Exhibit 1
[Form of Underwriting Agreement]
1,200,000 Shares of Common Stock
and
1,200,000 Redeemable Warrants
Apollo BioPharmaceutics, Inc.
UNDERWRITING AGREEMENT
Garden City, New York
____________, 1997
First United Equities Corporation
As Representative of the
Several Underwriters listed on Schedule A hereto
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Apollo BioPharmaceutics, Inc., a Delaware corporation (the "Company"),
confirms its agreement with First United Equities Corporation ("First United")
and each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 12 hereof), for whom First United is acting as
representative (in such capacity, First United shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares ("Shares") of the Company's common stock, $.02 par
value par share ("Common Stock"), and redeemable warrants ("Redeemable
Warrants"), each such Redeemable Warrant entitling the registered holder thereof
to purchase one share of Common Stock, set forth in Schedule A hereto. Pursuant
to, and subject to certain conditions set forth in, the agreement (the "Warrant
Agreement") between the Company and American Stock Transfer and Trust Company
(the "Warrant Agent"), each Redeemable Warrant is exercisable from _______, 1997
(the date of the Prospectus, as defined herein) until ____________, 2002 (five
years after the date of the Prospectus, as defined herein) at an initial
exercise price (subject to adjustment as set forth in the Warrant Agreement)
equal to $___ per share of Common Stock (130% of the initial public offering
price thereof), and is redeemable at the Company's election for a period of four
years commencing 12 months after the date hereof. Such Shares and Redeemable
Warrants are hereinafter referred to as the "Firm Securities."
1
Upon your request, as provided in Section 3(b) of this Agreement, the
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 180,000 shares of Common Stock and/or up to an additional
180,000 Redeemable Warrants for the purpose of covering over-allotments, if any.
Such 180,000 additional shares of Common Stock and 180,000 additional Redeemable
Warrants are hereinafter referred to as the "Option Securities," and together
with the Firm Securities are hereinafter referred to as the "Securities." The
shares of Common Stock issuable upon exercise of the Redeemable Warrants are
hereinafter sometimes referred to as the "Redeemable Warrant Shares."
The Company also proposes to issue and sell to you certain warrants (the
"Managing Underwriter's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") to be dated as of the
Closing Date (as hereinafter defined) for the purchase of up to an additional
120,000 shares of Common Stock, each such Managing Underwriter's Warrant
entitling the registered holder thereof to purchase one share of Common Stock
and being substantially identical to the Redeemable Warrants, except that, so
long as the Managing Underwriter's Warrants are held by the Representative or
any affiliate thereof, the Managing Underwriter's Warrants shall not be
redeemable by the Company. The Managing Underwriter's Warrants and the shares of
Common Stock issuable upon exercise of the Managing Underwriter's Warrants are
hereinafter referred to as the "Representative's Securities." The Securities and
the Representative's Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
You represent and warrant that you have been authorized by each of the
other Underwriters to enter into this Agreement on its behalf and to act for it
in the manner herein provided.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-18769), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities and the Redeemable Warrant Shares under the Securities Act of 1933,
as amended (the "Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Rules and Regulations") of the
Commission under the Act. The Company will not file any amendment thereto to
which the Underwriters shall have objected in writing after having been
furnished with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time such
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein (including without limitation those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration
2
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
For the purposes of this Agreement, all references to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to ▇▇▇▇▇.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any of any Preliminary Prospectus,
the Registration Statement, or the Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or, to the best knowledge of the Company after due inquiry, threatened. Each of
the Preliminary Prospectus, the Registration Statement, and the Prospectus at
the time of filing thereof conformed in all material respects with the
requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement, or the Prospectus at the
time of filing thereof contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by or on behalf of any Underwriter expressly for use in the
Preliminary Prospectus, Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto.
(c) When the Registration Statement becomes effective and as of each
Closing Date and each Option Closing Date, if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, each of the Registration Statement and the
Prospectus will conform in all material respects to the requirements of the Act
and the Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company with respect to the Underwriters by or on behalf of any
Underwriter expressly for use in the Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of Delaware. Except as
set forth in the Prospectus, the Company does not own an interest in any
corporation, partnership, limited liability company, trust, joint venture or
other business entity. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations require such
qualification or licensing (except where the failure to be so qualified would
not have a Material Adverse Effect (as hereinafter defined)). The Company has
all requisite power and authority (corporate and other), and has
3
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises, and permits of and from all governmental or regulatory
authorities (including without limitation those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; to the Company's knowledge, the
Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state, local and foreign laws, rules and regulations;
and the Company has not received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order, license,
certificate, franchise or permit that, if the subject of an unfavorable
decision, ruling or finding, could, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined). For purposes of this
Agreement, "Material Adverse Effect" means any circumstance, change in or effect
on the Company that, individually or in the aggregate with any other
circumstance, change in or effect on the Company is, or could be, materially
adverse to the condition (financial or otherwise), earnings, position,
prospects, value, operation, properties, employee relationships, customer or
supplier relationships, liabilities, business or results of operations of the
Company.
(e) The Company has the duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and "Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date, if any, based upon the assumptions set forth
therein (except that the effects of the exercise of the Underwriters'
over-allotment option are not reflected therein). The Company is not a party to
or bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, warrants, options or other securities, or any rights
with respect thereto, except for this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement and as described in the Prospectus. All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and the holders thereof
have no rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such securities
was issued in violation of the preemptive rights of any holders of any security
of the Company or similar contractual rights granted by or binding upon the
Company. The Securities, the Redeemable Warrant Shares and the Representative's
Securities are not and will not be subject to any preemptive or other similar
rights of any stockholder of the Company or any other person, have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof (and to the extent applicable, of the Warrant Agreement and the
Representative's Warrant Agreement), will be validly issued, fully paid, and
non-assessable and will conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issuance, and sale of the Securities, the Redeemable Warrant Shares and the
Representative's Securities has been duly and validly taken; and the
certificates evidencing the Shares will be in due and proper form.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus present fairly, in all material
respects, the financial position, income, changes in cash flow, changes in
stockholders' equity, and the results of operations of the Company at the
respective dates and for the respective periods to which they apply and such
financial statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. The pro forma financial
4
statements and other pro forma financial information (including the notes
thereto) included in the Registration Statement and the Prospectus (A) present
fairly, in all material respects, the information shown therein, (B) have been
prepared, in all material respects, in accordance with the applicable
requirements of Item 310 of Regulation S-B promulgated under the Exchange Act,
(C) have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements, and (D) have been properly
compiled on the bases described therein, and the assumptions used in the
preparation of the pro forma financial statements and other pro forma financial
information and included in the Registration Statement and the Prospectus are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein. There has been no
Material Adverse Effect on the Company since the date of the financial
statements included in the Registration Statement and the Prospectus and the
outstanding debt, the property (both tangible and intangible), and business of
the Company conform in all respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information set forth in
the Prospectus under the headings "Summary Financial Data," "Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," present fairly, on the basis stated in the
Prospectus, the information set forth therein, and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(g) The Company (i) has paid all federal, state, local, and foreign taxes
for which it is liable (other than such taxes as are being contested in good
faith for which adequate reserves have been established) including, without
limitation withholding taxes and amounts payable under Chapters 21 through 24 of
the Internal Revenue Code of 1986, as amended (the "Code"), and has duly filed
all information returns it is required to file pursuant to the Code, (ii) has
established adequate reserves for such taxes that are not due and payable, and
(iii) does not have any material tax deficiency or claims outstanding, proposed
or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Securities, the Redeemable Warrant Shares or the Representative's
Securities, (ii) the purchase by the Underwriters of the Securities, and the
purchase and exercise by the Representative of the Managing Underwriter's
Warrants, (iii) the purchase of the Redeemable Warrant Shares in connection with
the exercise of the Redeemable Warrants, and the purchase of the Common Stock
purchasable upon exercise of the Managing Underwriter's Warrants, (iv) the
consummation by the Company of any of its obligations under this Agreement, the
Warrant Agreement, the Representative's Warrant Agreement, the Managing
Underwriter's Warrants or the Redeemable Warrants, (v) the initial sale to the
public of the Securities or (vi) resales of the Securities in connection with
the distribution contemplated hereby.
(i) The Company maintains insurance policies, including without limitation
general liability and property insurance, that insure the Company and its
employees and agents against such losses and risks as are generally insured
against by comparable businesses. The Company has not failed to give notice or
present any insurance claim with respect to any matter, including without
limitation to the Company's business, property or employees, under any insurance
policy or surety bond in a due and timely manner and has failed to pay any
premiums due and payable thereunder. To the best knowledge of the Company after
due inquiry, there are no facts or
5
circumstances under any such insurance policy or surety bond that would relieve
any insurer of its obligation to satisfy in full any otherwise valid claim of
the Company.
(j) Except as disclosed in the Registration Statement, there is no action,
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding (including without limitation those having jurisdiction
over environmental or similar matters), domestic or foreign, pending or, to the
best knowledge of the Company after due inquiry, threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of, the Company that (i) questions the validity of the capital stock of
the Company, this Agreement, the Warrant Agreement, the Representative's Warrant
Agreement, the Managing Underwriter's Warrants, the Redeemable Warrants, or any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement, the Warrant Agreement, the Representative's Warrant Agreement,
the Managing Underwriter's Warrants or the Redeemable Warrants, or (ii) could,
if adversely determined, have a Material Adverse Effect.
(k) The Company has full legal right, power, and authority to issue,
deliver, and sell the Securities, the Redeemable Warrant Shares and the
Representative's Securities, and to enter into this Agreement, the Warrant
Agreement, the Representative's Warrant Agreement, the Managing Underwriter's
Warrants and the Redeemable Warrants, and to consummate the transactions
provided for in such agreements; and this Agreement has been duly and properly
authorized, executed and delivered by the Company; and the Warrant Agreement,
the Representative's Warrant Agreement, the Redeemable Warrants and the Managing
Underwriter's Warrants have been duly authorized by the Company and will be duly
executed and delivered by the Company at the Closing. This Agreement
constitutes, and each of the Warrant Agreement, the Representative's Warrant
Agreement, the Redeemable Warrants, and the Managing Underwriter's Warrants,
when delivered at the Closing or any Option Closing will constitute, the legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms; and none of the Company's issue and sale of the
Securities, the Redeemable Warrant Shares or the Representative's Securities,
its execution or delivery of this Agreement, the Warrant Agreement, the Managing
Underwriter's Warrants, the Representative's Warrant Agreement, the Redeemable
Warrants or the Managing Underwriter's Warrants, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with, or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any Lien of any kind
whatsoever upon, any property or assets (tangible or intangible) of the Company
pursuant to the terms of (i) the certificate of incorporation or by-laws, in
each case as amended to date, of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement, or any other agreement or instrument
to which the Company is a party or by which it is bound or to which any of its
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation,
applicable to the Company, of any arbitrator, court, regulatory body, or
administrative agency or other governmental agency or body (including without
limitation those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
6
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court or governmental or
regulatory authority, domestic or foreign, or any other person or entity, is
required for the issuance of the Securities, the Redeemable Warrant Shares and
the Representative's Securities pursuant to the Prospectus and the Registration
Statement, the performance of the Company's obligations under this Agreement,
the Warrant Agreement, the Redeemable Warrants, the Representative's Warrant
Agreement and the Managing Underwriter's Warrants, and the transactions
contemplated hereby and thereby, including without limitation any waiver of any
preemptive, first refusal or other rights that any person or entity may have for
the issue and/or sale of any of the Securities, the Redeemable Warrant Shares or
the Representative's Securities, except such as have been or may be obtained
under the Act or may be required under the state securities or blue sky laws
("Blue Sky laws"), in connection with the Underwriters' purchase and
distribution of the Securities, the purchase of the Redeemable Warrant Shares to
be sold by the Company under the Redeemable Warrants, and the purchase of the
Representative's Securities to be sold by the Company under the Representative's
Warrant Agreement and the Managing Underwriter's Warrants.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is party or by it may be bound or to
which any of its assets, properties, or business may be subject, have been duly
and validly authorized, executed and delivered by the Company and constitute the
legal, valid and binding agreements of the Company, and to the best knowledge of
the Company after due inquiry, the other parties thereto, enforceable against
the Company, and to the best knowledge of the Company after due inquiry, the
other parties thereto, in accordance with their respective terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form SB-2, and there are no contracts, agreements or
other documents that are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement that are not
described or filed as required, and the exhibits that have been filed are
complete and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money, (ii) entered into any transaction other than in the ordinary
course of business consistent with past practice, or (iii) declared or paid any
dividend or made any other distribution on or in respect of its capital stock of
any class, and, since such respective dates, there has not been (i) any change
in the capital stock, in the debt (long or short term) or in the liabilities of
the Company or (ii) a Material Adverse Effect.
(o) No breach or default by or of the Company or, to the best knowledge of
the Company after due inquiry, any other party exists in the due performance and
observance of any term, covenant or condition of any material license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
7
instrument to which the Company is a party or by which it may be bound or to
which the property or assets (tangible or intangible) of the Company is subject
or affected.
(p) Except as described in the Prospectus, the Company does not maintain,
sponsor or contribute to any program or arrangement that is an "employee pension
benefit plan," an "employee welfare benefit plan," or a "multiemployer plan" as
such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company does not maintain or contribute (and has not previously
maintained or contributed) to a "defined benefit plan," as defined in Section
3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, that could subject the Company to any tax penalty on
prohibited transactions and that has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure, and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination or opinion letters have been received from the Internal Revenue
Service with respect to each ERISA Plan which is intended to comply with Code
Section 401(a), stating that the form of such ERISA Plan and the attendant trust
are qualified thereunder. The Company has never completely or partially
withdrawn from a "multiemployer plan."
(q) The Company has not taken and shall not take, directly or indirectly,
any action designed to, or that might reasonably be expected to cause or result
in (under the Exchange Act or otherwise), stabilization or manipulation of the
price of any security of the Company, whether to facilitate the sale or resale
of the Securities or otherwise.
(r) To the best knowledge of the Company and except as disclosed in the
Prospectus, none of the patents, patent rights, trademarks, service marks, trade
names, copyrights, technology, and know-how, and none of the license or rights
to the foregoing, presently owned or held by the Company or used in or necessary
to the conduct of its business as now conducted or proposed to be conducted (all
of the foregoing, collectively, its "Intellectual Properties"), are in dispute
or are in any conflict with the right of any other person or entity. To the best
of knowledge of the Company after due inquiry, the Company (i) owns or has the
right to use all of its Intellectual Properties, free and clear of any liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever (collectively, "Liens") without
infringing upon or otherwise acting adversely to the right or claimed right of
any person or other entity under or with respect to any of the foregoing and
(ii) except as set forth in the Prospectus, is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees, or otherwise
to any owner or licensee of, or other claimant to, any Intellectual Properties
with respect to the use thereof or in connection with the conduct of its
business or otherwise.
(s) To the Company's best knowledge and except as disclosed in the
Prospectus, the Company owns and has the unrestricted right to use all trade
secrets, know-how (including all unpatented and/or unpatentable proprietary or
confidential information, systems, and procedures), inventions, designs,
processes, works of authorship, computer programs, and technical data and
information that are material to the development, manufacture, operation and
sale of all products and services sold or otherwise described or referred to in
the Registration Statement and the Prospectus proposed to be sold by the
Company, free and clear of and without violating any right, Lien or claim of
others, including without limitation former employers of its employees;
8
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company or its employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company. The Company is not aware of any such development of
similar or identical trade secrets or technical information by others.
(t) The Company has taken reasonable security measures to protect the
secrecy, confidentiality, and value of all of its Intellectual Properties in all
material respects.
(u) The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in the
Prospectus to be owned or leased by it free and clear of all Liens of any kind
whatsoever, other than (i) those referred to in the Prospectus and (ii) Liens
for taxes not yet due and payable.
(v) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. LLP, whose report is filed with the Commission as
a part of the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
(w) There are no agreements, claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's, consulting or origination fee with respect to the sale of the
Securities, the Redeemable Warrant Shares or the Representative's Securities or
any other agreements, claims, payments, issuances, arrangements or
understandings with respect to the Company or any of its officers, directors,
stockholders, partners, employees, or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(x) Each of the Common Stock and the Redeemable Warrants has been approved
for quotation on the NASDAQ SmallCap Market.
(y) Neither the Company nor any of its officers, employees, or agents or
any other person acting on behalf of the Company has, directly or indirectly,
given or agreed to give any money, gift, or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee, or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) that (a) might subject the
Company or any other such person to any damage or penalty in any civil,
criminal, or governmental litigation or proceeding (domestic or foreign), (b) if
not given in the past, could have had a Material Adverse Effect on the Company,
or (c) if not continued in the future, could have a Material Adverse Effect on
the Company. The Company's internal accounting controls are sufficient to cause
the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(z) Except as set forth in the Prospectus, no officer, director or
principal stockholder of the Company, nor any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities, has or
9
has had, either directly or indirectly, (i) an interest in any person or entity
that (A) furnishes or sells services or products that are furnished or sold or
are proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing or proposed agreements,
arrangements, understandings, or transactions between or among the Company and
any officer, director, or principal stockholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
(aa) Any certificate signed by any officer of the Company on behalf of the
Company and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
(bb) The minute books of the Company have been made available to the
Representative and contains a complete summary of all meetings and actions of
the directors of the Company since the time of its incorporation, and reflects
accurately in all material respects all transactions referred to in such
minutes.
(cc) No holders of any securities of the Company or of any options,
warrants, or other convertible or exchangeable securities of the Company (i)
have the right to include any securities issued by the Company in the
Registration Statement or (ii) except and to the extent described in the
Prospectus, have the right to include any securities issued by the Company in
any registration statement to be filed by the Company or to require the Company
to file a registration statement under the Act; and, except and to the extent
described in the Prospectus, no person or entity holds any anti- dilution rights
with respect to any securities of the Company.
(dd) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of Dr. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇ in the forms filed as Exhibits
10.12, 10.14 and 10.13, respectively, to the Registration Statement, and (ii)
purchased term key-person insurance on the life of Dr. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the
amount of $1,000,000, which policy names the Company as the beneficiary thereof.
2. Representations and Warranties of the Managing Underwriter. The
Managing Underwriter represents and warrants, on behalf of itself and each of
the Underwriters, as follows:
(a) The Managing Underwriter has been authorized by each of the other
Underwriters to enter into this Agreement on its behalf and to act for it in the
manner herein provided.
(b) The Managing Underwriter, its counsel and/or certain agents of the
Managing Underwriter, have been provided with copies of all materials related to
the Company which they have requested and all such parties have had an adequate
opportunity to review all such materials.
(c) The information set forth in the last paragraph on the front cover
page, the first paragraph on the inside front cover, under the caption
"Underwriting" and in the Risk Factor under the caption entitled "Inexperience
of Managing Underwriter" in the Registration Statement any Preliminary
Prospectus, and the Prospectus relating to the Securities filed by the Company
10
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you,
on behalf of the respective Underwriters, represent and warrant to the Company
that the statements made therein are correct.
3. Purchase, Sale, and Delivery of the Securities and Managing
Underwriter's Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$__________ (90% of the public offering price) per Share and $0.25 per
Redeemable Warrant, those numbers of Shares and Redeemable Warrants set forth in
Schedule A opposite the name of such Underwriter, subject to such adjustment as
the Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares or warrants, plus any additional number of Firm
Securities that such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants, and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 180,000 shares of Common of Stock at a price of $_____ (90% of the
public offering price) per share, and/or up to an additional 180,000 Redeemable
Warrants at a price of $0.25 per Redeemable Warrant. The option granted hereby
will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the respective numbers and types of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for any such Option Securities. Any such time
and date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative and the
Company. Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Option Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and the delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative at
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________________, 1997 by wire transfer of same day federal funds or at such
other time and date as shall be agreed upon by the Representative and the
Company, but not less than three nor more than fifteen full business days after
the effective date of the Registration Statement (such time and date of payment
and delivery being herein called "Closing
11
Date"). In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company, by New York Clearing House funds. If such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase that proportion of the total number of Option Securities then being
purchased that the number of Firm Securities set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares or warrants. Certificates for the Firm Securities and the Option
Securities, if any, shall be in the definitive, fully registered form, shall
bear no restrictive legends and shall be in such denominations and registered in
such names as the Underwriters may request in writing at least two (2) business
days prior to the Closing Date or the relevant Option Closing Date, as the case
may be. The certificates for the Firm Securities and the Option Securities, if
any, shall be made available to the Representative at such office or such other
place as the Representative may designate for inspection, checking and packaging
no later than 9:30 a.m. on the last business day prior to the Closing Date or
the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Managing Underwriter's Warrants at a purchase price of $.001
per Representative's Warrant, which warrants shall entitle the holders thereof
to purchase up to an aggregate of 120,000 shares of Common Stock. The Managing
Underwriter's Warrants shall be exercisable for a period of five (5) years
commencing on the effective date of the Registration Statement at an exercise
price per share purchased thereunder equal to one hundred thirty percent (130%)
of the initial public offering price of the Shares. The Representative's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
attached hereto as Exhibit A. Payment for the Managing Underwriter's Warrants
shall be made on the Closing Date.
4. Public Offering of the Shares and the Redeemable Warrants.
As soon after the Registration Statement becomes effective as the
Representative deems advisable, the Underwriters shall make a public offering of
the Shares and the Redeemable Warrants (other than to residents of or in any
jurisdiction in which qualification of the Shares and/or the Redeemable Warrants
is required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price of the Shares and/or the Redeemable
Warrant after distribution thereof has been completed to such extent as the
Representative, in its sole discretion, deems advisable. The Underwriters may
enter into one or more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
12
5. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and shall not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the Act or
the Exchange Act before termination of the offering of the Shares and the
Redeemable Warrants by the Underwriters of which the Representative shall not
previously have been advised and furnished with a copy, or to which the
Representative shall have objected or which is not in compliance with the Act,
the Exchange Act and the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company shall advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, or if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission or authority of any proceedings
for the suspension of the qualification of any of the Securities or the
Redeemable Warrant Shares for offering or sale in any jurisdiction or of the
initiation or threatening of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission or authority shall enter a stop order or suspend
such qualification at any time, the Company shall use its best efforts to obtain
promptly the lifting of such order or suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement.
(d) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus that the Company proposes for use by the
Underwriters in connection with the offering of the Securities that differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or its counsel ("Underwriters' Counsel") shall object.
13
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities and the Redeemable Warrant Shares for
offering and sale under the securities laws of such jurisdictions as the
Representative may designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company shall, unless the
Representative agrees that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities and the Redeemable Warrant Shares in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities or the Redeemable
Warrant Shares is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company shall notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company shall furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the twelve-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement that will be in the detail required by, and otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve consecutive months after the effective date
of the Registration Statement.
(h) During a period of five years after the date hereof, the Company shall
deliver to the Representative:
14
i) statements of income of the Company for each quarter in the form
furnished to the Company's stockholders and certified by the Company's
principal financial or accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent certified
public accountants;
iii) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD
or any securities exchange; and
v) every material press release and every material news item or
article of interest to the financial community in respect of the Company
or its affairs that was released or prepared by or on behalf of the
Company; provided that the Company shall only be obligated to use best
efforts as to the information set forth in this subsection (iv).
During such five-year period, the foregoing financial statements shall
comply in all material respects with the requirements of the Exchange Act.
(i) The Company shall maintain a transfer agent, and if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock and a warrant agent for
the Redeemable Warrants.
(j) The Company shall furnish or cause to be furnished to the
Representative or on the Representative's order, without charge, at such place
as the Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (one of which copies shall be manually signed and shall include all
financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Representative may request.
(k) The Company has provided the Representative with true copies of duly
executed, legally binding and enforceable agreements (collectively, the "Lock-Up
Agreements") pursuant to which, for a period of thirteen (13) months after the
effective date of the Registration Statement, each of the Company's officers,
directors, stockholders of the Company (except as otherwise disclosed to the
Representative), and all holders of securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock has agreed that, without the prior written consent of the
Representative, such person or entity (each, a "Restricted Party") shall not
directly or indirectly offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate or otherwise encumber or dispose of any
shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant
15
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein in accordance with the Rules and Regulations (all of
the foregoing being referred to collectively as "Restricted Securities"). On or
before the Closing Date, the Company shall deliver instructions to the transfer
agent authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to place
appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall not take, or permit any of its officers, directors,
or stockholders or any of their respective affiliates (within the meaning of the
Rules and Regulations) to take, directly or indirectly, any action designed to,
or that might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms and other
documents as may be required (including without limitation a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed shall comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(o) Unless otherwise agreed by the Company and the Representative, the
Company shall cause the Common Stock and the Redeemable Warrants to be quoted on
the NASDAQ SmallCap Market, and for a period of seven years from the date
hereof, shall use its best efforts to maintain the NASDAQ SmallCap Market
quotation of the Common Stock and the Redeemable Warrants.
(p) For a period of three years from the Closing Date, the Company shall
furnish to the Representative, as and to the extent reasonably requested by the
Representative, at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Company's securities, (ii) the list of holders of all of
the Company's securities, and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the Company.
(q) The Company has filed a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Common Stock and the Redeemable
Warrants, respectively, and has requested that such filing be declared effective
at the same time as the Registration Statement becomes effective, and as soon as
practicable hereafter but in no event more than 30 days from the effective date
of the Registration Statement, shall, take all necessary and appropriate actions
for the Common Stock and the Redeemable Warrants to be included in Standard and
Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than seven years, in the case of the Common
Stock, and until no Redeemable Warrants are outstanding, in the case of the
Redeemable Warrants.
16
(r) Until that date which is 25 days after the effective date of the
Registration Statement the Company shall not, without the prior written consent
of the Representative and Underwriters' Counsel, issue, directly or indirectly,
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's operations
or such releases as counsel has advised the Company are necessary to comply with
applicable law.
(s) Until after the earlier of (i) six years from the date hereof, and
(ii) the sale to the public of all of the Representative's Securities, the
Company shall maintain the effectiveness of the Registration Statement on Form
SB-2 (or other appropriate form, including, without limitation, Form S-3)
covering the Representative's Securities.
(t) For a period of three years after the effective date of the
Registration Statement, (i) the Company shall notify the Representative of each
meeting of the Board of Directors of the Company (the "Board") and each meeting
of the Executive Committee of the Board, and (ii) one individual selected by the
Representative (who may be a director, officer, agent or affiliate of the
Representative) shall be permitted to attend all meetings of the Board and the
Executive Committee and to receive all notices and other correspondence and
communications sent by the Company to the members of the Board and the Executive
Committee. Such individual shall be reimbursed for all reasonable out-of-pocket
expenses incurred in connection with such person's attendance at meetings of the
Board and Executive Committee.
(u) Commencing on the date hereof, the Company shall pay to First United a
commission equal to five (5) percent (5%) of the exercise price of the
Redeemable Warrants, payable on the date of the exercise of any or all thereof
on terms provided for in the Warrant Agreement; provided, however, it is hereby
agreed that no such commission will be paid in connection with the exercise of
any of the Managing Underwriter's Warrants. The Company will not solicit the
exercise of the Redeemable Warrants through any third party other than First
United; and the Company hereby irrevocably appoints First United as its
exclusive third-party agent for the solicitation of exercise of the Redeemable
Warrants, such agency being coupled with an interest on the part of First
United.
(v) The Company hereby agrees that, for a period of five years from the
date of this Agreement: (i) prior to entering into any agreements with
respect to the public offering or private placement of equity securities or
securities convertible into equity securities of the Company it will approach
the Representative to determine their level of interest, and (ii) to use
diligent efforts consistent with good business practices to induce any other
underwriter to include the Representative in the underwriting syndicate, with
respect to any public offerings by the Company.
6. Payment of Expenses.
(a) The Company hereby agrees to pay, on each of the Closing Date and each
Option Closing Date (to the extent not paid at the Closing Date), all expenses
and fees (other than fees and expenses of Underwriters' Counsel, except as
provided in clause (iv) below) incident to the performance of the obligations of
the Company under this Agreement, the Warrant Agreement, and the
Representative's Warrant Agreement, including without limitation (i) the fees
and expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing
(including mailing and handling charges), filing, delivery, and mailing
(including the payment of postage with respect thereto) of the Registration
Statement and the Prospectus and any amendments and supplements thereto and the
copying, mailing (including the payment of postage with respect thereto), and
delivery of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreements, and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of
17
the Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities, including, but not limited to (x) the purchase by the Underwriters
of the Securities and the purchase by the Representative of the Managing
Underwriter's Warrants from the Company, and (y) the consummation by the Company
of any of its obligations under this Agreement and the Representative's Warrant
Agreement, and (z) resale of the Securities by the Underwriters in connection
with the distribution contemplated hereby, (iv) the qualification of the
Securities, the Redeemable Warrant Shares and the Representative's Securities
under state or foreign securities or "Blue Sky" laws and determination of the
status of such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental
Blue Sky Memorandum," and the "Legal Investment Survey," if any, and
disbursements and reasonable fees of counsel in connection therewith, (v)
advertising costs and expenses, and costs and expense in connection with bound
volumes and prospectus memorabilia and "tomb-stone" advertisement expenses, (vi)
costs and expenses in connection with Company counsel's due diligence
investigations, including without limitation the fees of any independent counsel
or consultant retained, (vii) fees and expenses of the Warrant Agent and of the
transfer agent and registrar for the Common Stock, (viii) the fees payable to
the Commission and the NASD, and (ix) the fees and expenses incurred in
connection with the listing or quotation, as the case may be, of the Securities
on the NASDAQ SmallCap Market and any other exchange or market system.
(b) The Company further agrees that, in addition to the expenses payable
pursuant to Section 6(a), it shall pay to the Representative on the Closing Date
by certified or bank cashier's check or, at the election of the Representative,
by deduction from the proceeds of the offering contemplated herein a
non-accountable expense allowance equal to three percent of the gross proceeds
received by the Company from the sale of the Firm Securities less any amounts
paid by the Company to the Representative for out-of-pocket and due diligence
expenses, and legal fees and expenses of counsel to the Representative, $____ of
which has been paid to date. If the Representative elects to exercise the
over-allotment option described in Section 3(b) hereof, the Company agrees to
pay to the Representative on each Option Closing Date (by certified or bank
cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to three
percent of the gross proceeds from the sale of the Option Securities sold on
such Option Closing Date.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof and the performance by the Company on and as of the Closing Date and each
Option Closing Date, if any, of its covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not later than
12:00 A.M., New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Representative, and at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued
18
and no proceedings for that purpose shall have been instituted or shall be
pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the prices of the Securities
and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact that, in the Representative's opinion, is material, or omits to state a
fact that, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact that, in the Representative's opinion, is material, or omits to state a
fact that, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date or Option Closing Date, as the case
may be, the Representative shall have received from Underwriters' Counsel, such
opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Managing Underwriter's Warrants, the
Registration Statement, the Prospectus, and other related matters as the
Representative may request and Underwriters' Counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
favorable opinion of ▇▇▇▇▇▇ & Dodge LLP, counsel to the Company ("Company
Counsel"), dated the Closing Date, addressed to the Underwriters, and in form
and substance satisfactory to Underwriters, covering the matters set forth on
Annex A attached hereto.
(e) At the Closing Date, the Underwriters shall have received the
favorable opinion of ▇▇▇▇▇▇▇▇ & Sunstein, patent counsel to the Company, dated
the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, covering the matters set forth on Annex B
attached hereto.
(f) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinions of Company Counsel, and ▇▇▇▇▇▇▇▇ & Sunstein,
patent counsel to the Company, respectively, each dated the Option Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, confirming as of each Option Closing Date the statements
made by such counsel in its opinion delivered on the Closing Date.
(g) On or prior to each of the Closing Date and each Option Closing Date,
if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters
19
referred to in Section 7(c), or in order to evidence the accuracy, completeness,
or satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(h) Prior to each of the Closing Date and each Option Closing Date, if
any, (i) there shall have been no Material Adverse Effect on the Company, (ii)
there shall have been no transaction, not in the ordinary course of business,
entered into by the Company from the latest date as of which the financial
condition of the Company is set forth in the Registration Statement and
Prospectus that is materially adverse to the Company; (iii) the Company shall
not be in material breach or material default under any provision of any
instrument relating to any outstanding indebtedness; (iv) the Company shall not
have issued any securities (other than as described in the Registration
Statement and other than the Securities and the Representative's Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital stock
or any material change in the debt (long or short term) or liabilities or
obligations of the Company (contingent or otherwise); (v) no material amount of
the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or involving or
affecting its business or properties, before or by any court or federal, state
or foreign commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding could have a Material Adverse Effect on
the Company, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(i) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company, signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus, and this Agreement, and that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the
Closing Date or such Option Closing Date, as the case may be,
and the Company has complied, in all material respects, with
all agreements and covenants and satisfied, in all material
respects, all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge
after due inquiry, are contemplated or threatened under the
Act;
iii) the Registration Statement and the Prospectus and each
amendment and each supplement thereto, if any, contain all
statements and information required to be included therein,
and none of the Registration Statement, the Prospectus, or any
amendment or supplement thereto includes any untrue
20
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading and neither the Preliminary
Prospectus or any supplement thereto included any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; except that such certification
may expressly exclude statements or omissions made in reliance
upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf
of the Underwriters expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus; and
iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a)
the Company shall not have incurred, up to and including the
Closing Date or the Option Closing Date, as the case may be,
other than in the ordinary course of its business consistent
with past practice, any material liabilities or obligations,
direct or contingent; (b) the Company shall not have paid or
declared any dividends or other distributions on its capital
stock; (c) the Company shall not have entered into any
transactions not in the ordinary course of business consistent
with past practice; (d) there shall not have been any change
in the capital stock or long-term debt or any increase in the
short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of business
consistent with past practice) of the Company; (e) the Company
shall not have sustained any material loss or material damage
to its property or assets, whether or not insured; (f) there
shall be no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or any
affiliated party that is required to be set forth in an
amended or supplemented Prospectus and that has not been so
set forth; and (g) there shall not have occurred any event
required to be set forth in an amended or supplemented
Prospectus that shall not have been set forth.
References to the Registration Statement and the Prospectus in this subsection
(i) are to such documents as amended and supplemented at the date of such
certificate.
(j) By the Closing Date, the Underwriters shall have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated the date hereof, addressed to the Underwriters in form
and substance satisfactory (including as to the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. LLP
covering the matters set forth on Annex C attached hereto.
21
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. LLP a letter, dated
as of the Closing Date or such Option Closing Date, as the case may be, to the
effect that they reaffirm that the statements made in the letter furnished
pursuant to subsection (k) of this Section, except that the specified date
referred to therein as of which the examination made by them as described
therein shall have been made shall be a date not more that five days prior to
Closing Date or such Option Closing Date, as the case may be, and if the Company
has elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection (k) of this Section with respect to certain amounts, percentages and
financial information as specified by the Representative and deemed to be a part
of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (v).
(m) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for its account and
the several Underwriters' accounts, certificates representing the appropriate
numbers and types of Representative's Securities and Securities, as the case may
be, against payment therefor as provided herein.
(n) No order suspending the sale of the Securities, the Redeemable Warrant
Shares or the Representative's Securities in any jurisdiction designated by the
Representative pursuant to subsection (e) of Section 5 hereof shall have been
issued on either the Closing Date or the Option Closing Date, if any, and no
proceedings for that purpose shall have been instituted or shall be
contemplated.
(o) On or before the Closing Date, the Company shall have executed and
delivered the Warrant Agreement to the Warrant Agent, with a fully executed
original copy to the Representative, and shall have executed and delivered to
the Representative, (i) the Representative's Warrant Agreement, in the form
attached hereto as Exhibit A, and (ii) the Managing Underwriter's Warrants, in
such denominations and to such designees (who must be officers of the
Representative) as shall have been requested by the Representative.
(p) On or before Closing Date, the Common Stock and the Redeemable
Warrants each shall have been duly approved for quotation on the NASDAQ SmallCap
Market, subject to official notice of issuance.
(q) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-Up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
If any representation or warranty of the Company herein shall not be true
and correct, or if any other material condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or the relevant Option
Closing Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement or, if the Representative so elects, it may waive any
such conditions that have not been fulfilled or extend the time for their
fulfillment.
22
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 8 "Underwriter" shall include the
officers, directors, stockholders, partners, employees, agents, and counsel of
each Underwriter, including specifically each person who may be substituted for
an Underwriter as provided in Section 12 hereof), and each person, if any, who
controls such Underwriter (each, a "controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses, or liabilities, joint or several (and
actions, proceedings, investigations and inquiries in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation
commenced or threatened, or any claim whatsoever) (collectively, "Losses"), as
such are incurred, to which the Underwriter or such controlling person may
become subject under the Act, the Exchange Act, or any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in any Preliminary Prospectus, the Registration Statement, or
the Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement or
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, or the NASDAQ SmallCap Market, or any other securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made
exclusively in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement, or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be; provided, however, that the indemnity
agreement contained in this paragraph with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such Losses purchased the Securities which are the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Securities a copy of the Prospectus (or
the Prospectus as amended or supplemented) was not sent or delivered to such
person and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented).
The indemnity agreement in this subsection (a) shall be in addition to any
liability that the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement (whether on his or her own
behalf or pursuant to a power of attorney), and each other person, if any, who
controls the Company within the meaning of the Act and the Exchange Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters, but
only
23
with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement, or Prospectus or any amendment thereof
or supplement thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement, or Prospectus or any amendment thereof
or supplement thereto or in any such application. The Company acknowledges that
the statements with respect to the public offering of the Securities set forth
in the last paragraph on the front cover page, the first paragraph on the inside
front cover and under the caption "Underwriting" and in the Risk Factor under
the caption entitled "Inexperience of Managing Underwriter" in the Registration
Statement, any Preliminary Prospectus and the Prospectus relating to the
Securities filed by the Company (insofar as such information relates to the
Underwriters) constitutes the only information furnished by the Underwriters to
the Company for inclusion in the Registration Statement, any Preliminary
Prospectus, and the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition to any
liability that the several Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section, except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
that it may have otherwise). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable period of time after notice of commencement of the
action, (iii) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them that are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties) or (iv)
counsel to the indemnifying parties shall have concluded that a conflict exists
between the indemnified party or parties and the indemnifying parties, in any of
which events such fees and expenses of additional counsel shall be borne by the
indemnifying parties. Anything in this Section to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent unless such consent was unreasonably
withheld or delayed.
24
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes a claim for indemnification pursuant to
this Section, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case, notwithstanding the fact that the express
provisions of this Section provide for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any indemnified party,
then each indemnifying party shall contribute to the amount paid as a result of
such losses, claims, damages, expenses or liabilities (or actions in respect
thereof) (A) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand, from the offering of the Securities,
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such Losses, as well as any other relevant equitable
considerations. In any case where the Company is a contributing party and the
Underwriters are the indemnified parties, the relative benefits received by the
Company on the one hand, and the Underwriters, on the other, shall be deemed to
be in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting discounts
received by the Underwriters hereunder, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters, and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the Losses (or actions in respect
thereof) referred to above in this subdivision (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by the Underwriters hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities that any indemnifying
party may have at common law or otherwise.
25
9. Representations and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at the
Closing Date and the applicable Option Closing Date, as the case may be, and
such representations, warranties and agreements of the Company and the
respective indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, or any controlling person of any
Underwriter or the Company, and shall survive termination of this Agreement and
the issuance and delivery of the Securities to the Underwriters and the
Representative's Securities to the Representative, as the case may be.
10. Effective Date.
This Agreement shall become effective at 10:00 a.m., New York City time,
on the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Representative, in its
discretion, shall release the Securities for the sale to the public; provided,
however, that the provisions of Sections 6, 8 and 11 of this Agreement shall at
all times be effective. For purposes of this Section, the Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing such
Securities for offering or the release by the Representative for publication of
the first newspaper advertisement that is subsequently published relating to the
Securities.
11. Termination.
(a) Subject to subsection (b) of this Section, the Representative shall
have the right to terminate this Agreement by providing written notice thereof
to the Company at any time prior to the delivery of any payment for the
Securities if prior to such time any of the following occurs: (i) any domestic
or international event or act or occurrence has disrupted, or in the
Representative's opinion will in the immediate future disrupt, the financial
markets; or (ii) any material adverse change in the financial markets shall have
occurred; or (iii) trading on the New York Stock Exchange, the American Stock
Exchange or in the over-the-counter market shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other governmental or regulatory
authority having jurisdiction; or (iv) the United States shall have become
involved in a war or major hostilities, or there shall have been an escalation
in an existing war or major hostilities or a national emergency shall have been
declared in the United States; or (v) a banking moratorium shall have been
declared by a state or federal governmental or regulatory authority; or (vi) a
moratorium in foreign exchange trading shall have been declared; or (vii) the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) there shall have been a Material Adverse
Effect, or such material adverse change in the general market, political or
economic conditions, in the United States or
26
elsewhere, as in the Representative's judgment would make it inadvisable to
proceed with the offering, sale and/or delivery of the Securities; or (ix) if
Dr. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ no longer serves the Company in her present capacity.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 11(a), neither party shall have any further
obligation to the other party except that (i) the Company shall be responsible
for any unpaid exercises under Section 6(a) up through the date of such
termination and (ii) both parties shall continue to have the obligations set
forth in Section 8 of this Agreement. Notwithstanding any contrary provision
contained in this Agreement, if this Agreement shall not be carried out within
the time specified herein, or any extension thereof granted to the
Representative, by reason of any failure on the part of the Company to perform
any undertaking or satisfy any condition of this Agreement by it to be performed
or satisfied (including, without limitation, pursuant to Section 7 or Section 13
hereof) then the Company shall promptly reimburse and indemnify the
Representative for the expenses payable under Section 6(a), including Blue Sky
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement and whether or not
this Agreement is otherwise carried out, the provisions of Section 6 and Section
8 shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
12. Substitution of the Underwriters.
If one or more of the Underwriters shall fail (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 7, Section 11 or Section 13 hereof) to purchase the Securities which it
or they are obligated to purchase on such date under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative shall not have completed
such arrangements within such 24-hour period, then:
(a) If the anticipated net proceeds to the Company from the
Defaulted Securities does not exceed 10% of the total anticipated net
proceeds to the Company from the Firm Securities to be purchased on such
date, the non-defaulting Underwriters shall be obligated to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the anticipated net proceeds to the Company from the
Defaulted Securities exceeds 10% of the total anticipated net proceeds to
the Company from the Firm Securities to be purchased on such date, this
Agreement shall terminate without liability on the part of any
non-defaulting Underwriters or the Company.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
27
In the event of any such default that does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
13. Default by the Company.
If the Company shall fail at the Closing Date or any Option Closing Date,
as applicable, to sell and deliver the respective numbers and types of
Securities that it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Sections 6, 8 and 11 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
14. Notices.
All notices and communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given if mailed by certified or registered mail, return receipt requested, sent
via an established, reputable overnight courier service, or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ____________ with a copy to ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant
▇▇▇▇▇▇▇▇ & Bilzin, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. Notices to the Company shall be
directed to Apollo BioPharmaceutics, Inc., One ▇▇▇▇▇▇▇ Square, Building 200,
Suite 2200, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: Dr. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ with a
copy to ▇▇▇▇▇▇ & Dodge LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
15. Parties.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Company and the controlling persons, directors and
officers referred to in Section 7 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
16. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to its
choice of law or conflict of laws principles.
28
17. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which taken together shall
be deemed to be one and the same instrument.
18. Entire Agreement; Amendments.
This Agreement and the Representative's Warrant Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof, including without limitation a letter of intent dated May 28, 1996. This
Agreement may not be amended except in a writing signed by the Representative
and the Company.
19. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement. The parties agree, however, that in the event any
provision of this Agreement shall be declared invalid or unenforceable, the
parties shall negotiate a new provision achieving to the extent possible the
purpose of the invalid provision.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and each of the several Underwriters.
Very truly yours,
APOLLO BIOPHARMACEUTICS, INC.
By___________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Ph.D.
President and CEO
Confirmed and accepted as of the date first
above written:
29
FIRST UNITED EQUITIES CORPORATION
For itself and as Representative
of the several Underwriters listed
in the attached Schedule A
By___________________________________
Name:
Title:
30
SCHEDULE A
Number of Firm
Securities to
Name of Underwriter Be Purchased
------------------- ------------
Number
of
Number Redeemable
of Shares Warrants
--------- --------
First United Equities Corporation
--------- ---------
TOTAL 1,200,000 1,200,000
========= =========
31
ANNEX A
Matters to be Covered in the Opinion of
▇▇▇▇▇▇ & Dodge LLP, Counsel for the Company
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is duly
qualified to do business and is in good standing as a foreign corporation in the
commonwealth of Massachusetts, which, to our knowledge, is the only jurisdiction
in which its ownership or leasing of any properties or the character of its
operations requires such qualification. The Company has all corporate power and
authority necessary to own or hold its properties and conduct the business in
which it is presently engaged as described in the Prospectus. To our knowledge,
the Company does not own an interest in any corporation, partnership, joint
venture, trust or other business entity.
2. The Company's authorized capitalization consists of 20,000,000 shares
of Common Stock, $.02 par value per share, and 1,000,000 shares of Preferred
Stock, $0.01 par value per share. All of the issued and outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and are fully paid and non-accessible with no personal liability attaching to
the ownership thereof. The Shares being delivered on the date hereof upon
issuance and delivery and payment therefor in the manner described in the
Underwriting Agreement are, and the Redeemable Warrant Shares and the
Representative's Warrant Shares, when issued upon exercise in accordance with
the terms of the Warrant Agreement and the Representative's Warrant Agreement
will be, duly and validly authorized and issued, fully paid and non-accessible
with no personal liability attaching to the ownership thereof. The statements
made in the Prospectus under the caption "Description of Securities" insofar as
they purport to constitute summaries of the terms for the Company's capital
stock and securities convertible or exercisable for such capital stock
(including the Securities), constitute accurate summaries of the terms of such
capital stock in all material respects and fairly present in all material
respects the terms of such securities.
3. Upon the consummation of the initial public offering, there will be no
preemptive or other rights to subscribe for or to purchase or rights of first
refusal or participation with respect to any shares of Common Stock pursuant to
the Company's charter or by-laws or any agreement or other instrument known to
us. Except as described in the Prospectus and as provided in the Company charter
and by-laws, there are no restrictions upon the voting or transfer of any shares
of Common Stock pursuant to any agreement or other instrument known to us.
4. To our knowledge, but without inquiry into the dockets of any court,
commission, regulatory body, administrative agency or other governmental body,
and except as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company is a party or to which any property or
assets of the Company is subject which, if determined adversely to the Company
are reasonably likely to have a Material Adverse Effect on the business or
prospects of the Company taken as a whole.
5. The Registration Statement has been declared effective under the
Securities Act and, to our knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for that purpose
is pending or threatened by the Commission.
1
6. The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company prior to the date hereof
(other than the financial statements, financial and statistical information, pro
forma financial information and related schedules and notes thereto, as to which
we express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
7. To our knowledge, there are no contracts or other documents that are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and Regulations
that have not been described or filed as exhibits to the Registration Statement.
8. The Company has full right, power, and authority to execute and deliver
the Underwriting Agreement, the Warrant Agreement, the Redeemable Warrants, the
Representative's Warrant Agreement and the Managing Underwriter's Warrants and
to consummate the transactions contemplated thereby.
9. Each of the Underwriting Agreement, the Warrant Agreement, the
Redeemable Warrants, the Managing Underwriter's Warrants Agreement and the
Managing Underwriter's Warrants has been duly authorized, executed, and
delivered by the Company. Each of the Underwriting Agreement, the Warrant
Agreement, the Redeemable Warrants, the Representative's Warrant Agreement and
the Representative's Warrant constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
10. The issuance and sale of the Securities being delivered on the date
hereof by the Company, the compliance by the Company with all of the provisions
of the Underwriting Agreement, the Warrant Agreement, the Redeemable Warrants,
the Representative's Warrant Agreement and the Representative's Warrant and the
consummation of the transactions contemplated thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default, an event of default, or an event which, with notice or
lapse of time or both, would constitute a default or event of default under, any
indenture, mortgage, deed of trust, loan agreement, or other agreement or
instrument filed as an exhibit to the Registration Statement, nor will such
actions result in any violation of the provisions of the charter or by-laws of
the Company or any material statute, order, rule or regulation or, to our
knowledge, any judgment, order or decree of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or assets,
except for such conflicts, breaches, violations and defaults as are not
reasonably likely, individually or in the aggregate, to have (a) a Material
Adverse Effect on the business or prospects of the Company; or (b) any adverse
effect on the consummation of the transactions contemplated by the Underwriting
Agreement, the Warrant Agreement, the Redeemable Warrants, the Representative's
Warrant Agreement and the Representative's Warrants. Except for the registration
of the Securities under the Securities Act, and such consents, approvals,
authorizations, registrations, or qualifications as may be required under the
Exchange Act and applicable state or foreign securities laws in connection with
the purchase and distribution of the Securities by the underwriters thereof, no
consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the issuance and
sale of the Securities being delivered on the date hereof by the Company, the
compliance by the Company with all of the provisions of the Underwriting
Agreement, the Warrant Agreement, the Redeemable Warrants,
2
the Representative's Warrant Agreement and the Representative's Warrants or the
consummation of the transactions contemplated thereby.
11. To our knowledge, except as described under the caption "Shares
Eligible for Future Sale - Registration Rights" in the Preliminary Prospectus
and except for registration rights applicable to the Representative's Warrants
there are no contracts, agreements or understandings in effect on the date
hereof between the Company and any person owning securities of the Company
granting such person the right to require the Company to include such securities
in the Registration Statement or in any other registration statement filed by
the Company under the Securities Act.
12. The Common Stock, the Redeemable Warrants and the Redeemable Warrant
Shares issued and sold by the Company have been accepted for listing by The
Nasdaq Small Cap Market upon official notice of issuance of the shares by the
Company to The Nasdaq Small Cap Market.
In connection with the preparation of the Registration Statement and the
Prospectus, we have participated in conferences with officers and
representatives of the Company and the independent accountants of the Company,
at which conferences we have made inquiries of such persons and others and
discussed the contents of the Registration Statement and the Prospectus. While
the limitations inherent in the independent verification of factual matters and
the character of determinations involved in the registration process are such
that we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (except as specifically stated
elsewhere in this opinion), nothing has come to our attention that has caused us
to believe that the Registration Statement, as of its effective date, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading (except that we express no view or opinion with respect
to the financial statements and schedules or other financial and statistical
data included in the Registration Statement), and nothing has come to our
attention that has caused us to believe that the Prospectus, as of its date and
as of the Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that we express no view or opinion with respect to the
financial statements and schedules or other financial and statistical data
included in the Prospectus).
3
ANNEX B
Matters to be Covered in the Opinion of ▇▇▇▇▇▇▇▇ & Sunstein
i) such counsel represents the Company in certain matters
relating to intellectual property, including patents and
proprietary rights;
ii) such counsel is familiar with the technology and processes
used by the Company in its business and the manner of its use
and has read the portions of the Registration Statement and
the Prospectus entitled "Risk Factors-- Technological
Uncertainty; Early State of Product Development; No Assurance
of Regulatory Approvals," "Risk Factors--Development of New
Technologies and Products," "Risk Factors--No Assurance of
United States or Foreign Regulatory Approval; Government
Regulation," "Risk Factors-- Uncertain Ability to Protect
Proprietary Technology," "Business-- Products in Development"
and "Business--Intellectual Property Rights" (the
"Intellectual Property Portion");
iii) to the extent that the Intellectual Property Portion contains
descriptions of the Company's patent applications and patent
applications licensed to the Company (collectively the
"Applications") and patents issued to or otherwise owned or
licensed by it (collectively the "Patents"), such descriptions
are accurate and do not omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading;
iv) such counsel has reviewed the Patents and Applications which
Patents and Applications are described in the Intellectual
Property Portion, and based upon such review, a review of the
prior art references made known to counsel and discussions
with Company personnel, such counsel is aware of no valid
United States or foreign issued patent that is or would be
infringed by the activities of the Company in the manufacture,
use or sale of any product or proposed product or other
material as described in the Prospectus and made or used
according to the Patents or the Applications;
v) The Applications have been properly prepared and filed on
behalf of the Company or its strategic partners, as the case
may be, and are being diligently pursued by the Company or its
strategic partners, as the case may be; each of the
Applications is assigned or licensed to the Company or its
strategic partners, as the case may be; to such counsel's
knowledge, no other entity or individual has any right in or
to any of the inventions claimed in any of the Applications or
patents sought to be issued therefrom; and each of the
Applications discloses patentable subject matter; and
4
vi) such counsel is aware of no pending or threatened judicial,
administrative or other proceedings by governmental
authorities or others relating to the Patents or Applications
challenging the validity or scope of the Patents or
Applications (other than customary prosecution proceedings
relating to the Applications).
Such counsel shall also state that it has no reason to believe that the
information contained in the Intellectual Property Portion of the Registration
Statement or the Prospectus, as of its effective date, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the information contained in the Intellectual Property Portion of the
Prospectus, as of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits 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.
In rendering any such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and public officials, provided that copies
of any such statements or certificates shall be delivered to Underwriters'
Counsel.
References to the Registration Statement and the Prospectus in this Annex
shall include any amendment or supplement thereto at the date of such opinion.
5
ANNEX C
Matters to be Covered in the Comfort Letter
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Co.
i) confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
ii) stating that it is their opinion that the financial statements and
supporting schedules of the Company included in the Registration
Statement comply as to form, in all material respects, with the
applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Representative may rely upon the
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. LLP with respect to the financial
statements and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review that included a
reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date
of the latest available unaudited interim financial statements), a
reading of the latest available minutes of the stockholders and
board of directors and the various committees of the boards of
directors of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has
come to their attention that would lead them to believe that (A) the
pro forma financial information contained in the Registration
Statement and Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or is not fairly presented in conformity
with generally accepted accounting principles applied on a basis
consistent with that of the audited financial statements of the
Company or the unaudited pro forma financial information included in
the Registration Statement, (B) the unaudited financial statements
and supporting schedules of the Company included in the Registration
Statement do not comply as to form, in all material respects, with
the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the
Company included in the Registration Statement, or (C) at a
specified date not more than five days prior to the effective date
of the Registration Statement, there has been any change in the
capital stock or long-term debt of the Company, or any decrease in
the stockholders' equity or net current assets or net assets of the
Company as compared with amounts shown in the balance sheet included
in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (D) during the period from ________ to a specified
date not more than five days prior to the effective date of the
Registration Statement, there was any increase or decrease in net
revenues, net earnings or increase in net earnings per common share
of the
6
Company, in each case as compared with the corresponding period
beginning __________other than as set forth in or contemplated by
the Registration Statement, or, if there was any such decrease or
increase, setting forth the amount of such decrease or increase;
iv) stating that they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company
and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards), set forth in the letter and
found them to be in agreement;
v) stating that they have not during the immediately preceding five
year period (or such shorter period as the Company shall have been
in existence) brought to the attention of any of the Company's
management any "material weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control
Structure Related Matters Noted in an Audit," in any of the
Company's internal controls;
vi) stating that they have in addition carried out certain specified
procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration
Statement and the Prospectus and that nothing has come to their
attention as a result of such procedures that caused them to believe
such unaudited pro forma financial information does not comply in
form in all respects with the applicable accounting requirements of
Item 301 Regulation S-B or that the pro forma adjustments have not
been properly applied to the historical amounts in the compilation
of that information; and
vii) statements as to such other matters incident to the transaction
contemplated hereby as the Representative may request.
7