection with any such loss, claim, damage, liability,
action, investigation or proceeding, as such fees and expenses are incurred. This indemnity
agreement is not exclusive and will be in addition to any liability which the Underwriters
might otherwise have and shall not limit any rights or remedies which may otherwise be
available under this Agreement, at law or in equity to the Company Indemnified Parties.
(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, the indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party under this Section 7, notify such indemnifying party
in writing of the commencement of that action; provided, however, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have under this
Section 7 except to the extent it has been materially prejudiced by such failure; and,
provided, further, that the failure to notify an indemnifying party shall not relieve it
from any
24
liability which it may have to an indemnified party otherwise than under this Section 7. If
any such action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of the
indemnified party, be counsel to the indemnifying party). After notice from the
indemnifying party to the indemnified party of its election to assume the defense of such
action, except as provided herein, the indemnifying party shall not be liable to the
indemnified party under Section 7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense of such action other than reasonable
costs of investigation; provided, however, that any indemnified party shall have the right
to employ separate counsel in any such action and to participate in the defense of such
action but the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized in writing by the Company in the case of a claim
for indemnification under Section 7(a) or ▇▇▇▇▇ in the case of a claim for indemnification
under Section 7(b), (ii) such indemnified party shall have been advised by its counsel that
there may be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying party has
failed to assume the defense of such action and employ counsel reasonably satisfactory to
the indemnified party within a reasonable period of time after notice of the commencement of
the action or the indemnifying party does not diligently defend the action after assumption
of the defense, in which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of (or, in the case of
a failure to diligently defend the action after assumption of the defense, to continue to
defend) such action on behalf of such indemnified party and the indemnifying party shall be
responsible for legal or other expenses subsequently incurred by such indemnified party in
connection with the defense of such action; provided, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one separate firm
of attorneys at any time for all such indemnified parties (in addition to any local
counsel), which firm shall be designated in writing by ▇▇▇▇▇ if the indemnified parties
under this Section 7 consist of any Underwriter Indemnified Party or by the Company if the
indemnified parties under this Section 7 consist of any Company Indemnified Parties.
Subject to this Section 7(c), the amount payable by an indemnifying party under Section 7
shall include, but not be limited to, (x) reasonable legal fees and expenses of counsel to
the indemnified party and any other expenses in investigating, or preparing to defend or
defending against, or appearing as a third party witness in respect of, or otherwise
incurred in connection with, any action, investigation, proceeding or claim, and (y) all
amounts paid in settlement of any of the foregoing. No indemnifying party shall, without
the prior written consent of the indemnified parties, settle or compromise or consent to the
entry of judgment with respect to any pending or threatened action or any claim whatsoever,
in respect of which indemnification or contribution could be sought under this Section 7
(whether or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of each
indemnified party in form and substance reasonably satisfactory to such indemnified party
from all liability arising out of such action or claim and (ii) does not include a statement
as to or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party. Subject to the provisions of the following sentence, no indemnifying
party shall be liable for settlement of any pending or threatened action or any claim
whatsoever that is effected without its written consent (which consent shall not be
unreasonably withheld or delayed), but if settled with its written consent, if its consent
has been unreasonably withheld or delayed or if there be a judgment for the plaintiff in any
such matter, the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or judgment. In
addition, if at any time an indemnified party shall have requested that an indemnifying
party reimburse the indemnified party for fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature contemplated by
Sections 7(a) or (b) effected without its written consent if (i) such settlement is entered
into more than forty-five (45) days after receipt by such indemnifying party of the request
for reimbursement, (ii) such indemnifying party shall have received notice of the terms of
such settlement at least thirty (30) days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party in accordance
with such request prior to the date of such settlement.
25
(d) If the indemnification provided for in this Section 7 is unavailable or insufficient to
hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount paid,
payable or otherwise incurred by such indemnified party as a result of such loss, claim,
damage, expense or liability (or any action, investigation or proceeding in respect
thereof), as incurred, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Underwriters on the
other from the offering of the Stock, or (ii) if the allocation provided by clause (i) of
this Section 7(d) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) of this Section 7(d) but
also the relative fault of the Company, on the one hand, and the Underwriters on the other
with respect to the statements, omissions, acts or failures to act which resulted in such
loss, claim, damage, expense or liability (or any action, investigation or proceeding in
respect thereof) as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Underwriters on the other with
respect to such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement (before deducting
expenses) received by the Company, bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Stock purchased under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The relative fault
of the Company, on the one hand, and the Underwriters on the other 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, on the one hand, or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement, omission, act or failure to act; provided that the
parties hereto agree that the written information furnished to the Company through the
Representatives by or on behalf of the Underwriters for use in the Preliminary Prospectus,
any Registration Statement or the Prospectus, or in any amendment or supplement thereto,
consists solely of the Underwriter’s Information as defined in Section 18.
(e) The Company and the Underwriters agree that it would not be just and equitable if
contributions pursuant to Section 7(d) above were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable considerations referred
to Section 8(e) above. The amount paid or payable by an indemnified party as a result of
the loss, claim, damage, expense, liability, action, investigation or proceeding referred to
in Section 8(e) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against or appearing as a
third party witness in respect of, or otherwise incurred in connection with, any such loss,
claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Stock underwritten by it and
distributed to the public were offered to the public less the amount of any damages which
such Underwriter has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement, omission or alleged omission, act or alleged act or failure to act
or alleged failure to act. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Underwriters’
obligations to contribute as provided in this Section 7 are several in proportion to their
respective underwriting obligations and not joint.
8. Termination. The obligations of the Underwriters hereunder may be terminated by ▇▇▇▇▇,
in its absolute discretion by notice given to the Company prior to delivery of and payment for the
Firm Stock if, prior to that time, any of the events described in Sections 6(k), 6(m) or 6(n) have
occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under
this Agreement.
9. Reimbursement of Underwriters’ Expenses. Notwithstanding anything to the contrary in
this Agreement, if (a) this Agreement shall have been terminated pursuant to Section 8 or 10, (b)
the Company shall fail to tender the Stock for delivery to the Underwriters for any reason not
permitted under this Agreement, (c) the Underwriters shall decline to purchase the Stock for any
reason permitted under this Agreement or (d) the sale of the Stock is not consummated because any
condition to the obligations of the Underwriters set forth herein is not satisfied or because of
the refusal, inability or failure on the part of the Company to perform any agreement herein or
26
to satisfy any condition or to comply with the provisions hereof, then in addition to the payment
of amounts in accordance with Section 5, the Company shall reimburse the Underwriters for the fees
and expenses of Underwriters’ counsel and for such other out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Agreement and the proposed purchase of the
Stock, including, without limitation, travel and lodging expenses of the Underwriters, and upon
demand the Company shall pay the full amount thereof to ▇▇▇▇▇; provided that if this Agreement is
terminated pursuant to Section 10 by reason of the default of one or more Underwriters, the Company
shall not be obligated to reimburse any defaulting Underwriter on account of expenses to the extent
incurred by such defaulting Underwriter provided further that the foregoing shall not limit any
reimbursement obligation of the Company to any non-defaulting Underwriter under this Section 10.
10. Substitution of Underwriters. If any Underwriter or Underwriters shall default in its
or their obligations to purchase shares of Stock hereunder on any Closing Date and the aggregate
number of shares which such defaulting Underwriter or Underwriters agreed but failed to purchase
does not exceed ten percent (10%) of the total number of shares to be purchased by all Underwriters
on such Closing Date, the other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters shall so default and the aggregate number of shares with respect to which such default
or defaults occur is more than ten percent (10%) of the total number of shares to be purchased by
all Underwriters on such Closing Date and arrangements satisfactory to the Representatives and the
Company for the purchase of such shares 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 shares of Stock of a defaulting Underwriter or Underwriters on such Closing
Date as provided in this Section 10, (i) the Company shall have the right to postpone such 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 Statements or the Prospectus, or
in any other documents or arrangements, and the Company agrees promptly to file any amendments to
the Registration Statements or supplements to the Prospectus which may thereby be made necessary,
and (ii) the respective numbers of shares 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 10 shall be without
liability on the part of any non-defaulting Underwriter or the Company, except that the
representations, warranties, covenants, indemnities, agreements and other statements set forth in
Section 2, the obligations with respect to expenses to be paid or reimbursed pursuant to Sections 5
and 9 and the provisions of Section 7 and Sections 12 through 22, inclusive, shall not terminate
and shall remain in full force and effect.
12. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) each Underwriter’s responsibility to the Company is solely contractual in nature, the
Representatives have been retained solely to act as underwriters in connection with the sale
of the Stock and no fiduciary, advisory or agency relationship between the Company and the
Representatives has been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether any of the Representatives has advised or is advising the
Company on other matters;
(b) the price of the Stock set forth in this Agreement was established by the Company
following discussions and arms-length negotiations with the Representatives, and the Company
is capable of evaluating and understanding, and understands and accepts, the terms, risks
and conditions of the transactions contemplated by this Agreement;
(c) it has been advised that the Representatives and their affiliates are engaged in a broad
range of transactions which may involve interests that differ from those of the Company and
that the Representatives have no obligation to disclose such interests and transactions to
the Company by virtue of any fiduciary, advisory or agency relationship; and
(d) it waives, to the fullest extent permitted by law, any claims it may have against the
Representatives for breach of fiduciary duty or alleged breach of fiduciary duty and agrees
that the Representatives shall have no liability (whether direct or indirect) to the Company
in respect of such a
27
fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in
right of the Company, including stockholders, employees or creditors of the Company.
13. Successors; Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the several Underwriters, the Company their respective
successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, other than the persons mentioned in the preceding sentence, any legal
or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being intended to be and being
for the sole and exclusive benefit of such persons and for the benefit of no other person; except
that the representations, warranties, covenants, agreements and indemnities of the Company
contained in this Agreement shall also be for the benefit of the Underwriter Indemnified Parties,
and the indemnities of the several Underwriters shall be for the benefit of the Company Indemnified
Parties. It is understood that each Underwriter’s responsibility to the Company is solely
contractual in nature and the Underwriters do not owe the Company, or any other party, any
fiduciary duty as a result of this Agreement. No purchaser of any of the Stock from any
Underwriter shall be deemed to be a successor or assign by reason merely of such purchase.
14. Survival of Indemnities, Representations, Warranties, etc. The respective
indemnities, covenants, agreements, representations, warranties and other statements of the Company
and the several Underwriters, as set forth in this Agreement or made by them respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter, the Company or any person controlling any of them and shall
survive delivery of and payment for the Stock. Notwithstanding any termination of this Agreement,
including without limitation any termination pursuant to Section 8 or Section 10, the indemnities,
covenants, agreements, representations, warranties and other statements forth in Sections 2, 5, 7
and 9 and Sections 12 through 22, inclusive, of this Agreement shall not terminate and shall remain
in full force and effect at all times.
15. Notices. All statements, requests, notices and agreements hereunder shall be in
writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex, facsimile
transmission or email to ▇▇▇▇▇ and Company, LLC, Attention: Head of Equity Capital Markets,
Fax: ▇▇▇-▇▇▇-▇▇▇▇ with a copy to the General Counsel, Fax: ▇▇▇-▇▇▇-▇▇▇▇; and
(b) if to the Company shall be delivered or sent by mail, telex, facsimile transmission or
email to [
] Attention: [
], Fax: [
], email [
];
provided, however, that any notice to an Underwriter pursuant to Section 7 shall be delivered or
sent by mail, or facsimile transmission to such Underwriter at its address set forth in its
acceptance telex to the Representatives, which address will be supplied to any other party hereto
by the Representatives upon request. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof.
16. Definition of Certain Terms. For purposes of this Agreement, (a) “business day” means
any day on which the New York Stock Exchange, Inc. is open for trading and (b) “subsidiary” has the
meaning set forth in Rule 405 of the Rules and Regulations.
17. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, including without limitation Section 5-1401 of the New York
General Obligations. The Company and the Company Subsidiary irrevocably appoint ▇▇▇▇▇▇ Godward
Kronish LLP, with offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (and its
successors) as their authorized agent in the Borough of Manhattan in The City of New York upon
which process may be served in any such suit or proceeding, and agrees that service of process upon
such agent, and written notice of said service to the Company or the Company Subsidiary by the
person serving the same to the address provided in Section 15, shall be deemed in every respect
effective service of process upon the Company and the Company Subsidiary in any such suit or
proceeding. The Company irrevocably (a) submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York for the purpose of any suit,
action or other proceeding arising out of this Agreement or the transactions contemplated by this
Agreement, the Registration Statements and any Preliminary Prospectus or the Prospectus, (b) agrees
that all claims in respect of any such suit, action or proceeding may be heard and determined by
any such court, (c) waives to the fullest extent permitted by applicable law, any immunity from the
jurisdiction of any such court or from any legal process, (d) agrees not to commence any such suit,
action
28
or proceeding other than in such courts, and (e) waives, to the fullest extent permitted by
applicable law, any claim that any such suit, action or proceeding is brought in an inconvenient
forum.
18. Underwriters’ Information. The parties hereto acknowledge and agree that, for all
purposes of this Agreement, the Underwriters’ Information consists solely of the following
information in the Prospectus: (i) the last paragraph on the front cover page concerning the terms
of the offering by the Underwriters; and (ii) the statements concerning the Underwriters contained
in the Prospectus under the heading “Underwriting.”
19. Authority of the Representatives. In connection with this Agreement, you will act for
and on behalf of the several Underwriters, and any action taken under this Agreement by the
Representatives, will be binding on all the Underwriters.
20. Partial Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity or enforceability of
any other section, paragraph, clause or provision hereof. If any section, paragraph, clause or
provision of this Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
21. General. This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof. In this Agreement, the
masculine, feminine and neuter genders and the singular and the plural include one another. The
section headings in this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be amended or modified,
and the observance of any term of this Agreement may be waived, only by a writing signed by the
Company and the Representatives.
22. Counterparts. This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
29
If the foregoing is in accordance with your understanding of the agreement between the Company
and the several Underwriters, kindly indicate your acceptance in the space provided for that
purpose below.
| Very truly yours, ZARS PHARMA, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Accepted as of
the date first above written:
the date first above written:
▇▇▇▇▇ and Company, LLC
CIBC World Markets
Acting on their own behalf
and as Representatives of several
Underwriters referred to in the
foregoing Agreement.
CIBC World Markets
Acting on their own behalf
and as Representatives of several
Underwriters referred to in the
foregoing Agreement.
By: ▇▇▇▇▇ and Company, LLC
| By: | ||||
| Name: | ▇▇▇▇▇▇ ▇ ▇▇▇▇▇ | |||
| Title: | Managing Director and Head of Equity Capital | |||
| Markets | ||||
30
SCHEDULE A
| Number of Shares of Firm | Number of Shares of Optional | |||||||
| Name | Stock to be Purchased | Stock to be Purchased | ||||||
▇▇▇▇▇ and Company, LLC |
||||||||
CIBC World Markets |
||||||||
Leerink ▇▇▇▇▇ & Company |
||||||||
Susquehanna Financial Group, LLLP |
||||||||
Total |
||||||||
31
SCHEDULE B
General Use Free Writing Prospectuses
32
SCHEDULE C
List of the Relationships of the Company and its affiliates with NASD member firms
EXHIBIT A
Form of Lock-Up Agreement
34
Lock-Up Agreement
[ ], 2007
▇▇▇▇▇ and Company, LLC
CIBC World Markets
As Representatives of the several Underwriters
c/o Cowen and Company, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
CIBC World Markets
As Representatives of the several Underwriters
c/o Cowen and Company, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: ZARS Pharma, Inc.. – Registration Statement on Form S-1 for Shares of Common Stock
Dear Sirs:
This Agreement is being delivered to you in connection with the proposed Underwriting
Agreement (the “Underwriting Agreement”) between ZARS Pharma, Inc., a Delaware corporation (the
“Company”) and ▇▇▇▇▇ and Company, LLC (“Cowen”) and CIBC World Markets (“CIBC”), as representatives
(the “Representatives”) of a group of underwriters (collectively, the “Underwriters”), to be named
therein, and the other parties thereto (if any), relating to the proposed public offering (the
“Offering”) of shares of the common stock, par value $.01 per share (the “Common Stock”) of the
Company pursuant to a Registration Statement on Form S-1 (the “Registration Statement”) to be filed
with the Securities and Exchange Commission.
In order to induce you and the other Underwriters to enter into the Underwriting Agreement,
and in light of the benefits that the offering of the Common Stock will confer upon the undersigned
in its capacity as a securityholder and/or an officer, director or employee of the Company, and for
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each Underwriter that, during the period beginning on and including the
date of the Underwriting Agreement through and including the date that is the 180th day after the
date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned will not, without the
prior written consent of Cowen and CIBC, directly or indirectly, (i) offer, sell, assign, transfer,
pledge, contract to sell, or otherwise dispose of, or announce the intention to otherwise dispose
of, any shares of Common Stock (including, without limitation, Common Stock which may be deemed to
be beneficially owned by the undersigned in accordance with the rules and regulations promulgated
under the Securities Act of 1933, as the same may be amended or supplemented from time to time
(such shares, the “Beneficially Owned Shares”)) or securities convertible into or exercisable or
exchangeable for Common Stock, (ii) enter into any swap, hedge or similar agreement or arrangement
that transfers in whole or in part, the economic risk of ownership of the Beneficially Owned Shares
or securities convertible into or exercisable or exchangeable for Common Stock, whether now owned
or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter
acquires the power of disposition, or (iii) engage in any short selling of the Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock. If (i) the Company
issues an earnings release or announces material news or a material event relating to the Company
during the last 17 days of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up
Period, the Company announces that it will release earnings results during the 16-day period
beginning on the last day of the Lock-Up Period, the Lock-Up Period shall be extended and the
restrictions imposed by this Agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the announcement of the material news
or material event, as applicable, unless Cowen and CIBC waive, in writing, such extension.
The restrictions set forth in the immediately preceding paragraph shall not apply to:
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(1) if the undersigned is a natural person, any transfers made by the undersigned (a) as a
bona fide gift to any one or more donees or to a trust the beneficiaries of which are
exclusively the undersigned or members of the undersigned’s immediate family, (b) by will or
intestate succession upon the death of the undersigned or (c) as a bona fide gift to a
charity or educational institution,
(2) if the undersigned is a corporation, partnership, limited liability company or other
business entity, any transfers to any shareholder, partner or member of, or owner of a
similar equity interest in, the undersigned, as the case may be, if, in any such case, such
transfer is not for value, and
(3) if the undersigned is a corporation, partnership, limited liability company or other
business entity, any transfer made by the undersigned (a) in connection with the sale or
other bona fide transfer in a single transaction of all or substantially all of the
undersigned’s capital stock, partnership interests, membership interests or other similar
equity interests, as the case may be, or all or substantially all of the undersigned’s
assets, in any such case not undertaken for the purpose of avoiding the restrictions imposed
by this agreement or (b) to another corporation, partnership, limited liability company or
other business entity so long as the transferee is an affiliate (as defined below) of the
undersigned and such transfer is not for value;
provided, however, that in the case of any transfer described in clause (1), (2) or (3) above, it
shall be a condition to the transfer that (A) the transferee executes and delivers to Cowen and
CIBC, acting on behalf of the Underwriters, not later than one business day prior to such transfer,
a written agreement, in substantially the form of this agreement (it being understood that any
references to “immediate family” in the agreement executed by such transferee shall expressly refer
only to the immediate family of the undersigned and not to the immediate family of the transferee)
or otherwise satisfactory in form and substance to Cowen and CIBC, and (B) if the undersigned is
required to file a report under Section 16(a) of the Securities Exchange Act of 1934, as amended,
reporting a reduction in beneficial ownership of shares of Common Stock or Beneficially Owned
Shares or any securities convertible into or exercisable or exchangeable for Common Stock or
Beneficially Owned Shares during the Lock-Up Period (as the same may be extended as described
above), the undersigned shall include a statement in such report to the effect that, in the case of
any transfer pursuant to clause (1) above, such transfer is being made as a gift or by will or
intestate succession or, in the case of any transfer pursuant to clause (2) above, such transfer is
being made to a shareholder, partner or member of, or owner of a similar equity interest in, the
undersigned and is not a transfer for value or, in the case of any transfer pursuant to clause (3)
above, such transfer is being made either (a) in connection with the sale or other bona fide
transfer in a single transaction of all or substantially all of the undersigned’s capital stock,
partnership interests, membership interests or other similar equity interests, as the case may be,
or all or substantially all of the undersigned’s assets or (b) to another corporation, partnership,
limited liability company or other business entity that is an affiliate of the undersigned and such
transfer is not for value. For purposes of this paragraph, “immediate family” shall mean a spouse,
child, grandchild or other lineal descendant (including by adoption), father, mother, brother or
sister of the undersigned; and “affiliate” shall have the meaning set forth in Rule 405 under the
Securities Act of 1933, as amended.
In addition, notwithstanding anything to the contrary contained in this Agreement, shares of
Common Stock acquired in open market transactions after the date of the Underwriting Agreement
shall not be subject to this Lock-Up Agreement so long as, in connection therewith, no public
reports, including but not limited to reports pursuant to Rule 144 of the Securities Act of 1933,
as amended, or pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, are
required to be filed by the undersigned during the duration of the Lock-Up Period or are
voluntarily filed by the undersigned during the duration of the Lock-Up Period.
In order to enable this covenant to be enforced, the undersigned hereby consents to the
placing of legends or stop transfer instructions with the Company’s transfer agent with respect to
any Common Stock or securities convertible into or exercisable or exchangeable for Common Stock.
The undersigned further agrees that (i) it will not, during the Lock-Up Period (as the same
may be extended as described above), make any demand or request for or exercise any right with
respect to the registration under the Securities Act of 1933, as amended, of any shares of Common
Stock or other Beneficially Owned Shares or any securities convertible into or exercisable or
exchangeable for Common Stock or other Beneficially Owned Shares, and (ii) the Company may, with
respect to any Common Stock or other Beneficially Owned Shares or any securities convertible into
or exercisable or exchangeable for Common Stock or other Beneficially Owned Shares owned or held
(of record or beneficially) by the undersigned, cause the transfer agent or other registrar to
enter stop transfer
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instructions and implement stop transfer procedures with respect to such securities during the
Lock-Up Period (as the same may be extended as described above).
The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this agreement and that this agreement has been duly authorized (if the
undersigned is not a natural person), executed and delivered by the undersigned and is a valid and
binding agreement of the undersigned. This agreement and all authority herein conferred are
irrevocable and shall survive the death or incapacity of the undersigned (if a natural person) and
shall be binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
The undersigned acknowledges and agrees that whether or not any public offering of Common
Stock actually occurs depends on a number of factors, including market conditions.
If (i) the Underwriting Agreement (other than the provisions thereof which survive
termination) terminates or is terminated prior to the payment for and delivery of the shares
proposed for sale under the Registration Statement, (ii) the Company notifies you in writing that
it does not intend to proceed with the Offering or (iii) the Underwriting Agreement is not executed
within one (1) year from the date of this Lock-Up Agreement, this Lock-Up Agreement shall terminate
immediately upon such date and be of no further force and effect.
| Very truly yours, | ||||
| Print Name of Stockholder | ||||
| Authorized Signature | ||||
| Name of Signatory if Stockholder is an Entity | ||||
| Title of Signatory if Stockholder is an Entity | ||||
| Address: | ||||
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EXHIBIT B
Matters to be Covered in the Opinion of Counsel for the Company
Intentionally Omitted.
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EXHIBIT C
Matters to be Covered in the Opinion of Regulatory Counsel for the Company
Intentionally Omitted.
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EXHIBIT D
Matters to be Covered in the Opinion of Patent Counsel for the Company
Intentionally Omitted.
EXHIBIT
E
Matters
to be Covered in the Opinion of Utah Counsel for the Company
Intentionally Omitted.