Exhibit 1.1
6,000,000 Shares/1/
Kyphon Inc.
Common Stock
($0.001 Par Value)
PURCHASE AGREEMENT
[________________ _____], 2002
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
BANC OF AMERICA SECURITIES LLC
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
U.S. Bancorp Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
KYPHON INC., a Delaware corporation (the "Company"), proposes to sell to
the several Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 6,000,000 shares (the "Firm Shares") of Common Stock, $0.001 par
value per share (the "Common Stock"), of the Company. The Company has also
granted to the several Underwriters an option to purchase up to 900,000
additional shares of Common Stock on the terms and for the purposes set forth in
Section 3 hereof (the "Option Shares"). The Firm Shares and any Option Shares
purchased pursuant to this Purchase Agreement are herein collectively called the
"Securities."
The Company hereby confirms its agreement with respect to the sale of the
Securities to the several Underwriters, for whom you are acting as
representatives (the "Representatives").
1. Registration Statement and Prospectus. A registration statement on Form
S-1 (File No. 333-83678) with respect to the Securities, including a preliminary
form of prospectus, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations ("Rules and Regulations") of the
------------------
/1/ Plus an option to purchase up to 900,000 additional shares to cover
over-allotments.
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission; one or more amendments to such registration statement
have also been so prepared and have been, or will be, so filed; and, if the
Company has elected to rely upon Rule 462(b) of the Rules and Regulations to
increase the size of the offering registered under the Act, the Company will
prepare and file with the Commission a registration statement with respect to
such increase pursuant to Rule 462(b). Copies of such registration statement(s)
and amendments and each related preliminary prospectus have been delivered to
you.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus (including a term sheet meeting
the requirements of Rule 434 of the Rules and Regulations). If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, it will prepare and
file a prospectus (or a term sheet meeting the requirements of Rule 434)
pursuant to Rule 424(b) that discloses the information previously omitted from
the prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission, and, in
the event of any amendment thereto after the effective date and prior to the
First Closing Date (as hereinafter defined), such registration statement as so
amended (but only from and after the effectiveness of such amendment), including
a registration statement (if any) filed pursuant to Rule 462(b) of the Rules and
Regulations increasing the size of the offering registered under the Act and
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rules 430A(b) and 434(d) of the Rules and
Regulations, is hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was declared
effective by the Commission is hereinafter called the "Prospectus," except that
if any prospectus (including any term sheet meeting the requirements of Rule 434
of the Rules and Regulations provided by the Company for use with a prospectus
subject to completion within the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Act) filed by the Company with the
Commission pursuant to Rule 424(b) (and Rule 434, if applicable) of the Rules
and Regulations or any other such prospectus provided to the Underwriters by the
Company for use in connection with the offering of the Securities (whether or
not required to be filed by the Company with the Commission pursuant to Rule
424(b) of the Rules and Regulations) differs from the prospectus on file at the
time the Registration Statement is or was declared effective by the Commission,
the term "Prospectus" shall refer to such differing prospectus (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations) from and
after the time such prospectus is filed with the Commission or transmitted to
the Commission for filing pursuant to such Rule 424(b) (and Rule 434, if
applicable) or from and after the time it is first provided to the Underwriters
by the Company for such use. The term "Preliminary Prospectus" as used herein
means any preliminary prospectus included in the Registration Statement prior to
the time it becomes or became effective under the Act and any prospectus subject
to completion as described in Rule 430A or 434 of the Rules and Regulations.
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2. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; except
that the foregoing shall not apply to statements in or omissions from any
Preliminary Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by you, or by any Underwriter through
you (as limited by Section 6(f)), specifically for use in the preparation
thereof.
(ii) As of the time the Registration Statement (or any
post-effective amendment thereto, including a registration statement (if
any) filed pursuant to Rule 462(b) of the Rules and Regulations increasing
the size of the offering registered under the Act) is or was declared
effective by the Commission, upon the filing or first delivery to the
Underwriters of the Prospectus (or any supplement to the Prospectus
(including any term sheet meeting the requirements of Rule 434 of the Rules
and Regulations)) and at the First Closing Date and Second Closing Date (as
hereinafter defined), (A) the Registration Statement and Prospectus (in
each case, as so amended and/or supplemented) conformed or will conform in
all material respects to the requirements of the Act and the Rules and
Regulations, (B) the Registration Statement (as so amended) did not or will
not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
or were made, not misleading, and (C) the Prospectus (as so supplemented)
did not or will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they are
or were made, not misleading; except that the foregoing shall not apply to
statements in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for use in the preparation
thereof (as limited by Section 6(f)). If the Registration Statement has
been declared effective by the Commission, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no
proceeding for that purpose has been initiated or, to the Company's
knowledge, threatened by the Commission.
(iii) The financial statements of the Company, together with the
related notes, set forth in the Registration Statement and Prospectus
comply in all material respects with the requirements of the Act and fairly
present the financial condition of the Company as of the dates indicated
and the results of operations and
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changes in cash flows for the periods therein specified in conformity with
generally accepted accounting principles consistently applied throughout
the periods involved; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein. No other financial statements or schedules are required to be
included in the Registration Statement or Prospectus.
PricewaterhouseCoopers LLP, which has expressed its opinion with respect to
the financial statements and schedules filed as a part of the Registration
Statement and included in the Registration Statement and Prospectus, are
independent public accountants as required by the Act and the Rules and
Regulations.
(iv) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries has full corporate power and corporate authority to own its
properties and conduct its business as currently being carried on and as
described in the Registration Statement and Prospectus, and is duly
qualified to do business as a foreign corporation in good standing in each
jurisdiction in which it owns or leases real property or in which the
conduct of its business makes such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not have
a material adverse effect upon the business, prospects, properties,
operations, condition (financial or otherwise) or results of operations of
the Company and its subsidiaries, taken as a whole ("Material Adverse
Effect").
(v) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor any of its
subsidiaries has incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions, or declared or
paid any dividends or made any distribution of any kind with respect to its
capital stock; and there has not been any change in the capital stock
(other than a change in the number of outstanding shares of Common Stock
due to the issuance of shares upon the exercise of outstanding options or
warrants), or any material change in the short-term or long-term debt, or
any issuance of options, warrants, convertible securities or other rights
to purchase the capital stock of the Company or any of its subsidiaries
(other than issuances of options in the ordinary course of business under
existing plans described in the Registration Statement and Prospectus, not
to exceed the shares available for issuance as described therein), or any
material adverse change in the business, prospects, properties, operations,
condition (financial or otherwise) or results of operations of the Company
and its subsidiaries, taken as a whole ("Material Adverse Change"), or any
development involving a prospective Material Adverse Change.
(vi) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company or any of its subsidiaries
is a party or of which any property or assets of the Company is the subject
before or by any court or governmental
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agency, authority or body, or any arbitrator, which, individually or in the
aggregate, could reasonably be expected to result in any Material Adverse
Change.
(vii) There are no contracts or documents that are required to be
filed as exhibits to the Registration Statement by the Act or by the Rules
and Regulations that have not been so filed.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding
obligation of the Company, enforceable in accordance with its terms, except
as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity. The
execution, delivery and performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any material agreement or instrument to which the
Company is a party or by which it is bound or to which any of its property
is subject, the Company's charter or by-laws, or any order, rule,
regulation or decree of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; no consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement or for the consummation of the transactions
contemplated hereby, including the issuance or sale of the Securities by
the Company, except such as may be required under the Act, the rules of the
National Association of Securities Dealers, Inc., the rules of The Nasdaq
National Market or state securities or blue sky laws; and the Company has
full power and authority to enter into this Agreement and to authorize,
issue and sell the Securities as contemplated by this Agreement.
(ix) All of the issued and outstanding shares of capital stock of
the Company are duly authorized and validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities
that have not been waived in writing, and the holders thereof are not
subject to personal liability by reason of being such holders; the
Securities which may be sold hereunder by the Company have been duly
authorized and, when issued, delivered and paid for in accordance with the
terms of this Agreement, will have been validly issued and will be fully
paid and nonassessable, and the holders thereof will not be subject to
personal liability by reason of being such holders; and the capital stock
of the Company conforms or conformed, as of the respective dates disclosed
in the Registration Statement and Prospectus, to the description thereof in
the Registration Statement and Prospectus. Except as otherwise stated in
the Registration Statement and Prospectus there are or were, as of the
respective dates disclosed in the Registration Statement and Prospectus, no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock
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pursuant to the Company's charter, by-laws or any agreement or other
instrument to which the Company is a party or by which the Company is
bound. Except as otherwise stated in the Registration Statement and
Prospectus, neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement gives
rise to any rights for or relating to the registration of any shares of
Common Stock or other securities of the Company. Any such rights to require
the Company to include such securities in the Securities registered
pursuant to the Registration Statement have been satisfied or effectively
waived. All of the issued and outstanding shares of capital stock of each
of the Company's subsidiaries has been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise
described in the Registration Statement and Prospectus and except for any
directors' qualifying shares, the Company owns of record and beneficially,
free and clear of any security interests, claims, liens, proxies, equities
or other encumbrances, 99% of the issued and outstanding shares of such
stock. Except as described in the Registration Statement and the
Prospectus, there are or were, as of the respective dates disclosed in the
Registration Statement and Prospectus, no options, warrants, agreements,
contracts or other rights in existence to purchase or acquire from the
Company or any subsidiary of the Company any shares of the capital stock of
the Company or any subsidiary of the Company. The Company has or had, as of
the respective dates disclosed in the Registration Statement and
Prospectus, an authorized and outstanding capitalization as set forth in
the Registration Statement and the Prospectus.
(x) To its knowledge, the Company, together with its
subsidiaries, holds, and is operating in compliance in all material
respects with, all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders of any governmental or
self-regulatory body required for the conduct of its business and all such
franchises, grants, authorizations, licenses, permits, easements, consents,
certifications and orders are valid and in full force and effect, and the
Company has not received any notice of proceedings relating to the
revocation or modification of any such franchise, grant, authorization,
license, permit, easement, consent, certification or order that, if
determined adversely to the Company, would individually or in the aggregate
have a Material Adverse Effect; and the Company, together with its
subsidiaries, is in compliance in all material respects with all applicable
federal, state, local and foreign laws, regulations, orders and decrees.
(xi) The Company, together with its subsidiaries, has good and
marketable title to all property (whether real or personal) described in
the Registration Statement and Prospectus as being owned by it, in each
case free and clear of all liens, claims, security interests, other
encumbrances or defects except such as are described in the Registration
Statement and the Prospectus or that would otherwise not, individually or
in the aggregate, have a Material Adverse Effect. The property held under
lease by the Company and its subsidiaries is held by them under valid,
subsisting and enforceable leases with only such exceptions with respect to
any particular lease as do not interfere
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in any material respect with the conduct of the business of the Company or
its subsidiaries.
(xii) The Company, together with its subsidiaries, owns or
possesses all patents, patent applications, trademarks, service marks,
tradenames, trademark registrations, service ▇▇▇▇ registrations,
copyrights, licenses, inventions, trade secrets and rights necessary for
the conduct of the business of the Company and its subsidiaries as
currently carried on and as described in the Registration Statement and
Prospectus; except as stated in the Registration Statement and Prospectus,
no name which the Company or any of its subsidiaries uses and no other
aspect of the business of the Company or any of its subsidiaries involve or
give rise to any infringement of, or license or similar fees for, any
patents, patent applications, trademarks, service marks, tradenames,
trademark registrations, service ▇▇▇▇ registrations, copyrights, licenses,
inventions, trade secrets or other similar rights of others material to the
business of the Company, and neither the Company nor any of its
subsidiaries has received any notice alleging any such infringement or fee
and the Company does not know of any basis for the assertion of any such
claim of infringement or fee.
(xiii) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in breach of or otherwise
in default, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note,
indenture, loan agreement or any other material contract, lease or other
instrument to which it is subject or by which any of them may be bound, or
to which any of the material property or assets of the Company or any of
its subsidiaries is subject.
(xiv) The Company, together with its subsidiaries, has timely
filed all federal, state, local and foreign income and franchise tax
returns required to be filed and is not in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with
respect thereto that would individually or in the aggregate have a Material
Adverse Effect, other than any which the Company, together with its
subsidiaries, is contesting in good faith.
(xv) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and
sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by the
Company.
(xvi) The Securities have been approved for quotation on The
Nasdaq National Market upon official notice of issuance and, on the date
the Registration Statement became or becomes effective, the Company's
Registration Statement on Form 8-A or other applicable form under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), became or
will become effective.
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(xvii) Other than Kyphon Europe bvba and Kyphon Deutschland GmbH,
the wholly owned subsidiaries of the Company, the Company, directly or
indirectly, does not own any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust or
other entity.
(xviii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xix) Other than as contemplated by this Agreement, the Company
has not incurred any liability for any finder's or broker's fee or agent's
commission in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(xx) Neither the Company nor any of its affiliates is presently
doing business with the government of Cuba or with any person or affiliate
located in Cuba.
(xxi) The Company is not in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), does not own or operate any real
property contaminated with any substance that is subject to any
Environmental Laws, is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and is not subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation
which might lead to such a claim.
(xxii) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for companies
engaged in similar businesses in similar industries.
(xxiii) No labor dispute with the employees of the Company exists
or, to the knowledge of the Company, is imminent that might have a Material
Adverse Effect.
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(xxiv) Except with notice to the Representatives and compliance
with applicable laws, none of the Directed Stock (as defined below)
distributed in connection with the Directed Stock Program (as defined
below) will be offered or sold outside of the United States.
(xxv) The Company has not offered, or caused the Underwriters to
offer, any Securities to any person pursuant to the Directed Stock Program
with the specific intent to unlawfully influence (i) a customer or supplier
of the Company to alter the customer's or supplier's level or type of
business with the Company or (ii) a trade journalist or publication to
write or publish favorable information about the Company or its products.
(xxvi) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment company,"
as such term is defined in the Investment Company Act of 1940, as amended.
(xxvii) All statistical, research and market-related data
included in the Prospectus are based on or derived from sources that the
Company believes to be reliable and accurate, and the Company has obtained
the written consent to the use of such data from such sources to the extent
required.
(xxviii) Immediately after the issuance and sale of the
Securities to the Underwriters, no shares of preferred stock of the Company
shall be issued and outstanding, and no holder of any shares of capital
stock, securities convertible into or exchangeable or exercisable for
capital stock or options, warrants or other rights to purchase capital
stock or any other securities of the Company shall have any existing or
future right to acquire any shares of preferred stock of the Company.
(xxix) The clinical, pre-clinical and other studies and tests
conducted by or on behalf of or sponsored by the Company or in which the
Company or its products or product candidates have participated that are
described in the Registration Statement and Prospectus or the results of
which are referred to in the Registration Statement or Prospectus were and,
if still pending, are being conducted in all material respects in
accordance with standard medical and scientific research procedures. The
descriptions in the Registration Statement and Prospectus of the results of
such studies and tests are accurate and complete in all material respects
and fairly present the data derived from such studies and tests, and the
Company has no knowledge of any other studies or tests the results of which
are materially inconsistent with or otherwise materially call into question
the results described or referred to in the Registration Statement and
Prospectus. Except to the extent disclosed in the Registration Statement
and the Prospectus, the Company has operated and currently is in compliance
in all material respects with all applicable United States Food and Drug
Administration ("FDA") rules, regulations and policies. Except to the
extent disclosed in the Registration Statement and the Prospectus, the
Company has not received any notices or other correspondence from the FDA
or any other
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governmental agency requiring the termination, suspension or modification
of any clinical or pre-clinical studies or tests that are described in the
Registration Statement or Prospectus or the results of which are referred
to in the Registration Statement or Prospectus.
(b) Any certificate referring to this Agreement that is signed by any
officer of the Company and delivered to you or to counsel for the Underwriters
shall be deemed a representation and warranty by the Company to each Underwriter
as to the matters covered thereby.
3. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell the Firm Shares to the several Underwriters,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto. The purchase price for each Firm Share shall
be $[___] per share. In making this Agreement, each Underwriter is contracting
severally and not jointly; except as provided in paragraph (c) of this Section 3
and in Section 8 hereof, the agreement of each Underwriter is to purchase only
the respective number of Firm Shares specified in Schedule I.
It is understood that 300,000 shares of the Firm Shares ("Directed
Stock") will initially be reserved by the Underwriters for offer and sale to
employees, directors and persons having relationships with the Company or its
employees ("Directed Stock Participants") subject to the terms and conditions
set forth in the Prospectus and in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc. ("Directed Stock Program").
Under no circumstance will the Representatives or any Underwriter be liable to
the Company or to any Directed Stock Participant for any action taken or omitted
to be taken in good faith in connection with such Directed Stock Program. To the
extent that any shares of Directed Stock are not affirmatively reconfirmed for
purchase by any Directed Stock Participant on or by the end of the business day
following the date of this Agreement, such Directed Stock may be offered to the
public as part of the public offering contemplated hereby.
The Firm Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by wire transfer of same day funds payable to the order of the Company
at the offices of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., U.S. Bancorp Center, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other location as may be mutually
acceptable, at 9:00 a.m. Central time on the third (or if the Securities are
priced, as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30
p.m. Eastern time, the fourth) full business day following the date hereof, or
at such other time and date as you and the Company determine pursuant to Rule
15c6-1(a) under the Exchange Act, such time and date of delivery being herein
referred to as the "First Closing Date." Delivery of the Firm Shares will be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives. Certificates representing the
Firm Shares, in definitive form
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and in such denominations and registered in such names as you may request upon
at least two business days' prior notice to the Company, will be made available
for checking and packaging not later than 10:30 a.m., Central time, on the
business day next preceding the First Closing Date at the offices of U. S.
Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., U.S. Bancorp Center, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, or such other location as may be mutually acceptable.
(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters an option to purchase all or
any portion of the Option Shares at the same purchase price as the Firm Shares,
for use solely in covering any over-allotments made by the Underwriters in the
sale and distribution of the Firm Shares. The option granted hereunder may be
exercised in whole or in part at any time (but not more than once) within 30
days after the effective date of this Agreement upon notice (confirmed in
writing) by the Representatives to the Company setting forth the aggregate
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the certificates for the Option
Shares are to be registered and the date and time, as determined by you, when
the Option Shares are to be delivered, such time and date being herein referred
to as the "Second Closing" and "Second Closing Date," respectively; provided,
however, that the Second Closing Date shall not be earlier than the First
Closing Date nor earlier than the second business day after the date on which
the option shall have been exercised. If the option is exercised, the number of
Option Shares to be purchased by each Underwriter shall be the same percentage
of the total number of Option Shares to be purchased by the several Underwriters
as the number of Firm Shares to be purchased by such Underwriter is of the total
number of Firm Shares to be purchased by the several Underwriters, as adjusted
by the Representatives in such manner as the Representatives deem advisable to
avoid fractional shares. No Option Shares shall be sold and delivered unless the
Firm Shares previously have been, or simultaneously are, sold and delivered.
The Option Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by wire transfer of same day funds payable to the order of the Company
at the offices of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., U.S. Bancorp Center, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other location as may be mutually
acceptable at 9:00 a.m., Central time, on the Second Closing Date. Delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
Certificates representing the Option Shares in definitive form and in such
denominations and registered in such names as you have set forth in your notice
of option exercise, will be made available for checking and packaging not later
than 10:30 a.m., Central time, on the business day next preceding the Second
Closing Date at the office of U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., U.S. Bancorp
Center, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other location as may
be mutually acceptable.
(c) It is understood that you, individually and not as Representatives
of the several Underwriters, may (but shall not be obligated to) make payment to
the Company on behalf of any Underwriter for the Securities to be purchased by
such Underwriter. Any such
-11-
payment by you shall not relieve any such Underwriter of any of its obligations
hereunder. Nothing herein contained shall constitute any of the Underwriters an
unincorporated association or partner with the Company.
4. Covenants. The Company covenants and agrees with the several
Underwriters as follows:
(a) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to cause the
Registration Statement and any post-effective amendments thereto to become
effective as promptly as possible; the Company will notify you promptly of the
time when the Registration Statement or any post-effective amendment to the
Registration Statement has become effective or any supplement to the Prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) has been filed and of any request by the Commission for any
amendment or supplement to the Registration Statement or Prospectus or
additional information; if the Company has elected to rely on Rule 430A of the
Rules and Regulations, the Company will prepare and file a Prospectus (or term
sheet within the meaning of Rule 434 of the Rules and Regulations) containing
the information omitted therefrom pursuant to Rule 430A of the Rules and
Regulations with the Commission within the time period required by, and
otherwise in accordance with the provisions of, Rules 424(b), 430A and 434, if
applicable, of the Rules and Regulations; if the Company has elected to rely
upon Rule 462(b) of the Rules and Regulations to increase the size of the
offering registered under the Act, the Company will prepare and file a
registration statement with respect to such increase with the Commission within
the time period required by, and otherwise in accordance with the provisions of,
Rule 462(b); the Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration Statement
or Prospectus (including any term sheet within the meaning of Rule 434 of the
Rules and Regulations) that, in your opinion, may be necessary or advisable in
connection with the distribution of the Securities by the Underwriters; and the
Company will not file any amendment or supplement to the Registration Statement
or Prospectus (including any term sheet within the meaning of Rule 434 of the
Rules and Regulations) to which you shall reasonably object by notice to the
Company after having been furnished a copy a reasonable time prior to the
filing.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for any such
purpose; and the Company will promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a prospectus (including any term
sheet within the meaning of Rule 434 of the Rules and Regulations) relating to
the Securities is required to be delivered under the Act, the Company will
comply as far as it is able with all requirements imposed upon it by the Act, as
now and hereafter amended, and by the Rules and
-12-
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Securities as contemplated by the
provisions hereof and the Prospectus. If during such period any event occurs as
a result of which the Prospectus would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances then existing, not misleading, or if during such
period it is necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act, the Company will promptly notify you and will
amend the Registration Statement or supplement the Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such
compliance.
(d) The Company shall use its best efforts to qualify the Securities
for sale under the securities laws of such jurisdictions as you reasonably
designate and to continue such qualifications in effect so long as required for
the distribution of the Securities, except that the Company shall not be
required in connection therewith to qualify as a foreign corporation, subject
itself to taxation or to execute a general consent to service of process in any
state.
(e) The Company will furnish to the Underwriters and counsel for the
Underwriters copies of the Registration Statement (three of which will be signed
and will include all consents and exhibits filed therewith), each Preliminary
Prospectus, the Prospectus, and all amendments and supplements (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations) to such
documents, in each case as soon as available and in such quantities as you may
from time to time reasonably request.
(f) During a period of five years commencing with the date hereof, the
Company will furnish to the Representatives, and to each Underwriter who may so
reasonably request in writing, copies of all periodic and special reports
furnished to the stockholders of the Company and all information, documents and
reports filed with the Commission, the National Association of Securities
Dealers, Inc., Nasdaq or any securities exchange (other than any such
information, documents and reports that are filed with the Commission
electronically via ▇▇▇▇▇ or any successor system).
(g) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than 15 months after the end
of the Company's current fiscal quarter, an earnings statement (which need not
be audited) covering a 12-month period beginning after the effective date of the
Registration Statement that shall satisfy the provisions of Section 11(a) of the
Act and Rule 158 of the Rules and Regulations.
(h) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming effective
under the provisions of Section 9(a) hereof or is terminated, will pay or cause
to be paid (i) all expenses (including transfer taxes allocated to the
respective transferees) incurred in connection with the delivery to the
Underwriters of the Securities, (ii) all expenses and fees (including, without
limitation, fees and expenses of the Company's accountants and counsel but,
except as otherwise provided below, not including fees of the Underwriters'
counsel) in connection with the preparation, printing, filing, delivery, and
shipping of the Registration Statement (including the financial
-13-
statements therein and all amendments, schedules, and exhibits thereto), the
Securities, each Preliminary Prospectus, the Prospectus, and any amendment
thereof or supplement thereto, and the printing, delivery, and shipping of this
Agreement and other underwriting documents, including Blue Sky Memoranda
(covering the states and other applicable jurisdictions), (iii) all filing fees
and reasonable fees and disbursements of the Underwriters' counsel incurred in
connection with the qualification of the Securities for offering and sale by the
Underwriters or by dealers under the securities or blue sky laws of the states
and other jurisdictions which you shall designate or are necessary to distribute
the Directed Stock, (iv) the fees and expenses of any transfer agent or
registrar, (v) the filing fees incident to any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities, (vi) the fees for quotation of the Securities on The Nasdaq National
Market, if any, (vii) all costs and expenses of the Underwriters, including fees
and disbursements of counsel for the Underwriters and any stamp duties or other
taxes incurred by the Underwriters, in connection with matters related to the
Directed Stock, and (viii) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise specifically
provided for herein. If the sale of the Securities provided for herein is not
consummated by reason of action by the Company pursuant to Section 9(a) hereof
which prevents this Agreement from becoming effective, or by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will reimburse the several Underwriters for all
out-of-pocket disbursements (including fees and disbursements of counsel)
incurred by the Underwriters in connection with their investigation, preparing
to market and marketing the Securities or in contemplation of performing their
obligations hereunder. The Company shall not in any event be liable to any of
the Underwriters for loss of anticipated profits from the transactions covered
by this Agreement.
(i) The Company intends to apply the net proceeds from the sale of the
Securities to be sold by it hereunder for the purposes set forth in the
Prospectus and will file such reports with the Commission with respect to the
sale of the Securities and the application of the proceeds therefrom as may be
required in accordance with Rule 463 of the Rules and Regulations.
(j) The Company will not, without the prior written consent of U.S.
Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., from the date of execution of this Agreement and
continuing to and including the date 180 days after the date of the Prospectus
(the "Lock-Up Period") offer for sale; sell; contract to sell; pledge; grant any
option for the sale of; or otherwise issue or dispose of, directly or indirectly
(or publicly disclose the intention to make any such offer, sale, pledge, grant,
issuance or other disposition), any Common Stock or any securities convertible
into or exchangeable for, or any options or rights to purchase or acquire,
Common Stock, except for (i) the registration of the offer and sale of the
Securities and sales to the Underwriters pursuant to this Agreement; (ii) the
issuance of Common Stock upon the exercise of options and warrants disclosed as
outstanding in the Registration Statement and Prospectus; (iii) the issuance of
stock options not exercisable and saleable during the Lock-Up Period pursuant to
stock option plans described in the Registration Statement and Prospectus; (iv)
the issuance of shares of Common
-14-
Stock upon the automatic conversion of a convertible promissory note held by J&A
Group, LLC as disclosed in the Registration Statement and Prospectus; and (v)
the issuance of warrants to purchase Common Stock in connection with the
Company's repayment of convertible promissory notes disclosed as outstanding in
the Registration Statement and Prospectus. The Company agrees not to accelerate
the vesting of any option or warrant or the lapse of any repurchase right prior
to the expiration of the Lock-Up Period.
(k) The Company either has caused to be delivered to you or will cause
to be delivered to you prior to the effective date of the Registration Statement
a letter from each (i) of the Company's directors and officers and (ii) holder
of Common Stock and securities convertible into or exchangeable for Common Stock
representing, in the aggregate, at least 1% of the Company's outstanding Common
Stock, stating that such person agrees that he, she or it will not, without your
prior written consent, offer for sale, sell, contract to sell or otherwise
dispose of, as set forth in such letter, any shares of Common Stock or rights to
purchase Common Stock, except to the Underwriters pursuant to this Agreement,
for a period of 180 days after commencement of the public offering of the
Securities by the Underwriters (the "Lock-Up Agreement"). The Company will
enforce the terms of each Lock-Up Agreement and issue stop-transfer instructions
to the transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach of or default under the
applicable Lock-Up Agreement.
(l) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities, and has not effected any sales of Common Stock which are
required to be disclosed in response to Item 701 of Regulation S-K under the Act
which have not been so disclosed in the Registration Statement.
(m) The Company will not incur any liability for any finder's or
broker's fee or agent's commission in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
(n) The Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in which
Directed Stock is offered in connection with the Directed Stock Program.
(o) In connection with the Directed Stock Program to ensure that the
Directed Stock sold to the Company's employees or directors will be restricted
to the extent required by the National Association of Securities Dealers, Inc.
or the rules of such association from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement, the Company will direct the
transfer agent to place stop-transfer restrictions upon such securities for such
period of time. Should the Company release, or seek to release, from such
restrictions any of the Directed Stock, the Company agrees to reimburse the
Underwriters for any reasonable expense (including, without limitation, legal
expenses) they incur with such release.
-15-
(p) The Company will file with the Commission such periodic and
special reports as required by the Rules and Regulations.
5. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters hereunder are subject to the accuracy, as of the date hereof and at
each of the First Closing Date and the Second Closing Date (as if made at such
Closing Date), of and compliance with all representations, warranties, covenants
and agreements of the Company contained herein, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Central time, on the date of this Agreement, or such later time
and date as you, as Representatives of the several Underwriters, shall approve
and all filings required by Rules 424, 430A and 434 of the Rules and Regulations
shall have been timely made; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereof shall have been issued; no
proceedings for the issuance of such an order shall have been initiated or
threatened; and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to your satisfaction.
(b) No Underwriter shall have advised the Company that the
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto (including any term sheet within the meaning of Rule 434 of the Rules
and Regulations), contains an untrue statement of fact which, in your opinion,
is material, or omits to state a fact which, in your opinion, is material and is
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they are or were made, not
misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, the Company, together with its subsidiaries, shall not have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock; and there
shall not have been any change in the capital stock (other than a change in the
number of outstanding shares of Common Stock due to the issuance of shares upon
the exercise of outstanding options or warrants), or any material change in the
short-term or long-term debt of the Company, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital stock
of the Company, or any Material Adverse Change or any development involving a
prospective Material Adverse Change (whether or not arising in the ordinary
course of business), that, in your judgment, makes it impractical or inadvisable
to offer or deliver the Securities on the terms and in the manner contemplated
in the Prospectus.
(d) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel for the Company, dated such
Closing Date and addressed to you, to the effect that:
-16-
(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.
The Company has full corporate power and authority to own its properties
and conduct its business as currently being carried on and as described in
the Registration Statement and Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which it owns or leases real property or in which the
conduct of its business makes such qualification necessary and in which the
failure to so qualify would have a Material Adverse Effect.
(ii) The capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock" and such description fairly
summarizes the information called for with respect thereto to the extent
required under the Act and the Rules and Regulations thereunder. All of the
issued and outstanding shares of the capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable.
The Securities to be issued and sold by the Company hereunder have been
duly authorized and, when issued, delivered and paid for in accordance with
the terms of this Agreement, will have been validly issued and will be
fully paid and nonassessable. Except as otherwise stated in the
Registration Statement and Prospectus, there are no preemptive rights or
other rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of Common Stock pursuant to the Company's
charter, by-laws or any agreement or other instrument known to such counsel
to which the Company is a party or by which the Company is bound. To such
counsel's knowledge, except as otherwise stated in the Registration
Statement and Prospectus, neither the filing of the Registration Statement
nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any rights for or relating to the registration of
any shares of Common Stock or other securities of the Company, or any such
rights have been satisfied or effectively waived.
(iii) To such counsel's knowledge, except as described in the
Registration Statement and Prospectus, there are no options (other than
those issued in the ordinary course of business), warrants, agreements,
contracts or other rights in existence to purchase or acquire from the
Company any shares of the capital stock of the Company.
(iv) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
such counsel, threatened by the Commission.
(v) The descriptions in the Registration Statement and Prospectus
of statutes, regulations, legal and governmental proceedings, contracts and
other documents are accurate in all material respects and fairly present
the information required to be shown; and such counsel does not know of any
statutes, regulations,
-17-
pending or threatened legal or governmental proceedings or contracts or
other documents required to be described in the Prospectus or included as
exhibits to the Registration Statement that are not described or included
as required.
(vi) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as defined
in the Investment Company Act of 1940, as amended.
(vii) The statements set forth under the headings "Management --
Employee Benefit Plans," "Management -- Limitations on Liability and
Indemnification," "Related Party Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as
such statements purport to summarize legal matters, documents or
proceedings referred to therein, provide a fair summary of such legal
matters, documents or proceedings to the extent required under the Act and
the Rules and Regulations thereunder.
(viii) The Company has full corporate power and authority to
enter into this Agreement, and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid, legal and
binding obligation of the Company enforceable in accordance with its terms
(except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity); the
execution, delivery and performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, rule or regulation, any agreement or instrument known
to such counsel to which the Company is a party or by which it is bound or
to which any of its property is subject, the Company's charter or by-laws,
or any order or decree known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
respective properties; and no consent, approval, authorization or order of,
or filing with, any court or governmental agency or body is required for
the execution, delivery and performance of this Agreement or for the
consummation of the transactions contemplated hereby, including the
issuance or sale of the Securities by the Company, except such as may be
required under the Act or state securities laws.
(ix) To such counsel's knowledge, the Company holds, and is
operating in compliance in all material respects with, all franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates and orders of any governmental or self-regulatory body
required for the conduct of its business and all such franchises, grants,
authorizations, licenses, permits, easements, consents, certifications and
orders are valid and in full force and effect.
-18-
(x) To such counsel's knowledge, the Company is not in violation
of its charter or bylaws or in breach of or otherwise in default in (nor
has any event occurred which with notice, lapse of time, or both would
result in any breach of, or constitute a default in) the performance of any
material obligation, agreement or condition contained in any bond,
debenture, note, indenture, loan agreement, mortgage, deed of trust, credit
agreement or any other material contract, lease or other instrument
described in, or filed as an exhibit to, the Registration Statement and
Prospectus, to which it is subject or by which it may be bound, or to which
any of the material property or assets of the Company is subject, nor in
violation of any federal, state, local or foreign law, regulation or rule
or any decree, judgment or order applicable to the Company the effect of
which would individually or in the aggregate have a Material Adverse
Effect.
(xi) The Registration Statement and the Prospectus, and any
amendment thereof or supplement thereto (including any term sheet within
the meaning of Rule 434 of the Rules and Regulations), comply as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; and on the basis of conferences with officers of the Company,
examination of documents referred to in the Registration Statement and
Prospectus and such other procedures as such counsel deemed appropriate,
nothing has come to the attention of such counsel that causes such counsel
to believe that the Registration Statement or any amendment thereof, at the
time the Registration Statement became effective and as of such Closing
Date (including any Registration Statement filed under Rule 462(b) of the
Rules and Regulations), 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
Prospectus (as of its date and as of such Closing Date), as amended or
supplemented, includes any untrue statement of material fact or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they are or were made, not
misleading; it being understood that such counsel need express no opinion
as to the financial statements or other financial data included in any of
the documents mentioned in this clause.
In rendering such opinion such counsel may rely (i) as to matters of
law other than the General Corporation Law of the State of Delaware, the General
Corporation Law of the State of California and federal law, upon the opinion or
opinions of local counsel provided that the extent of such reliance is specified
in such opinion and that such counsel shall state that such opinion or opinions
of local counsel are satisfactory to them and that they believe they and you are
justified in relying thereon and (ii) as to matters of fact, to the extent such
counsel deems reasonable, upon certificates of officers of the Company and its
subsidiaries provided that the extent of such reliance is specified in such
opinion.
(e) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of ▇▇▇▇, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇, ▇.▇., special counsel for the Company with respect to intellectual
property matters, dated
-19-
such Closing Date and addressed to you, and in form reasonably satisfactory to
Cooley Godward LLP, counsel for the Underwriters, to the effect that:
(i) Attached hereto are Schedules II and III, which set forth
patents and patent applications owned and licensed, respectively, by the
Company. To such counsel's knowledge, except as described in the
Prospectus, (A) the Company has valid license rights or clear title to the
Intellectual Property referenced in the Prospectus, and there are no rights
of third parties to any such Intellectual Property; (B) there is no
infringement or other violation by third parties of any of the Intellectual
Property of the Company referenced in the Prospectus; (C) there is no
infringement or other violation by the Company of any Intellectual Property
of others; (D) there is no pending or threatened action, suit, proceeding
or claim by governmental authorities or others that the Company infringes
or otherwise violates any Intellectual Property of others, and such counsel
is unaware of any facts which would form a reasonable basis for any such
claim; and (E) there is no pending or threatened action, suit, proceeding
or claim by governmental authorities or others challenging the rights of
the Company in or to, or challenging the scope of, any Intellectual
Property of the Company referenced in the Prospectus, and such counsel is
unaware of any facts which would form a reasonable basis for any such
claim.
(ii) To such counsel's knowledge, the patent applications of the
Company presently on file disclose patentable subject matter, and such
counsel is not aware of any inventorship challenges, any interference which
has been declared or provoked, or any other material fact with respect to
the patent applications of the Company presently on file that (A) would
preclude the issuance of patents with respect to such applications or (B)
would lead such counsel to conclude that such patents, when issued, would
not be valid and enforceable in accordance with applicable regulations.
(iii) Such counsel has reviewed the portions of the Registration
Statement and the Prospectus under the captions: "Risk Factors--If we are
unable to prevent third parties from using our intellectual property, our
ability to compete in the market will be harmed;" "Risk Factors--Our
instruments could infringe on the intellectual property rights of others,
which may lead to costly litigation, payment of substantial damages or
royalties and/or our inability to use essential technologies;"
"Business--Patents and Proprietary Technology" (collectively, the "Patent
Sections"). On the basis of such counsel's representation of the Company,
such counsel has no reason to believe that the information in the Patent
Sections contains any untrue statement or material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading and insofar
as such Patent Sections constitute statements or summaries of matters of
law, to such counsel's knowledge, are, in all material respects, accurate
and complete statements or summaries, as the case may be, of the matters
referred to therein.
-20-
(iv) Except as set forth in the Registration Statement and
Prospectus, to the best of such counsel's knowledge, the Company together
with its subsidiaries taken as a whole own or possess sufficient licenses
or other rights to use all patents, trade secrets, trademarks, service
marks or other proprietary information or materials necessary to conduct
the business now being or proposed to be conducted by the Company and its
subsidiaries as described in the Prospectus.
(f) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇.▇., special counsel to the Company with respect to regulatory matters, dated
such Closing Date and addressed to you, to the effect that:
(i) In connection with this offering, such counsel represents the
Company with respect to United States Food and Drug Administration ("FDA")
regulatory matters.
(ii) The statements of federal law or regulation contained in the
Prospectus under the captions: "Risk Factors--Unless we obtain additional
FDA approvals, we will not be able to promote the use of our instruments in
specific surgical procedures or the benefits of any surgical procedures
using our instruments in the United States, and our ability to grow our
business could be harmed"; "Risk Factors--In the United States, we are not
permitted to promote, or train physicians in, the use of our KyphX
instruments with bone cement in the spine, unless we obtain additional FDA
approvals"; "Risk Factors--If we are unable to initiate and complete a
clinical study to support regulatory approval to market the use of bone
cement for use with our instruments in spine fracture surgery or to
document resulting benefits, our future competitive position and revenue
will be harmed"; "Risk Factors--Our failure to obtain or maintain necessary
regulatory clearances or approvals could hurt our ability to commercially
distribute and market our KyphX instruments"; "Risk Factors--Modifications
to our marketed devices may require new 510(k) clearances or premarket
approvals or may require us to cease marketing or recall the modified
devices until clearances are obtained"; "Risk Factors--If we fail to comply
with Quality System regulations, requirements, our manufacturing operations
could be delayed, and our product sales and profitability could suffer";
the 5th and 6th paragraphs under "Business--Our KyphX Instruments";
"Business--Government Regulation," and other references in the Registration
Statement and Prospectus to regulatory matters are, in all material
respects, correct and accurate statements or summaries of applicable
federal law and regulation, and fairly present the information disclosed
therein and do not omit to summarize applicable provisions of federal law
and regulations necessary to make those statements not misleading.
(iii) Such counsel has no reason to believe that the Registration
Statement or the Prospectus contains any untrue statement of a material
fact with
-21-
respect to government regulation or the Company's regulatory status or
omits to state any material fact relating to government regulation or the
Company's regulatory status that is required to be stated in the
Registration Statement or the Prospectus or is necessary to make the
statements therein, in the light of the circumstances under which they are
or were made, not misleading.
(iv) To such counsel's knowledge, the Company's business, as
currently conducted and as described in the Registration Statement and
Prospectus, does not violate the Federal Food, Drug and Cosmetic Act or any
FDA rule or regulation, and, to such counsel's knowledge, there are no FDA
judicial or administrative proceedings pending or threatened against the
Company.
(g) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, such opinion from ▇▇▇▇▇▇ Godward
LLP, counsel for the several Underwriters, dated such Closing Date and addressed
to you, with respect to the formation of the Company, the validity of the
Securities, the Registration Statement, the Prospectus and other related matters
as you reasonably may request, and such counsel shall have received such papers
and information as they request to enable them to pass upon such matters.
(h) On each Closing Date you, as Representatives of the several
Underwriters, shall have received a letter from of Pricewaterhouse Coopers LLP,
dated such Closing Date and addressed to you, to the effect that:
(i) They are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
rules and regulations thereunder adopted by the SEC;
(ii) In their opinion, the consolidated financial statements of
the Company and its subsidiaries audited by them and included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related rules and
regulations adopted by the SEC; and
(iii) on the basis of procedures consisting of a reading of the
latest available unaudited interim consolidated financial statements of the
Company and of the latest available unaudited monthly financial statements
of the Company (which, in the case of the letter delivered on the First
Closing Date, shall be at least as of March 31, 2002), a reading of the
minutes of meetings and consents of the stockholders and boards of
directors of the Company and the committees of such boards subsequent to
March 31, 2002, inquires of officers and other employees of the who have
responsibility for financial and accounting matters of the Company with
respect to transactions and events subsequent to March 31, 2002 and other
specified procedures and inquires to a date not more than five days prior
to the date of such letter (provided that the letter delivered on the First
Closing Date shall use a "cut-off" date not earlier than the date hereof),
nothing has come to their attention that would cause them to believe that:
(A) the audited consolidated financial statements and schedule of the
Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable requirements
of the Act and the applicable published rules and regulations of the SEC
thereunder or that such unaudited consolidated financial statements are not
in conformity with generally accepted accounting principles applied on the
basis substantially consistent with that of the audited consolidated
financial statements included in the Registration Statement and the
Prospectus; (B) with respect to the period subsequent to March 31, 2002
there were, as of the date of the most recent available monthly
consolidated financial statements of the Company, if any, and as of a
specified date not more than five days prior to the date of such letter
(provided that the letter delivered on the First Closing Date shall use a
"cut-off" date not earlier than the date hereof), any changes in the
capital stock or long-term indebtedness of the Company or any decrease in
the current assets or stockholders' equity (deficit) of the Company, in
each case as compared with the amounts shown in the most recent balance
sheet presented in the Registration Statement and the Prospectus, except
for changes or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur or which are set forth in
such letter; or (C) that during the period from March 31, 2002 to the date
of the most recent available monthly consolidated financial statements of
the Company, if any, and to a specified date not more than five days prior
to the date of such letter (provided that the letter delivered on the First
Closing Date shall use a "cut-off" date not earlier than the date hereof),
there was any decrease, as compared with corresponding period in the prior
fiscal year, in revenues from product sales, or increase in net loss,
except for decreases or increases, as the case may be, which the
Registration Statement and the Prospectus disclose have occurred or may
occur or which are set forth in such letter; and (iv) stating that they
have compared specific dollar amounts (or percentages derived from such
dollar amounts), numbers of shares, and other financial information
pertaining to the Company set forth in the Registration Statement and the
Prospectus, which have been specified by you prior to the date of this
Agreement, to the extent that such amounts, numbers, percentages, and
information may be derived from the general accounting and financial
records of the Company or from schedules furnished by the Company which are
subject to controls over financial reporting, 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 specified by you set forth in such letter, and found
them to be in agreement.
(i) On each Closing Date, there shall have been furnished to you, as
Representatives of the Underwriters, a certificate, dated such Closing Date and
addressed to you, signed by the chief executive officer and by the chief
financial officer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at and
as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness
of the Registration Statement or any amendment thereof or the qualification
of the Securities
-22-
for offering or sale has been issued, and no proceeding for that purpose
has been instituted or, to their knowledge, is contemplated by the
Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto (including any term sheet within the meaning of Rule
434 of the Rules and Regulations), and (A) such documents contain all
statements and information required to be included therein, the
Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, and the Prospectus, as amended or supplemented, does not
include any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (B) since the
effective date of the Registration Statement, there has not occurred any
event required to be set forth in an amended or supplemented prospectus
which has not been so set forth, (C) subsequent to the respective dates as
of which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries has incurred
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, not in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock, and except as disclosed in the Prospectus,
there has not been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the issuance of
shares upon the exercise of outstanding options or warrants), or any
material change in the short-term or long-term debt, or any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock, of the Company, or any of its subsidiaries, or any Material
Adverse Change or any development involving a prospective Material Adverse
Change (whether or not arising in the ordinary course of business), and (D)
except as stated in the Registration Statement and the Prospectus, there is
not pending, or, to the knowledge of the Company, threatened or
contemplated, any action, suit or proceeding to which the Company or any of
its subsidiaries is a party before or by any court or governmental agency,
authority or body, or any arbitrator, which might result in any Material
Adverse Change.
(j) The Company shall have furnished to you and counsel for the
Underwriters such additional documents, certificates and evidence as you or they
may have reasonably requested.
(l) The Securities shall have been approved for listing for quotation
on the Nasdaq National Market, subject only to notice of issuance at or prior to
such Closing Date.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and counsel
-23-
for the Underwriters. The Company will furnish you with such conformed copies of
such opinions, certificates, letters and other documents as you shall reasonably
request.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, including the information deemed to be a part of the
Registration Statement at the time of effectiveness pursuant to Rules 430A and
434(d) of the Rules and Regulations, if applicable, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto (including any term sheet
within the meaning of Rule 434 of the Rules and Regulations), or in any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the Common Stock
("Marketing Materials"), including any roadshow or investor presentations made
to investors by the Company (whether in person or electronically) or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by it in connection with investigating or defending against
such loss, claim, damage, liability or action; provided, however, that (i) 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 an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement, or in any Marketing Materials, in reliance upon
and in conformity with written information furnished to the Company by you, or
by any Underwriter through you, specifically for use in the preparation thereof;
and (ii) the foregoing indemnity agreement with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Securities, or any person controlling such Underwriter, if (A) a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law to have been delivered, at
or prior to the written confirmation of the sale of the Securities to such
person, (B) the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such losses, claims, damages or liabilities and (C) the
Company delivered, or caused to be delivered, the Prospectus to the Underwriters
in requisite quantity on a timely basis to permit such delivery or sending.
In addition to its other obligations under this Section 6(a), the
Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged
-24-
statement or omission, described in this Section 6(a), it will reimburse each
Underwriter on a monthly basis for all reasonable legal fees or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Underwriter that received such
payment shall promptly return it to the party or parties that made such payment,
together with interest, compounded daily, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Citibank, N.A. (the "Prime Rate"). Any
such interim reimbursement payments which are not made to an Underwriter within
30 days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement shall be in addition to
any liabilities which the Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject, under the Act or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by you, or by such Underwriter through you,
specifically for use in the preparation thereof, and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending against any such loss, claim, damage, liability
or action; provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount and commission
applicable to the Securities purchased by such Underwriter hereunder. This
indemnity will be in addition to any liability that any Underwriter may
otherwise have including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
that it may have
-25-
to any indemnified party except to the extent such indemnifying party has been
materially prejudiced by such failure. In case any such action shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
if, in the sole judgment of the Representatives, it is advisable for the
Underwriters to be represented as a group by separate counsel, the
Representatives shall have the right to employ a single counsel to represent the
Representatives and all Underwriters who may be subject to liability arising
from any claim in respect of which indemnity may be sought by the Underwriters
under subsection (a) of this Section 6, in which event the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party or
parties and reimbursed to the Underwriters as incurred (in accordance with the
provisions of the second paragraph in subsection (a) above). An indemnifying
party shall not be obligated under any settlement agreement relating to any
action under this Section 6 to which it has not agreed in writing. In addition,
no indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, 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 the Underwriters and the parties'
relevant intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriters
-26-
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this subsection (d). The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), no Underwriter shall be required to contribute any amount
in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 6 shall be in addition to any liability that the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company (including any person who, with
his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
(f) ▇▇▇▇▇ ▇▇▇▇▇▇▇ represents and warrants that it has been authorized
by each of the other Underwriters to enter into this Agreement on behalf of the
other Underwriters and to act for each of them in the manner herein provided.
The Underwriters severally confirm that the statements with respect to the
public offering of the Securities by the Underwriters set forth on the cover
page of the Prospectus, and in the section entitled "Underwriting" in the
Prospectus regarding (i) the first paragraph (which begins "The underwriters
named below..."), (ii) the table of underwriters participating in the offering
immediately following the first paragraph, (iii) the second paragraph (which
begins "The underwriters have advised us that they ..."), (iv) the sentence in
the fourth paragraph which begins "To the extent the underwriters exercise the
options ...", (v) the fifth paragraph (which begins "The following table shows
the underwriting discounts ..."), (vi) the table of underwriters discounts and
commissions immediately following the fifth paragraph, (vii) the eighth
paragraph (which begins "The offering of our shares of common stock ..."),
(viii) the sentence in the ninth paragraph which begins "The underwriters
reserve the right to reject ..", (ix) the thirteenth paragraph (which begins "To
facilitate this offering, ..."), and (x) the fourteenth paragraph (which begins
"In addition, the underwriters may stabilize ...") are correct. The Underwriters
severally confirm and the Company acknowledges that the statements described in
the immediately preceding sentence constitute the only information concerning
such Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
(g) In connection with the offer and sale of the Directed Stock, the
Company agrees, promptly upon a request in writing, to indemnify and hold
harmless the Underwriters from and against any and all losses, liabilities,
claims, damages and expenses incurred by them as a result of the failure of the
Directed Stock Participants to affirmatively reconfirm the Directed Stock for
purchase as of the date of this Agreement or to pay for and accept delivery of
the Directed Stock by the end of the First Closing Date.
-27-
7. Representations and Agreements to Survive Delivery. All representations,
warranties, and agreements of the Company herein or in certificates delivered
pursuant hereto, and the agreements of the several Underwriters and the Company
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling person thereof, or the Company or any of its officers,
directors, or controlling persons and shall survive delivery of, and payment
for, the Securities to and by the Underwriters hereunder.
8. Substitution of Underwriters.
(a) If any Underwriter or Underwriters shall fail to take up and pay
for the amount of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased does not aggregate
more than 10% of the total amount of Firm Shares set forth in Schedule I hereto,
the remaining Underwriters shall be obligated to take up and pay for (in
proportion to their respective underwriting obligations hereunder as set forth
in Schedule I hereto except as may otherwise be determined by you) the Firm
Shares that the withdrawing or defaulting Underwriters agreed but failed to
purchase.
(b) If any Underwriter or Underwriters shall fail to take up and pay
for the amount of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased aggregates more than
10% of the total amount of Firm Shares set forth in Schedule I hereto, and
arrangements satisfactory to you for the purchase of such Firm Shares by other
persons are not made within 36 hours thereafter, this Agreement shall terminate.
In the event of any such termination the Company shall not be under any
liability to any Underwriter (except to the extent provided in Section 4(h) and
Section 6 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the amount of Firm Shares agreed by such Underwriter to be purchased
hereunder) be under any liability to the Company (except to the extent provided
in Section 6 hereof).
If Firm Shares to which a default relates are to be purchased by the
non-defaulting Underwriters or by any other party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 8 as if such person had originally been a party to this Agreement.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at 10:00 a.m., Central time,
on the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective time of the Registration
Statement as you in your discretion shall
-28-
first release the Securities for sale to the public; provided, that if the
Registration Statement is effective at the time this Agreement is executed, this
Agreement shall become effective at such time as you in your discretion shall
first release the Securities for sale to the public. For the purpose of this
Section, the Securities shall be deemed to have been released for sale to the
public upon the earlier of (i) publication of a newspaper advertisement relating
thereto and (ii) release by you of an electronic communication authorizing
commencement of the offering the Securities for sale by the Underwriters or
other securities dealers. By giving notice as hereinafter specified before the
time this Agreement becomes effective, you, as Representatives of the several
Underwriters, or the Company, may prevent this Agreement from becoming effective
without liability of any party to any other party, except that the provisions of
Section 4(h) and Section 6 hereof shall at all times be effective and shall
survive the termination of this Agreement, including a termination pursuant to
this Section 9.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time at or prior to the First Closing Date, and the option referred to in
Section 3(b), if exercised, may be cancelled at any time prior to the Second
Closing Date, if (i) the Company shall have failed, refused or been unable, at
or prior to such Closing Date, to perform any agreement on its part to be
performed hereunder, (ii) any other condition of the Underwriters' obligations
hereunder is not fulfilled, (iii) trading on the Nasdaq National Market, New
York Stock Exchange or the American Stock Exchange shall have been wholly
suspended, (iv) minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required, on the Nasdaq
National Market, New York Stock Exchange or the American Stock Exchange, by such
Exchange or by order of the Commission or any other governmental authority
having jurisdiction, (v) a banking moratorium shall have been declared by
federal, New York, Minnesota or California authorities, or (vi) there has
occurred any material adverse change in the financial markets in the United
States or an outbreak of major hostilities (or an escalation thereof) in which
the United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or occurrence
of a similar character shall have occurred since the execution of this Agreement
that, in your judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Securities. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 4(h) and Section 6 hereof shall at all times be effective.
(c) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall be
notified promptly by you by telephone, confirmed by letter. If the Company
elects to prevent this Agreement from becoming effective, you shall be notified
by the Company by telephone, confirmed by letter.
10. Default by the Company. If the Company shall fail at the First Closing
Date to sell and deliver the number of Securities which it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the part
of any non-defaulting party.
-29-
No action taken pursuant to this Section shall relieve the Company
from liability, if any, in respect of such default.
11. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed or
delivered to the Representatives c/o U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc., U.S.
Bancorp Center, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, except that
notices given to an Underwriter pursuant to Section 6 hereof shall be sent to
such Underwriter at the address stated in the Underwriters' Questionnaire
furnished by such Underwriter in connection with this offering; if to the
Company, shall be mailed or delivered to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Any party to this Agreement may
change such address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers, directors,
employees and agents referred to in Section 6. Nothing in this Agreement is
intended or shall be construed to give to any other person, firm or corporation
any legal or equitable remedy or claim under or in respect of this Agreement or
any provision herein contained. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Securities
from any of the several Underwriters.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
14. 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 and all such counterparts
shall together constitute one and the same instrument.
[Signature Page Follows]
-30-
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
KYPHON INC.
By
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
Confirmed as of the date first
above mentioned, on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
BANC OF AMERICA SECURITIES LLC
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By: U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
By
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Managing Director
SCHEDULE I
Underwriter Number of Firm Shares (1)
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U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
Banc of America Securities LLC
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
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Total ..................................... [ ]
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(1) The Underwriters may purchase up to an additional 900,000 Option Shares, to
the extent the option described in Section 3(b) of the Agreement is
exercised, in the proportions and in the manner described in the Agreement.
SCHEDULE II
[List of Patents]
SCHEDULE III
[List of Patent Applications]