$100,000,000
INHALE THERAPEUTIC SYSTEMS, INC.
6 3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
PURCHASE AGREEMENT
October 6, 1999
▇▇▇▇▇▇ BROTHERS INC.
DEUTSCHE BANK SECURITIES INC.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
c/▇ ▇▇▇▇▇▇ Brothers Inc.
Three World Financial Center
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Inhale Therapeutic Systems, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell $100,000,000 in aggregate principal amount of its 6 3/4%
Convertible Subordinated Debentures due 2006 (the "Firm Debentures") to ▇▇▇▇▇▇
Brothers Inc., Deutsche Bank Securities Inc. and U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
(collectively, the "Initial Purchasers"). In addition, the Company proposes to
grant to the Initial Purchasers an option (the "Option") to purchase up to an
additional $9,000,000 in aggregate principal amount of 6 3/4% Convertible
Subordinated Debentures due 2006 to cover over-allotments, if any (the "Optional
Debentures" and, together with the Firm Debentures, the "Debentures").
The Debentures will be convertible into fully paid, nonassessable
shares of common stock of the Company, par value $0.0001 per share (the "Common
Stock"), on the terms, and subject to the conditions, set forth in the
Indenture. As used herein, "Conversion Shares" means the shares of Common Stock
into which the Debentures are convertible. The Debentures will be issued
pursuant to an indenture (the "Indenture") to be dated as of the First Delivery
Date (as defined in Section 2(a)), between the Company and Chase Manhattan Bank
and Trust Company, National Association, as Trustee (the "Trustee"). The
Debentures will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption therefrom.
Holders of the Debentures (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of a Resale
Registration Rights Agreement, dated the First Delivery Date, between the
Company and the Initial Purchasers (the "Registration Rights Agreement"),
pursuant to which the Company will agree to file with the Securities and
Exchange Commission (the "Commission") a shelf registration statement pursuant
to Rule 415 under the Securities Act (the "Registration Statement") covering the
resale of the Debentures and the Conversion Shares, and to use its best efforts
to cause the Registration Statement to be declared effective.
This Agreement, the Indenture, the Debentures and the Registration
Rights Agreement are referred to herein collectively as the "Operative
Documents".
This is to confirm the agreement between the Company and the Initial
Purchasers concerning the issue, offer and sale of the Debentures.
1 . REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents, warrants to and agrees with, the Initial Purchasers
that:
(a) The Company has prepared a preliminary offering memorandum
dated September 27, 1999 (the "Preliminary Offering Memorandum") and will
prepare an offering memorandum dated the date hereof (the "Offering
Memorandum") setting forth information concerning the Company, the Debentures,
the Registration Rights Agreement and the Common Stock. Copies of the
Preliminary Offering Memorandum have been, and copies of the Offering Memorandum
will be, delivered by the Company to the Initial Purchasers pursuant to the
terms of this Agreement. As used in this Agreement, "Preliminary Offering
Memorandum" and "Offering Memorandum" means the Preliminary Offering Memorandum
or the Offering Memorandum, as the case may be, as amended or supplemented.
Each of the Preliminary Offering Memorandum and the Offering Memorandum, did not
as of its respective date, and the Offering Memorandum will not as of a Delivery
Date (as defined in Section 2(b)), contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED that the Company makes no representation or warranty as to
information contained in or omitted from the Preliminary Offering Memorandum or
the Offering Memorandum in reliance upon and in conformity with written
information furnished to the Company by or on the behalf of any Initial
Purchaser through ▇▇▇▇▇▇ Brothers Inc. specifically for inclusion therein.
(b) Assuming the accuracy of the representations and warranties
of the Initial Purchasers contained in Section 6 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Debentures to the Initial Purchasers and the offer,
resale and delivery of the Debentures by the Initial Purchasers in the manner
contemplated by this Agreement, the Indenture, the Registration Rights Agreement
and the Offering Memorandum, to register the Debentures or the Conversion Shares
under the Securities Act or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
the conduct of its businesses requires such qualification (except for where the
failure to be so qualified would not have a material adverse effect on the
affairs, management, business, properties, financial condition, results of
operations or prospects of the Company (a "Material Adverse Effect")), and has
all power and authority necessary to own or hold its properties and to conduct
the businesses in which it is engaged; and the Company has no subsidiaries.
(d) The Company has an authorized capitalization as set forth in
the Offering Memorandum, and all of the issued and outstanding shares of capital
stock of the Company have been duly and validly authorized and issued, are fully
paid and nonassessable and conform to the description thereof contained in the
Offering Memorandum; the Conversion Shares which are authorized on the date
hereof have been duly and validly authorized and reserved for issuance upon
conversion of the Debentures and are free of preemptive rights; and all
Conversion Shares, when so issued and delivered upon such conversion in
accordance with the terms of the Indenture, will be duly and validly authorized
and issued, fully paid and nonassessable and free and clear of all liens,
encumbrances, equities or claims.
(e) The execution, delivery and performance of the Operative
Documents by the Company and the issuance of the Debentures and the Conversion
Shares and the consummation of the transactions contemplated hereby and thereby
will not (x) conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the properties or assets of the
Company is subject, (y) result in any violation of the provisions of the
certificate of incorporation or bylaws of the Company or (z) result in any
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
properties or assets; and except (i) with respect to the transactions
contemplated by the Registration Rights Agreement, as may be required under the
Securities Act, the Trust Indenture Act and the rules and regulations
promulgated thereunder and (ii) as required by the state securities or "blue
sky" laws, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of the Operative Documents by the
Company, and the consummation of the transactions contemplated hereby and
thereby.
(f) The Company has all necessary corporate right, power and
authority to execute and deliver this Agreement and perform its obligations
hereunder; and this Agreement and the transactions contemplated hereby have been
duly authorized, executed and delivered by the Company.
(g) The Company has all necessary corporate right, power and
authority to execute and deliver the Indenture and perform its obligations
thereunder; the Indenture has been duly authorized by the Company, and upon the
effectiveness of the Registration Statement, will be qualified under the Trust
Indenture Act; on the First Delivery Date, the Indenture will have been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery of the Indenture by the Trustee, will constitute a legally valid
and binding agreement of the Company enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, subject to general principles of
equity and to limitations on availability of equitable relief, including
specific performance (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing; and the Indenture
conforms in all material respects to the description thereof contained in the
Offering Memorandum.
(h) The Company has all necessary corporate right, power and
authority to execute and deliver the Registration Rights Agreement and perform
its obligations thereunder; the Registration Rights Agreement and the
transactions contemplated thereby have been duly authorized by the Company; when
the Registration Rights Agreement is duly executed and delivered by the Company
(assuming due authorization, execution and delivery by the Initial Purchasers),
it will be a legally valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, subject to general principles of equity and to
limitations on availability of equitable relief, including specific performance
(whether considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing, and except with respect to the rights of
indemnification and contribution thereunder, where enforcement thereof may be
limited by federal or state securities laws or the policies underlying such
laws; and the Registration Rights Agreement conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(i) The Company has all necessary corporate right, power and
authority to execute, issue and deliver the Debentures and perform its
obligations thereunder; the Debentures have been duly authorized by the Company;
when the Debentures are executed, authenticated and issued in accordance with
the terms of the Indenture and delivered to and paid for by the Initial
Purchasers pursuant to this Agreement on the respective Delivery Date (assuming
due authentication of the Debentures by the Trustee), such Debentures will
constitute legally valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable in accordance with their terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, subject to general principles of
equity and to limitations on availability of equitable relief, including
specific performance (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing; and the Debentures
conform in all material respects to the description thereof contained in the
Offering Memorandum.
(j) Except for the Registration Rights Agreement and the Stock
Purchase Agreement, dated January 18, 1995, between the Company and Pfizer, Inc.
("Pfizer"), the Stock Purchase Agreement, dated March 1, 1996, as amended,
between the Company and ▇▇▇▇▇▇ Healthcare Corporation and the Restated Investor
Rights Agreement, dated April 29, 1993, as amended October 29, 1993, among the
Company and certain stockholders of the Company, and except as contemplated
pursuant the Asset Purchase Agreement between the Company and Alliance
Pharmaceutical Corp., dated October 4, 1999 (the "Alliance Agreement"), there
are no contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have been waived
or satisfied) to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in any
securities being registered pursuant to any registration statement filed by the
Company under the Securities Act.
(k) The Company has not sustained, since the date of the latest
audited financial statements included in the Offering Memorandum, any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and, since such date, there has
not been any change in the capital stock or long-term debt of the Company or any
material adverse change in or affecting the affairs, management, business,
properties,
financial condition, stockholders' equity, results of operations or prospects of
the Company except: (i) as set forth or contemplated in the Offering Memorandum,
(ii) any grants under the Company's employee stock plans in accordance with the
terms of such plans as described in the Offering Memorandum, or other shares of
Common Stock (or rights to receive Common Stock) issued to service providers to
the Company in the ordinary course of business (the "Authorized Grants") or
(iii) operating losses incurred in the ordinary course of business.
(l) The financial statements of the Company (including the
related notes and supporting schedules) included in the Offering Memorandum
present fairly the financial condition and results of operations of the Company,
at the dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(m) Ernst &Young LLP, who have certified the financial
statements of the Company included in the Offering Memorandum, whose report
appears in the Offering Memorandum, are independent accountants as required by
the Securities Act and the rules and regulations promulgated thereunder.
(n) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by it, in each case free and clear of all liens, encumbrances, security
interests, claims and defects, except such as are described in the Offering
Memorandum or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company; and all real property and personal property held under lease by the
Company is held by it under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property by the Company.
(o) The Company carries, or is covered by, insurance as is
customary for companies similarly situated and engaged in similar businesses in
similar industries.
(p) The Company owns, or possesses adequate rights to use, all
material trademarks, service marks, trade names, trademark registrations,
service ▇▇▇▇ registrations, copyrights and licenses necessary for the conduct of
its business, and has no reason to believe that the conduct of its business will
conflict with, and has not received any notice of any claim of conflict with,
any such rights of others.
(q) The Company owns, or possesses adequate rights to use, all
material patents necessary for the conduct of its business. Except as set forth
or contemplated in the Offering Memorandum, no valid U.S. patent is, or to the
knowledge of the Company would be, infringed by the activities of the Company in
the manufacture, use or sale of any product or component thereof as described in
the Offering Memorandum. The patent applications (the "Patent Applications")
filed by or on behalf of the Company described in the Offering
Memorandum have been properly prepared and filed on behalf of the Company; each
of the Patent Applications and patents (the "Patents") described in the Offering
Memorandum is assigned or licensed to the Company, and, except as set forth or
contemplated in the Offering Memorandum, no other entity or individual has any
right or claim in any Patent, Patent Application or any patent to be issued
therefrom; and, to the knowledge of the Company, each of the Patent Applications
discloses potentially patentable subject matter. There are no actions, suits or
judicial proceedings pending relating to patents or proprietary information to
which the Company is a party or of which any property of the Company is subject,
and, to the knowledge of the Company, no actions, suits or judicial proceedings
are threatened by governmental authorities or, except as set forth or
contemplated in the Offering Memorandum, others. The Company is not aware of,
except as set forth or contemplated in the Offering Memorandum, any claim by
others that the Company is infringing or otherwise violating any patents or
other intellectual property rights of others and is not aware of any rights of
third parties to any of the Company's Patent Applications, licensed Patents or
licenses which could affect materially the use thereof by the Company. Except
as set forth in the Offering Memorandum, the Company owns or possesses
sufficient licenses or other rights to use all patents, trade secrets,
technology and know-how necessary to conduct the Company's business as described
in the Offering Memorandum.
(r) Except as disclosed in the Offering Memorandum, the Company
has filed with the Food and Drug Administration (the "FDA") and the California
Food and Drug Branch ("CFDB") for and received approval of all registrations,
applications, licenses, requests for exemptions, permits and other regulatory
authorizations necessary to conduct the Company's business as it is described in
the Offering Memorandum; the Company is in material compliance with all such
registrations, applications, licenses, requests for exemptions, permits and
other regulatory authorizations, and all applicable FDA and CFDB rules and
regulations, guidelines and policies, including but not limited to, applicable
FDA and CFDB rules, regulations and policies relating to current good
manufacturing practice ("CGMP") and current good laboratory practice ("CGLP");
the Company has no reason to believe that any party granting any such
registration, application, license, request for exemption, permit or other
authorization is considering limiting, suspending or revoking the same and knows
of no basis for any such limitation, suspension or revocation.
(s) The human clinical trials, animal studies and other
preclinical tests conducted by the Company or in which the Company has
participated that are described in the Offering Memorandum or the results of
which are referred to in the Offering Memorandum, and, to the knowledge of the
Company, such studies and tests conducted on behalf of the Company, were and, if
still pending, are being conducted in accordance with commonly used or
appropriate experimental protocols, procedures and controls applied by research
scientists generally in the preclinical or clinical study of new drugs; the
descriptions or the results of such studies and tests contained in the Offering
Memorandum are accurate and complete in all material respects, and the Company
has no knowledge of any other studies or tests, the results of which reasonably
call
into question the results described or referred to in the Offering Memorandum;
and the Company has not received any notices or other correspondence from the
FDA or any other governmental agency requiring the termination, suspension or
modification of any animal studies or other preclinical tests, or clinical
studies conducted by or on behalf of the Company or in which the Company has
participated that are described in the Offering Memorandum or the results of
which are referred to in the Offering Memorandum.
(t) Except as disclosed in the Offering Memorandum, there are no
legal or governmental proceedings pending to which the Company is a party or of
which any property or asset of the Company is the subject which, if determined
adversely to the Company might have a Material Adverse Effect; and to the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or, except as set forth or contemplated in the Offering
Memorandum, threatened by others.
(u) No event has occurred nor has any circumstance arisen which,
had the Debentures been issued on such Delivery Date, would constitute a default
or an Event of Default (as such term is defined in the Indenture).
(v) The Company is not (i) in violation of its certificate of
incorporation or bylaws, (ii) in default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (iii) in violation of any
law, ordinance, governmental rule, regulation or court decree to which it or its
properties or assets may be subject or has failed to obtain any license, permit,
certificate, franchise or other governmental authorization or permit necessary
to the ownership of its properties or to the conduct of its business, except to
the extent that any such default, event or violation described in the foregoing
clauses (i), (ii) and (iii) would not have a Material Adverse Effect.
(w) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(x) The Company has timely and properly filed with the
Commission all reports and other documents required to have been filed by it
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations promulgated under the
Exchange Act.
(y) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof or has
requested extensions thereof and has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company which has had (nor does
the Company have any knowledge of any tax deficiency which, if determined
adversely to the Company, might have) a Material Adverse Effect.
(z) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic wastes,
medical wastes, hazardous wastes or hazardous substances by the Company (or, to
the knowledge of the Company, any of its predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the Company in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under any applicable
law, ordinance, rule, regulation, order, judgment, decree or permit, except for
any violation or remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with all such
violations and remedial actions a Material Adverse Effect; there has been no
material spill, discharge, leak, emission, injection, escape, dumping or release
of any kind onto such property or into the environment surrounding such property
of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company
or with respect to which the Company has knowledge, except for any such spill,
discharge, leak, emission, injection, escape, dumping or release which would not
have or would not be reasonably likely to have, singularly or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a Material Adverse Effect; and the terms "hazardous
wastes", "toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and foreign laws
or regulations with respect to environmental protection.
(aa) There are no contracts or other documents which would be
required to be described in the Offering Memorandum if the Offering Memorandum
were a prospectus included in a registration statement on Form S-1 that have not
been so described in the Offering Memorandum.
(bb) Except as set forth in the Company's Proxy Statement filed
with the Commission on April 29, 1999, there is no relationship, direct or
indirect, between or among the Company, on the one hand, and the directors,
officers, shareholders, customers or suppliers of the Company, on the other
hand, which would be required to be described in the Offering Memorandum if the
Offering Memorandum were a prospectus included in a registration statement on
Form S-1 that has not been so described.
(cc) Since the date as of which information is given in the
Offering Memorandum through the date hereof, the Company has not (i) issued or
granted any securities (other than Authorized Grants), (ii) incurred any
material liability or obligation, direct or contingent, other than liabilities
and obligations which were incurred in the ordinary course of business, (iii)
entered into any material transaction not in the ordinary course of business or
(iv) declared or paid any dividend on its capital stock.
(dd) Except as disclosed in the Offering Memorandum, (i) there
are no outstanding securities convertible into or exchangeable for, or warrants,
rights or options issued by the Company to purchase, any shares of the capital
stock of the Company (except, in the case of options, any Authorized Grants),
(ii) there are no statutory, contractual, preemptive or other rights to
subscribe for or to purchase any Common Stock that do not by their terms
terminate upon the First Delivery Date and (iii) there are no restrictions upon
transfer of the Common Stock pursuant to the Company's certificate of
incorporation or bylaws.
(ee) The Company has undertaken a review to evaluate the effect
of the Year 2000 Problem (that is, any significant risk that its computer
hardware and software ("Computer Equipment") will not, in the case of dates or
time periods occurring after December 31, 1999, function at least as effectively
as in the case of dates or time periods occurring prior to January 1, 2000), and
determined that as a result thereof, the Company reasonably believes that (i)
there are no issues related to the Company's readiness to address the Year 2000
Problem that are of a character required to be described or referred to in the
Offering Memorandum and which have not been so described or referred to in the
Offering Memorandum and (ii) the Year 2000 Problem will not have a Material
Adverse Effect.
(ff) The Company (i) makes and keeps materially accurate books
and records and (ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for its
assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(gg) Neither the Company nor any director, officer, agent or
employee acting on behalf of the Company has (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977 or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(hh) No labor disturbance by the employees of the Company exists
or, to the
knowledge of the Company, is imminent which might be expected to have a Material
Adverse Effect.
(ii) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(jj) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Debentures are listed on any
national securities exchange registered under Section 6 of the Exchange Act or
quoted on an automated inter-dealer quotation system.
(kk) None of the Company or any of its affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) (other
than the Initial Purchasers, about which no representation is made by the
Company), has, directly or through an agent, engaged in any form of general
solicitation or general advertising in connection with the offering of the
Debentures (as those terms are used in Regulation D) under the Securities Act or
in any manner involving a public offering within the meaning of Section 4(2) of
the Securities Act; the Company has not entered into any contractual arrangement
with respect to the distribution of the Debentures except for this Agreement and
the Company will not enter into any such arrangement.
(ll) None of the Company or any of its affiliates (other than the
Initial Purchasers, about which no representation is made by the Company), has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any "security" (as defined in the
Securities Act) which is or will be integrated with the sale of the Debentures
in a manner that would require the registration under the Securities Act of the
Debentures.
(mm) The Company has not taken, directly or indirectly, any
action designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company in connection with the offering of the
Debentures.
2 . PURCHASE, SALE AND DELIVERY OF DEBENTURES.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to sell to
each Initial Purchaser, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company, at a purchase price of 97.00% of the
principal amount thereof (the "purchase price") the principal amount of Firm
Debentures set forth opposite such Initial Purchaser's name in Schedule I
hereto.
Delivery of and payment for the Firm Debentures shall be made at the
office of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, at 10:00 a.m. (New York time) on October 13, 1999, or such later date as
the Initial Purchasers shall designate, which date and time may be postponed by
agreement between the Initial Purchasers and the Company or as provided in
Section 8 (such date and time of delivery and payment for the Firm Debentures
being herein called the "First Delivery Date"). Delivery of the Firm Debentures
shall be made to the Initial Purchasers against payment of the purchase price by
the Initial Purchasers. Payment for the Firm Debentures shall be effected
either by wire transfer of immediately available funds to an account with a bank
in The City of New York, the account number and the ABA number for such bank to
be provided by the Company to the Initial Purchasers at least two business days
in advance of the First Delivery Date, or by such other manner of payment as may
be agreed by the Company and the Initial Purchasers.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants the
Option to the Initial Purchasers to purchase, severally and not jointly, the
Optional Debentures at the same price as the Initial Purchasers shall pay for
the Firm Debentures and the principal amount of the Optional Debentures to be
sold to be each Initial Purchaser shall be that principal amount which bears the
same ratio to the aggregate principal amount of Optional Debentures being
purchased as the principal amount of Firm Debentures set forth opposite the name
of such Initial Purchaser in Schedule I hereto (or such number increased as set
forth in Section 8). The Option may be exercised only to cover over-allotments
in the sale of the Firm Debentures by the Initial Purchasers. The Option may be
exercised once in whole or in part at any time not more than 30 days subsequent
to the date of this Agreement upon notice in writing or by facsimile by the
Initial Purchasers to the Company setting forth the amount (which shall be an
integral multiple of $1,000) of Optional Debentures as to which the Initial
Purchasers are exercising the Option.
The date for the delivery of and payment for the Optional Debentures,
being herein referred to as an "Optional Delivery Date", which may be the First
Delivery Date (the First Delivery Date and the Optional Delivery Date, if any,
being sometimes referred to as a "Delivery Date"), shall be determined by the
Initial Purchasers but shall not be later than five full business days after
written notice of election to purchase Optional Debentures is given. Delivery
of the Optional Debentures shall be made to the Initial Purchasers against
payment of the purchase price by the Initial Purchasers. Payment for the
Optional Debentures shall be effected either by wire transfer of immediately
available funds to an account with a bank in The City of New York, the account
number and the ABA number for such bank to be provided by the Company to the
Initial Purchasers at least two business days in advance of the Optional
Delivery Date, or by such other manner of payment as may be agreed by the
Company and the Initial Purchasers.
(c) The Company will deliver against payment of the purchase
price (a) the
Debentures initially sold to qualified institutional buyers ("QIBs"), as defined
in Rule 144A under the Securities Act ("Rule 144A") in the form of one or more
permanent global certificates (the "Global Debentures"), registered in the name
of Cede & Co., as nominee for The Depository Trust Company ("DTC") and (b) the
Debentures initially sold to "accredited investors" (as defined in Rule 501(a)
under the Securities Act) who are not QIBs in certificated, fully registered
form (the "Certificated Debentures"). Beneficial interests in the Debentures
initially sold to QIBs will be shown on, and transfers thereof will be effected
only through, records maintained in book-entry form by DTC and its participants.
The Global Debentures will be made available, at the request of the
Initial Purchasers, for checking at least 24 hours prior to such Delivery Date.
The Certificated Debentures will be made available, at the request of the
Initial Purchasers, for checking at least 48 hours prior to such Delivery Date.
(d) Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligations of the Initial Purchasers hereunder.
3 . FURTHER AGREEMENTS OF THE COMPANY. The Company further
agrees:
(a) To advise the Initial Purchasers promptly of any proposal to
amend or supplement the Offering Memorandum and not to effect any such amendment
or supplement without the consent of the Initial Purchasers. If, at any time
prior to completion of the resale of the Debentures by the Initial Purchasers,
any event shall occur or condition exist as a result of which it is necessary to
amend or supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a purchaser,
not misleading, to promptly notify the Initial Purchaser and prepare, subject to
the first sentence of this Section 3(a), such amendment or supplement as may be
necessary to correct such untrue statement or omission.
(b) To furnish to the Initial Purchasers and to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, counsel to the Initial Purchasers, copies of the Preliminary
Offering Memorandum and the Offering Memorandum (and all amendments and
supplements thereto) in each case as soon as available and in such quantities as
the Initial Purchasers reasonably requests for internal use and for distribution
to prospective purchasers; and to furnish to the Initial Purchasers on the date
hereof four copies of the Offering Memorandum signed by duly authorized officers
of the Company, one of which will include the independent auditors' reports
therein manually signed by such independent auditors. The Company will pay the
expenses of printing and distributing to the Initial Purchasers all such
documents.
(c) To use its reasonable efforts to take such action as the
Initial Purchasers
may reasonably request from time to time, to qualify the Debentures for offering
and sale under the securities laws of such jurisdictions as the Initial
Purchasers may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions in the United
States for as long as may be necessary to complete the resale of the Debentures;
PROVIDED that in connection therewith, the Company shall not be required to
qualify as a foreign corporation or otherwise subject itself to taxation in any
jurisdiction in which it is not otherwise so qualified or subject.
(d) To apply the proceeds from the sale of the Debentures as set
forth under "Use of Proceeds" in the Offering Memorandum.
(e) For a period of 90 days from the date of the Offering
Memorandum, not to, directly or indirectly, offer for sale, sell or otherwise
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition or purchase by any person at any
time in the future of), or announce an offering of any debt securities of the
Company (other than the Debentures) or any shares of Common Stock (other than
the Conversion Shares), or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than Authorized Grants or issuances
of shares of Common Stock or rights to receive shares of Common Stock in
connection with collaborative agreements entered into in the ordinary course of
business (the "Collaborative Shares") or issuances of shares of Common Stock or
rights to receive shares of Common Stock in connection with any merger,
consolidation, acquisition or similar business combination with a company not
subject to the reporting requirements of the Exchange Act ("Acquisition Shares")
or as contemplated pursuant to the Alliance Agreement (the "Alliance Shares"))
without the prior written consent of ▇▇▇▇▇▇ Brothers Inc.; and to cause each
officer and director of the Company to furnish to the Initial Purchasers, prior
to the First Delivery Date, and to cause each person or entity receiving any
such Collaborative Shares, Acquisition Shares or Alliance Shares to furnish to
the Initial Purchasers, prior to issuance of any such Collaborative Shares,
Acquisition Shares or Alliance Shares, a letter or letters, in form and
substance satisfactory to counsel to the Initial Purchasers, pursuant to which
each such person shall agree not to, directly or indirectly, offer for sale,
sell or otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition or purchase by
any person at any time in the future of), any shares of Common Stock
beneficially owned, deemed to be beneficially owned, or in the future acquired
by each such person for a period of 90 days from the date of the Offering
Memorandum, without the prior written consent of ▇▇▇▇▇▇ Brothers Inc., PROVIDED,
HOWEVER, that no such letter or letters shall be required with respect to any
such Collaborative Shares, Acquisition Shares or Alliance Shares so long as (i)
such shares shall be restricted securities, as defined in Rule 144 under the
Securities Act, on the day 90 days from the date of the Offering Memorandum and
(ii) the Company shall be under no obligation to register such shares under the
Securities Act prior to such date, PROVIDED, FURTHER, that with respect to the
shares of Common Stock owned by the officers of the Company, such restrictions
shall not apply to (i) sales of shares of Common Stock made to satisfy loans
incurred to finance the purchase of such shares of Common Stock, if that
satisfaction is required by the lender pursuant to margin regulations and (ii)
charitable donations of shares of Common Stock that are consistent with the
prior years' practice.
(f) For so long as any of the Debentures are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act, to
provide to any holder of the Debentures or to any prospective purchaser of the
Debentures designated by any holder, upon request of such holder or prospective
purchaser, information required to be provided by Rule 144A(d)(4) of the
Securities Act if, at the time of such request, the Company is not subject to
the reporting requirements under Section 13 or 15(d) of the Exchange Act.
(g) Each of the Debentures will bear, to the extent applicable,
the legend contained in "Notice to Investors" in the Offering Memorandum for the
time period and upon the other terms stated therein, except after the Debentures
are resold pursuant to a registration statement effective under the Securities
Act.
(h) To take such steps as shall be necessary to ensure that it
shall not become an "investment company" within the meaning of such term under
the Investment Company Act, and the rules and regulations of the Commission
thereunder.
(i) None of the Company or any of its affiliates will take,
directly or indirectly, any action which is designed to stabilize or manipulate,
or which constitutes or which might reasonably be expected to cause or result in
stabilization or manipulation, of the price of any security of the Company in
connection with the offering of the Debentures.
(j) To execute and deliver the Registration Rights Agreement (in
form and substance satisfactory to the Initial Purchasers.
(k) To use its best efforts to assist the Initial Purchasers in
arranging to cause the Debentures to be accepted to trade in the PORTAL market
("PORTAL") of the National Association of Securities Dealers, Inc. ("NASD").
(l) To use its best efforts to cause the Debentures to be
accepted for clearance and settlement through the facilities of DTC.
(m) To use its best efforts to have the Conversion Shares
approved by the NASDAQ Stock Market's National Stock Exchange ("NASDAQ") for
inclusion prior to the effectiveness of the Registration Statement.
(n) The Company has not taken and until a period of 90 days has
elapsed from the date of the Offering Memorandum shall not take, directly or
indirectly, any action which releases Pfizer from or waives any restriction
imposed on Pfizer with respect to the transfer ofshares of Common Stock
contained in the Stock Purchase Agreement between Pfizer and the
Company, dated January 18, 1995.
(0) The Company has not taken and until a period of 90 days has
elapsed from the date of the Offering Memorandum shall not take, directly or
indirectly, any action which releases ▇▇▇▇▇▇ from or waives any restriction
imposed on ▇▇▇▇▇▇ with respect to the transfer of shares of Common Stock
contained in the Stock Purchase Agreement between ▇▇▇▇▇▇ and the Company, dated
March 1, 1996, as amended.
4 . EXPENSES. The Company agrees to pay:
(a) the costs incident to the authorization, issuance, sale and
delivery of the Debentures, and any taxes payable in that connection;
(b) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering
Memorandum and any amendment or supplement to the Offering Memorandum, all
as provided in this Agreement;
(c) the costs of producing and distributing the Operative
Documents;
(d) the fees and expenses of ▇▇▇▇▇▇ Godward LLP and Ernst &
Young LLP;
(e) the costs of distributing the terms of agreement relating to
the organization of the underwriting syndicate and selling group to the
members thereof by mail, telex or other means of communication;
(f) the fees and expenses of qualifying the Debentures under the
securities laws of the several jurisdictions as provided in Section 3(c)
and of preparing, printing and distributing a Blue Sky Memorandum
(including reasonable related fees and expenses of counsel to the Initial
Purchasers);
(g) all costs and expenses incident to (i) the preparation of
the "road show" presentation materials and (ii) the road show travelling
expenses of the Company;
(h) all fees and expenses incurred in connection with any rating
of the Debentures;
(i) the costs of preparing the Debentures;
(j) all expenses and fees in connection with the application for
inclusion of the Debentures in the PORTAL market and the inclusion of the
Conversion Shares on the NASDAQ;
(k) the fees and expenses (including fees and disbursements of
counsel) of the Trustee, and the costs and charges of any registrar,
transfer agent, paying agent or conversion agent; and
(l) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement;
PROVIDED that, except as provided in this Section 4 and in Section 7, the
Initial Purchasers shall pay their own costs and expenses, including the costs
and expenses of their counsel and any transfer taxes on the Debentures which
they may sell.
5 . CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
several obligations of the Initial Purchasers hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company contained herein, to the performance by the Company of
its obligations hereunder, and to each of the following additional terms and
conditions:
(a) No Initial Purchaser shall have discovered and disclosed to
the Company prior to or on such Delivery Date that the Offering Memorandum or
any amendment or supplement thereto contains any untrue statement of a fact
which, in the opinion of counsel to the Initial Purchasers, is material or omits
to state any fact which is material and necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of the Operative Documents and the
Offering Memorandum or any amendment or supplement thereto, and all other legal
matters relating to the Operative Documents and the transactions contemplated
thereby shall be satisfactory in all material respects to counsel to the Initial
Purchasers, and the Company shall have furnished to such counsel all documents
and information that they may reasonably request to enable them to pass upon
such matters.
(c) ▇▇▇▇▇▇ Godward LLP shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated such Delivery Date, in form and substance
satisfactory to the Initial Purchasers, to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, and, based solely on certificates of public officials, is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company, and has all corporate
power and authority necessary to own or hold its properties and conduct the
business in which it is engaged; and, to the knowledge of such counsel, the
Company has no subsidiaries;
(ii) The Company has an authorized capitalization as set
forth in the Offering Memorandum, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and conform to
the description thereof contained in the Offering Memorandum in the section
entitled "Description of Capital Stock";
(iii) The Conversion Shares that are authorized on the date
hereof have been duly authorized and validly reserved for issuance upon
conversion of the Debentures and are free of preemptive rights; and the
Conversion Shares, when so issued and delivered upon such conversion in
accordance with the terms of the Indenture, will be duly and validly
authorized and issued, fully paid and nonassessable;
(iv) The statements in the Offering Memorandum under the
captions "Description of the Debentures" and "Description of Capital
Stock", insofar as they purport to summarize the provisions of the
Indenture, the Registration Rights Agreement, the Debentures and the Common
Stock (including the Conversion Shares) are accurate and complete in all
material respects to the extent required if such statements were contained
in a registration statement on Form S-3 under the Securities Act;
(v) There are no preemptive or other rights to subscribe
for or to purchase from the Company, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company's
certificate of incorporation or bylaws;
(vi) To the knowledge of such counsel and other than as set
forth in the Offering Memorandum, there are no legal or governmental
proceedings pending to which the Company is a party or of which any
property or assets of the Company is the subject which, if determined
adversely to the Company, might have a material adverse effect on the
financial position, stockholders' equity, results of operations or business
of the Company; and, to the actual knowledge of such counsel, no such
proceedings are overtly threatened or contemplated by governmental
authorities or threatened by others;
(vii) The execution, delivery and performance of this
Agreement, the Indenture and the Registration Rights Agreement and the
issuance of the Debentures and the Conversion Shares and the consummation
of the transactions contemplated hereby and thereby do not result in any
violation of the provisions of the certificate of incorporation or bylaws
of the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or assets; and,
except as may be required by the
securities or "blue sky" laws of any state of the United States in
connection with the sale of the Debentures, no consent, approval,
authorization or order of, or filing or registration with, any such court
or governmental agency or body is required for the execution, delivery and
performance of this Agreement and the Indenture by the Company and the
issuance of the Debentures and the Conversion Shares and the consummation
of the transactions contemplated hereby and thereby;
(viii) No registration of the Debentures or the Conversion
Shares under the Securities Act, and no qualification of the Indenture or
an indenture under the Trust Indenture Act, is required in connection with
the offer, sale and delivery of the Debentures or in connection with the
conversion of the Debentures into Conversion Shares, in each case, in the
manner contemplated by the Offering Memorandum, this Agreement and the
Indenture;
(ix) The statements in the Offering Memorandum under the
caption "Certain United States Federal Income Tax Considerations", insofar
as they purport to constitute summaries of matters of United States federal
income tax law and regulations or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein in all
material respects to the extent required if such statements were contained
in a registration statement on Form S-3 under the Securities Act;
(x) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xi) The Company has all necessary corporate right, power
and authority to execute and deliver each of the Operative Documents to
which it is a party and to perform its obligations thereunder and to issue,
sell and deliver the Debentures and the Conversion Shares to the Initial
Purchasers;
(xii) This Agreement has been duly authorized, executed and
delivered by the Company;
(xiii) The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Trustee, constitutes a legally valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, subject to general
principles of equity and to limitations on availability of equitable
relief, including specific performance (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing;
(xiv) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the Initial Purchasers,
constitutes a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms except as
rights to indemnity contained therein may be limited by applicable law and
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, subject to general principles of
equity and to limitations on availability of equitable relief, including
specific performance (regardless of whether such enforceability is
considered in a proceeding in equity or at law), by an implied covenant of
good faith and fair dealing; and
(xv) The Debentures have been duly authorized by the Company
and when executed, issued and authenticated in accordance with terms of the
Indenture and delivered to and paid for by the Initial Purchasers, will
constitute legally valid and binding obligations of the Company, entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, subject
to general principles of equity and to limitations on availability of
equitable relief, including specific performance (regardless of whether
such enforceability is considered in a proceeding in equity or at law) or
by an implied covenant of good faith and fair dealing.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States of America,
the laws of the State of New York and the Delaware General Corporation Law and
may state that it is relying, in respect of matters of New York law, upon
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, and in respect of matters of fact, upon certificates
of officers of the Company, PROVIDED that such counsel shall state that it
believes that the Initial Purchasers and it are justified in relying upon such
certificates. Such counsel shall also have furnished to the Initial Purchasers
a written statement, addressed to the Initial Purchasers and dated such Delivery
Date, in form and substance satisfactory to the Initial Purchasers, to the
effect that during the course of preparing the Offering Memorandum, such counsel
participated in conferences with officers and other representatives of the
Company, the Company's independent public accountants, the Initial Purchasers
and their counsel, at which the contents of the Offering Memorandum were
discussed, and while such counsel has not independently verified and is not
passing upon the accuracy, completeness or fairness of the statements made in
the Offering Memorandum except as explicitly set forth above, no facts have come
to the attention of such counsel which lead it to believe that the Offering
Memorandum (other than the financial statements,
financial and statistical data and supporting schedules as to which such counsel
shall make no statement), as of its date or as of such Delivery Date, contained
or contains 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 light of
the circumstances under which they were made, not misleading.
(d) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., General Counsel and Secretary of the
Company, shall have furnished to the Initial Purchasers his written opinion,
addressed to the Initial Purchasers and dated such Delivery Date, in form and
substance satisfactory to the Initial Purchasers, to the effect that:
(i) All of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable;
(ii) Except as disclosed in the Offering Memorandum, there are no
preemptive or other rights to subscribe for or to purchase from the
Company, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to any agreement or other instrument to which the
Company is a party known to such counsel; and
(iii) The execution, delivery and performance of this Agreement,
the Indenture and the Registration Rights Agreement and the issuance of the
Debentures and the Conversion Shares and the consummation of the
transactions contemplated hereby and thereby do not result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company is a
party or by which the Company is bound or to which any of the property or
assets of the Company is subject.
Such counsel shall also have furnished to the Initial Purchasers a
written statement, addressed to the Initial Purchasers and dated such Delivery
Date, in form and substance satisfactory to the Initial Purchasers, to the
effect that he has no reason to believe that the statements under the captions
"Risk Factors--Our patents may not protect our products and our products may
infringe on third-party patent rights" and "Patents and Proprietary Rights" in
the Offering Memorandum, as of its date or as of such Delivery Date, contained
or contains 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 light of
the circumstances under which they were made, not misleading.
(e) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, shall have furnished to the
Initial Purchasers their written opinion, as counsel to the Initial Purchasers,
addressed to the Initial Purchasers and dated such Delivery Date, in form and
substance satisfactory to the Initial Purchasers.
(f) With respect to the letter of Ernst & Young LLP delivered to
the Initial Purchasers concurrently with the execution of this Agreement (the
"initial letter"), the Company shall have furnished to the Initial Purchasers a
letter (the "bring-down letter") of such accountants, addressed to the Initial
Purchasers and dated such Delivery Date (i) confirming that they are independent
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of
the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more than five
days prior to the date of the bring-down letter), the conclusions and findings
of such firm with respect to the financial information and other matters covered
by the initial letter and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(g) The Company shall have furnished to the Initial Purchasers
on such Delivery Date a certificate, dated such Delivery Date and delivered on
behalf of the Company by one of its co-chief executive officers and its chief
financial officer, in form and substance satisfactory to the Initial Purchasers,
to the effect that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the date given and as of
such Delivery Date; and the Company has complied in all material respects
with all its agreements contained herein to be performed prior to or on
such Delivery Date;
(ii) (A) The Company has not sustained since the date of
the latest audited financial statements included in the Offering Memorandum
any loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, except (x) as set
forth or contemplated in the Offering Memorandum and (y) for operating
losses incurred in the ordinary course of business, or (B) since such date
there has not been any change in the capital stock or long-term debt of the
Company (except for issuances of shares of Common Stock upon exercise of
outstanding options described in the Offering Memorandum or pursuant to
Authorized Grants), or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company, except as set forth or contemplated in the Offering Memorandum;
and
(iii) Such officer has carefully examined the Offering
Memorandum and, in such officer's opinion (A) the Offering Memorandum, as
of its date, did not include any untrue statement of a material fact and
did not omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (B) since the date of the Offering Memorandum, no event has
occurred which should have been set forth in a supplement or
amendment to the Offering Memorandum.
(h) The Indenture shall have been duly executed and delivered by
the Company and the Trustee and the Debentures shall have been duly executed and
delivered by the Company and duly authenticated by the Trustee.
(i) The Company and the Initial Purchasers shall have executed
and delivered the Registration Rights Agreement (in form and substance
satisfactory to the Initial Purchasers) and the Registration Rights Agreement
shall be in full force and effect.
(j) The NASD shall have accepted the Debentures for trading on
PORTAL.
(i) The Company shall not have sustained since the date of
the latest audited financial statements included in the Offering Memorandum
any loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, except (A) as set
forth or contemplated in the Offering Memorandum and (B) for operating losses
incurred in the ordinary course of business, or (ii) since such date there
shall not have been any change in the capital stock or long-term debt of the
Company (except for issuances of shares of Common Stock upon exercise of
outstanding options described in the Offering Memorandum or pursuant to
Authorized Grants), or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, except as set
forth or contemplated in the Offering Memorandum, the effect of which, in any
such case described in clause (i) or (ii), is, in the reasonable judgment of
the Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or the delivery of the Debentures
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Offering Memorandum.
(1) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following:
(i) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange, the NASDAQ or the
over-the-counter market, or trading in any securities of the
Company on any exchange shall have been suspended or minimum
prices shall have been established on any such exchange or
market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction;
(ii) a banking moratorium shall have been declared by
United States federal or New York State authorities;
(iii) the United States shall have become engaged in
hostilities, there
shall have been an escalation in hostilities involving the United
States, or there shall have been a declaration of a national
emergency or war by the United States; or
(iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or
the effect of international conditions on the financial markets
in the United States shall be such) as to make it, in the sole
judgment of the Initial Purchasers, impracticable or inadvisable
to proceed with the offering or delivery of the Debentures being
delivered on such Delivery Date on the terms and in the manner
contemplated in the Offering Memorandum.
(m) The Company shall have furnished to the Initial Purchasers
such further information, certificates and documents as the Initial Purchasers
may reasonably request to evidence compliance with the conditions set forth in
this Section 5.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchasers.
6 . REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF INITIAL
PURCHASERS. Each Initial Purchaser, severally and not jointly, represents and
warrants that such Initial Purchaser is a QIB. Each Initial Purchaser,
severally and not jointly, agrees with the Company that:
(a) The Debentures and the Conversion Shares have not been and will
not be registered under the Securities Act in connection with the initial
offering of the Debentures.
(b) Such Initial Purchaser is purchasing the Debentures pursuant to a
private sale exemption from registration under the Securities Act;
(c) The Debentures have not been and will not be offered or sold by
such Initial Purchaser or its affiliates acting on its behalf within the
United States or to, or for the account or benefit of, United States
persons except in accordance with Rule 144A or to limited number of
"accredited investors" (as defined in Rule 501(a) under the Securities
Act);
(d) Such Initial Purchaser will not offer or sell the Debentures in
the United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D, including
(i) any advertisement, article, notice or other communication published in
any newspaper, magazine or similar medium or broadcast over television or
radio, or (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising in the United States; and
(e) Such Initial Purchaser has not offered or sold, and will not
offer or sell, any Debentures in the United States except to (A) persons
whom it reasonably believes to be QIBs and (B) a limited number of
"accredited investors" (as defined in Rule 501(a) under the Securities
Act).
7 . INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Initial
Purchaser, its officers and employees and each person, if any, who controls any
Initial Purchaser within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of the Debentures), to which that Initial
Purchaser, officer, employee or controlling person may become subject, insofar
as such loss, claim, damage, liability or action arises out of, or is based
upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in (A) any Preliminary Offering Memorandum or the
Offering Memorandum, or in any amendment or supplement thereto, or (B) any
blue sky application or other document prepared or executed by the Company
(or based upon any written information furnished by the Company) filed in
any jurisdiction specifically for the purpose of qualifying any or all of
the Debentures under the securities laws of any state or other jurisdiction
(such application, document or information being hereinafter called a "Blue
Sky Application") or
(ii) the omission or alleged omission to state therein any
material fact necessary to make the statements therein not misleading,
and shall reimburse each Initial Purchaser and each such officer, employee and
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Initial Purchaser, officer, employee or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Offering Memorandum or the
Offering Memorandum, or in any such amendment or supplement, or in any Blue Sky
Application in reliance upon and in conformity with the written information
furnished to the Company by or on behalf of any Initial Purchaser specifically
for inclusion therein and described in Section 7(e); PROVIDED, FURTHER, that as
to any Preliminary Offering Memorandum, this indemnity agreement shall not inure
to the benefit of any Initial
Purchaser, its officers or employees or any person controlling that Initial
Purchaser on account of any loss, claim, damage, liability or action arising
from the sale of Debentures to any person by that Initial Purchaser if that
Initial Purchaser failed to send or give a copy of the Offering Memorandum,
as the same may be amended or supplemented, to that person, and the untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such Preliminary Offering
Memorandum was corrected in the Offering Memorandum, unless such failure
resulted from non-compliance by the Company with Section 3(b). The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any Initial Purchaser or to any officer, employee or
controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless, the Company, its officers and directors, and each
person, if any, who controls the Company within the meaning of the Securities
Act from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Company or any such director,
officer or controlling person may become subject, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering Memorandum or the
Offering Memorandum or in any amendment or supplement thereto, or in any
Blue Sky Application, or
(ii) the omission or alleged omission to state therein any
material fact necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with the written information furnished to the Company by or on behalf
of that Initial Purchaser specifically for inclusion therein and described in
Section 7(e), and shall reimburse the Company and any such director, officer or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Initial Purchaser may otherwise have to the Company or any such
director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by
such failure and, PROVIDED, FURTHER, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and their respective officers, employees and
controlling persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Initial Purchasers against the
Company under this Section 8, if the Initial Purchasers shall have reasonably
concluded that there may be one or more legal defenses available to the Initial
Purchasers and their respective officers, employees and controlling persons that
are different from or additional to those available to the Company and its
officers, employees and controlling persons, the fees and expenses of a single
separate counsel shall be paid by the Company. No indemnifying party shall:
(i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld) settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or
(ii) be liable for any settlement of any such action effected
without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any
loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof:
(i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other from the offering of the Debentures, or
(ii) if the allocation provided by clause 7(d)(i) is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 7(d)(i) but
also the relative fault of the Company on the one hand and the Initial
Purchasers on the other with respect to the statements or omissions or
alleged statements or alleged omissions that resulted in such loss, claim,
damage or liability (or action in respect thereof), as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the Initial
Purchasers on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Debentures purchased under this Agreement (before deducting expenses) received
by the Company on the one hand, and the total discounts and commissions received
by the Initial Purchasers with respect to the Debentures purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the offering
of the Debentures under this Agreement, in each case as set forth in the table
on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Initial Purchasers, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if the amount of
contributions pursuant to this Section 7(d) were to be determined by PRO RATA
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7(d) shall be
deemed to include, for purposes of this Section 7(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Debentures resold by it in the initial placement of such Debentures were
offered to investors exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 7(d) are several in
proportion to their respective purchase obligations and not joint.
(e) The Initial Purchasers severally confirm that the statements
with respect to
the offering of the Debentures set forth on the cover page of the Offering
Memorandum and in the fifth, seventh, ninth, tenth, eleventh, twelfth and
fourteenth paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum are correct and constitute the only information furnished in writing
to the Company by or on behalf of the Initial Purchasers specifically for
inclusion in the Offering Memorandum.
8 . DEFAULTING INITIAL PURCHASERS.
If, on any Delivery Date, any Initial Purchaser defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Initial Purchasers shall be obligated to purchase the aggregate
principal amount of Debentures which the defaulting Initial Purchaser agreed but
failed to purchase on such Delivery Date in the respective proportions which the
total aggregate principal amount of Debentures set opposite the name of each
remaining non-defaulting Initial Purchaser in Schedule 1 hereto bears to the
total aggregate principal amount of Debentures set opposite the names of all the
remaining non-defaulting Initial Purchasers in Schedule 1 hereto; PROVIDED,
HOWEVER, that the remaining non-defaulting Initial Purchasers shall not be
obligated to purchase any Debentures on such Delivery Date if the total
aggregate principal amount of Debentures which the defaulting Initial Purchasers
agreed but failed to purchase on such date exceeds 9.09% of the total aggregate
principal amount at maturity of Debentures to be purchased on such Delivery
Date, and any remaining non-defaulting Initial Purchaser shall not be obligated
to purchase more than 110% of the aggregate principal amount at maturity of
Debentures which it agreed to purchase on such Delivery Date pursuant to the
terms of Section 2. If the foregoing maximums are exceeded, the remaining
non-defaulting Initial Purchasers, or those other purchasers satisfactory to the
Initial Purchasers who so agree, shall have the right, but shall not be
obligated, to purchase on such Delivery Date, in such proportion as may be
agreed upon among them, the total aggregate principal amount of Debentures to be
purchased on such Delivery Date. If the remaining Initial Purchasers or other
purchasers satisfactory to the Initial Purchasers do not elect to purchase on
such Delivery Date the aggregate principal amount of Debentures which the
defaulting Initial Purchasers agreed but failed to purchase, this Agreement (or
with respect to the Optional Delivery Date, the obligation of the Initial
Purchasers to purchase the Optional Debentures) shall terminate without
liability on the part of any non-defaulting Initial Purchasers and the Company,
except that the Company will continue to be liable for the payment of expenses
to the extent set forth in Sections 4 and 10. As used in this Agreement, the
term "Initial Purchaser" includes, for all purposes of this Agreement unless the
context requires otherwise, any party not listed in Schedule 1 hereto who,
pursuant to this Section 8, purchases Debentures which a defaulting Initial
Purchaser agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company for damages caused by its default.
If other purchasers are obligated or agree to purchase the Debentures of a
defaulting or withdrawing Initial Purchaser, either the remaining non-defaulting
Initial Purchasers or the Company may postpone the
Delivery Date for up to seven full business days in order to effect any changes
in the Offering Memorandum or in any other document or arrangement that, in the
opinion of counsel to the Company or counsel to the Initial Purchasers, may be
necessary.
9 . TERMINATION. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers by notice given to and
received by the Company prior to delivery of and payment for the Debentures if,
prior to that time, any of the events described in Sections 5(k) and (l) shall
have occurred or if the Initial Purchasers shall decline to purchase the
Debentures for any reason permitted under this Agreement.
10 . REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) the
Company shall fail to tender the Debentures for delivery to the Initial
Purchasers for any reason permitted under this Agreement or (b) the Initial
Purchasers shall decline to purchase the Debentures for any reason permitted
under this Agreement (including the termination of this Agreement pursuant to
Section 9), the Company shall reimburse the Initial Purchasers for the fees and
expenses of their counsel and for such other out-of-pocket expenses as shall
have been incurred by them in connection with this Agreement and the proposed
purchase of the Debentures, and upon demand the Company shall pay the full
amount thereof to the Initial Purchasers. If this Agreement is terminated
pursuant to Section 8 by reason of the default of one or more Initial
Purchasers, the Company shall not be obligated to reimburse any defaulting
Initial Purchaser on account of those expenses.
11 . NOTICES, ETC. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to ▇▇▇▇▇▇ Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: ▇-▇▇▇-▇▇▇-▇▇▇▇); and
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to Inhale Therapeutic Systems, Inc., ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, Esq. (Fax: (▇▇▇) ▇▇▇-▇▇▇▇).
PROVIDED, HOWEVER, that any notice to an Initial Purchaser pursuant to Section
7(c) shall be delivered or sent by mail, telex or facsimile transmission to each
such Initial Purchaser, which address will be supplied to any other party hereto
by ▇▇▇▇▇▇ Brothers Inc. upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by ▇▇▇▇▇▇ Brothers Inc.
(B) . PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Company and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements of the
Company contained in this Agreement shall also be deemed to be for the benefit
of the officers and employees of each Initial Purchaser and the person or
persons, if any, who control each Initial Purchaser within the meaning of
Section 15 of the Securities Act and any indemnity agreement of the Initial
Purchasers contained in Section 7(b) of this Agreement shall be deemed to be for
the benefit of directors, officers and employees of the Company, and any person
controlling the Company within the meaning of Section 15 of the Securities Act.
Nothing contained in this Agreement is intended or shall be construed to give
any person, other than the persons referred to in this Section 12, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
13 . SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchasers contained in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Debentures and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
of them or any person controlling any of them.
14 . DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the rules and regulations promulgated under the
Securities Act.
15 . GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
16 . COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17 . HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
Inhale Therapeutic Systems, Inc.
By /s/ ▇▇▇▇▇▇ Chess
-------------------------------
NAME:
TITLE:
Accepted and agreed by:
▇▇▇▇▇▇ Brothers Inc.
Deutsche Bank Securities Inc.
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇
By: ▇▇▇▇▇▇ Brothers Inc.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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AUTHORIZED REPRESENTATIVE
SCHEDULE 1
Principal Amount
Initial Purchasers of Firm Debentures
-------------------
▇▇▇▇▇▇ Brothers Inc. $ 65,000,000
Deutsche Bank Securities Inc. 17,500,000
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. 17,500,000
--------------------
Total $ 100,000,000
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