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EXHIBIT 1
2,500,000 Shares
CIMA LABS, INC.
Common Stock
($0.01 Par Value)
EQUITY UNDERWRITING AGREEMENT
October , 2000
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Deutsche Bank Securities Inc.
SG Cowen Securities Corporation
Fahnestock & Co., Inc.
As Representatives of the
Several Underwriters
c/o Deutsche Bank Securities Inc.
101 California Street
San Francisco, California 94111
Ladies and Gentlemen:
CIMA LABS, INC., a Delaware corporation (the "Company") proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as representatives (the "Representatives") an aggregate
of 2,500,000 shares of the Company's Common Stock, $0.01 par value (the "Firm
Shares"). The respective amounts of the Firm Shares to be so purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Company, and certain shareholders of the Company named in Schedule II hereto
(the "Selling Shareholders"), also propose to sell at the Underwriters' option
an aggregate of up to 375,000 additional shares of the Company's Common Stock
(the "Option Shares") as set forth below. The Company and the Selling
Shareholders are sometimes referred to herein collectively as the "Sellers."
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
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In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLING
SHAREHOLDERS.
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-3 (File No. 333-47558)
with respect to the Shares 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 (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. The Company has complied with the conditions for the use of Form S-3
under the Act. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means the form of prospectus first filed
with the Commission pursuant to Rule 424(b). Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or to the Prospectus shall be
deemed to refer to and include any documents incorporated by reference therein,
and, in the case of any reference herein to any Prospectus, also shall be deemed
to include any documents incorporated by reference therein, and any supplements
or amendments thereto, filed with the Commission after the date of filing of the
Prospectus under Rules 424(b) or 430A, and prior to the termination of the
offering of the Shares by the Underwriters.
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. The Company has
the power and authority to enter into this Agreement and to authorize, issue and
sell the Shares it will sell hereunder as contemplated hereby. This Agreement
has been duly and validly authorized, executed and delivered by the Company. The
Company is duly qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification or in which the failure to
qualify would have a material adverse effect upon the business of the Company
taken as a whole.
(iii) The outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable. All options to purchase the Company's Common Stock held by the
Selling Shareholders were duly authorized and validly issued to the Selling
Shareholders. All offers and sales by the Company of outstanding shares of
capital stock and other securities of the Company, prior to the date hereof,
were made in compliance with the Act
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and all applicable state securities or Blue Sky laws and were not issued in
violation of any preemptive right. The Shares to be issued and sold by the
Company have been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and non-assessable; and no preemptive
rights of stockholders exist with respect to any of the Shares or the issue and
sale thereof. Neither the filing of the Registration Statement nor the offering
or sale of the Shares as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any shares of Common Stock. The Company does not own an
equity interest in any corporation, partnership, joint venture or other
enterprise.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform, to the requirements of the Act and the Rules and Regulations. The
documents incorporated by reference in the Prospectus at the time they were
filed with the Commission conformed in all respects to the requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") or the Act, as applicable,
and the rules and regulations of the Commission thereunder. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not 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;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The financial statements of the Company, together with
related notes and schedules as set forth and incorporated by reference in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
therein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data included
and incorporated by reference in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company.
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(vii) Ernst & Young LLP, who have certified certain of the
financial statements filed with the Commission as part of, and incorporated by
reference in, the Registration Statement, are independent public accountants as
required by the Act and the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company before any
court or administrative agency or otherwise which if determined adversely to the
Company might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.
(ix) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as described in
the Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or as described in the Registration Statement) or which
are not material in amount. The Company occupies its leased properties under
valid and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.
(x) The Company has filed all Federal, State, local and
foreign tax returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by it to the extent that
such taxes have become due and are not being contested in good faith and for
which an adequate reserve for accrual has been established in accordance with
generally accepted accounting principles. All tax liabilities have been
adequately provided for in the financial statements of the Company, and the
Company does not know of any actual or proposed additional material tax
assessments.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, (A)
there has not been any material adverse change, or any development that could
reasonably be expected to result in a material adverse change, in or affecting
the earnings, business, management, properties, assets, rights, operations,
conditions (financial or otherwise), or prospects of the Company taken as a
whole, whether or not occurring in the ordinary course of business, (B) there
has not been any material transaction entered into or any material transaction
that is probable of being entered into by the Company, other than transactions
in the ordinary course of business and changes and transactions described or
contemplated in the Registration Statement, (C) the Company has not incurred any
material liabilities or obligations, direct or indirect or contingent or
non-contingent, which are not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company, (D) the
Company has not sustained any material loss or interference with their
respective businesses or properties from fire, flood, windstorm, accident or
other calamity, whether or not covered by insurance, (E) there has not been any
change in the capital stock of the Company (other than upon the exercise of
options and warrants described in the Registration Statement), or any material
increase in the short-term or long-term debt (including capitalized lease
obligations) of the Company, taken as a whole, (F) there has not been any
declaration or payment of any dividends or any distributions of any kind with
respect to the capital stock of the Company, other than any dividends or
distributions described or contemplated in the Registration
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Statement, or (G) there has not been any issuance of warrants, options,
convertible securities or other rights to purchase or acquire capital stock of
the Company (other than options granted under the Company's employee stock
option plans referred to in the Prospectus).
(xii) The Company is not, or with the giving of notice or
lapse of time or both, will not be, in violation of or in default under its
Certificate of Incorporation or By-Laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
taken as a whole or the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company taken
as a whole. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and the fulfillment of the terms hereof
will not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company is a party, or of the
Certificate of Incorporation or By-Laws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company holds all material licenses, certificates
and permits from governmental authorities which are necessary to the conduct of
its businesses; the Company owns or possesses the right to use all patents,
patent rights, trademarks, trade names, service marks, service names,
copyrights, license rights, know-how (including trade secrets and other
unpatented and unpatentable proprietary or confidential information, systems or
procedures) and other intellectual property rights ("Intellectual Property")
necessary to carry on its business in all material respects; the Company has not
infringed, and has not received notice of conflict with, any Intellectual
Property of any other person or entity. The Company has taken all reasonable
steps necessary to secure interests in such Intellectual Property from its
contractors. There are no outstanding options, licenses or agreements of any
kind relating to the Intellectual Property of the Company that are required to
be described in the Prospectus and are not described in all material respects.
The Company is not a party to or bound by any options, licenses or agreements
with respect to the Intellectual Property of any other person or entity that are
required to be set forth in the Prospectus and are not described in all material
respects. None of the technology employed by the Company has been obtained or is
being used by the Company in violation of any contractual obligation binding on
the Company or any of its officers, directors or employees or otherwise in
violation of the rights of any persons; the Company has not received any written
or oral communications alleging that the Company has violated, infringed or
conflicted with, or, by conducting its business as set forth in the Prospectus,
would violate, infringe or
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conflict with, any of the Intellectual Property of any other person or entity.
The Company knows of no infringement by others of Intellectual Property owned by
or licensed to the Company.
(xv) Neither the Company, nor to the Company's knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on The Nasdaq Stock Market in
accordance with Regulation M under the Exchange Act.
(xvi) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940, (as amended, the
"1940 Act") and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) 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 industries.
(xix) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (A) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (B) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xx) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or 5% or greater securityholders, except as set forth in the
Registration Statement.
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(xxi) The Company has not distributed and will not distribute
any prospectus or other offering material in connection with the offering and
sale of the Shares other than any Preliminary Prospectus or the Prospectus or
other materials permitted by the Act to be distributed by the Company.
(xxii) The Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, except for such instances of
non-compliance as would not individually or in the aggregate have a material
adverse effect on the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company. The
Company has not received notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus and is not so
disclosed. To the knowledge of the Company, the Company will not be required to
make future material capital expenditures to comply with Environmental Laws and,
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss.
9601, et seq.), or otherwise designated as a contaminated site under applicable
state or local law.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder has good and marketable title to
the Option Shares to be sold at the Option Closing Date (as such date is herein
defined) by such Selling Shareholder or holds, and has the full right, power and
ability to exercise, an option, or options, to purchase from the Company the
Option Shares to be sold at the Option Closing Date by such Selling Shareholder.
Such Selling Shareholder, at the Option Closing Date will have good and
marketable title to the Option Shares to be sold by such Selling Shareholder,
free and clear of any liens, encumbrances, equities and claims, and full right,
power and authority to effect the sale and delivery of such Option Shares; and
upon the delivery of, against payment for, such Option Shares pursuant to this
Agreement, the Underwriters will acquire good and marketable title thereto, free
and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney, and the
Custodian Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
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(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein or the information contained in the Registration
Statement, such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect the
business of the Company; and the sale of the Option Shares by such Selling
Shareholder pursuant hereto is not prompted by any information concerning the
Company which is not set forth in the Registration Statement or the documents
incorporated by reference therein. The information pertaining to such Selling
Shareholder under the caption "Selling Shareholders" in the Prospectus is
complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $[net price] per share, the number of
Firm Shares set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Certificates representing a number of the Option Shares or the
option agreements, representing the options granted by the Company to the
Selling Shareholders to purchase a number of the Option Shares (the "Option
Agreements"), have been placed and, upon exercise of such options, certificates
for such Shares to be sold hereunder by the Selling Shareholders shall be
placed, in custody with Wells Fargo Bank Minnesota, N.A. as custodian (the
"Custodian") pursuant to the Custodian Agreement executed by each Selling
Shareholder for delivery of any Option Shares to be sold hereunder by the
Selling Shareholders. Each of the Selling Shareholders specifically agrees that
the Option Agreements, and Option Shares represented by the certificates, held,
and to be held, in custody for the Selling Shareholders under the Custodian
Agreement are, and will be, subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Shareholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Shareholders hereunder shall not be terminable by any act or deed of the Selling
Shareholders (or by any other person, firm or corporation including the Company,
the Custodian or the Underwriters) or by operation of law (including the death
of an individual Selling Shareholder or the dissolution of a corporate Selling
Shareholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Option Shares hereunder, the Option
Agreements and the certificates for the Options Shares shall be delivered
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by the Custodian in accordance with the terms and conditions of this Agreement
as if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Option Shares held by it
against delivery of such Option Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
Federal (same day) funds to an account designated by the Company for the shares
to be sold by it, in each case against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment and
delivery are to be made through the facilities of the Depository Trust Company
at 10:00 a.m., New York time, on the third business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as you and the Company shall agree upon, such time and date being
herein referred to as the "Closing Date." (As used herein, "business day" means
a day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or executive
order to be closed.)
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section 2. The maximum number of Option Shares to
be sold by the Company and the Selling Shareholders is set forth opposite their
respective names on Schedule II hereto. The option granted hereby may be
exercised in whole or in part by giving written notice (i) at any time before
the Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to the
Company, the Attorney-in-Fact, and the Custodian setting forth the number of
Option Shares as to which the several Underwriters are exercising the option,
the names and denominations in which the Option Shares are to be registered and
the time and date at which such certificates are to be delivered. If the option
granted hereby is exercised in part, the respective number of Option Shares to
be sold by the Company and each of the Selling Shareholders listed in Schedule
II hereto shall be determined on a pro rata basis in accordance with the
percentages set forth opposite their names on Schedule II hereto, adjusted by
you in such manner as to avoid fractional shares. The time and date at which
certificates for Option Shares are to be delivered shall be determined by the
Representatives but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to the total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters. You, as Representatives of the several Underwriters,
may cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company and the Attorney-in-Fact. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date in Federal (same day) funds drawn to
the order of the Company for the Option Shares to be sold by it and to the order
of "Wells Fargo Bank Minnesota,
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N.A., as Custodian" for the Option Shares to be sold by the Selling Shareholders
against delivery of certificates therefor through the facilities of the
Depository Trust Company, New York, New York.
(e) Upon receipt by the Company and the Attorney-in-Fact of notice from
you, as Representatives of the several Underwriters, of their intent to exercise
their option to purchase the Option Shares, the Attorney-in-Fact, on behalf of
the Selling Shareholders, shall exercise the options to purchase the Option
Shares, and the Selling Shareholders shall deliver to the Company the
appropriate exercise price under such option as soon as possible, but in no
event later than one business day following the receipt of such notice. Upon
receipt thereof, the Company shall deliver to the Custodian certificate(s)
representing such Option Shares.
(f) If on the Option Closing Date, any Selling Shareholder fails to
sell the Option Shares which such Selling Shareholder has agreed to sell on such
date as set forth in Schedule II hereto, the Company agrees that it will sell or
arrange for the sale of that number of shares of Common Stock to the
Underwriters which represents the number of Option Shares which such Selling
Shareholder has failed to so sell, as set forth in Schedule II hereto, or such
lesser number as may be requested by the Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representatives may from time to time thereafter change the public offering
price and other selling terms. To the extent, if at all, that any Option Shares
are purchased pursuant to Section 2 hereof, the Underwriters will offer them to
the public on the foregoing terms.
It is further understood that you will act as the
Representatives for the Underwriters in the offering and sale of the Shares in
accordance with a Master Agreement Among Underwriters entered into by you and
the several other Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (B) not file any amendment to the Registration
Statement or supplement to the Prospectus or document incorporated by reference
therein of which the Representatives shall not previously have been advised and
furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Rules and Regulations
and (C)
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file on a timely basis all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission subsequent to
the date of the Prospectus and prior to the termination of the offering of the
Shares by the Underwriters.
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives, at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), including documents incorporated by reference therein,
and of all amendments thereto, as the Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will either (A) prepare
and file with the Commission an appropriate amendment to the
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Registration Statement or supplement to the Prospectus or (B) prepare and file
with the Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) Prior to the Closing Date, the Company will furnish to
the Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(viii) No offering, sale, short sale or other disposition of
any shares of Common Stock of the Company or other securities convertible into
or exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 90 days after
the date of this Agreement, directly or indirectly, by the Company otherwise
than hereunder or with the prior written consent of Deutsche Bank Securities
Inc. ("DBSI"), except for (A) the issuance of shares of Common Stock of the
Company upon exercise of currently outstanding options, warrants or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock and (B) the grant or issuance of options to purchase shares of Common
Stock pursuant to the Company's currently existing stock option plans and the
issuance of shares of Common Stock upon exercise of such options.
(ix) The Company will use its best efforts to maintain the
designation of, subject to notice of issuance, the Shares on The Nasdaq Stock
Market.
(x) The Company has caused each officer and director of the
Company to furnish to you, on or prior to the date of this agreement, a letter
or letters, in form and substance satisfactory to the Underwriters, pursuant to
which each such person shall agree not to offer, sell, sell short or otherwise
dispose of any shares of Common Stock of the Company or other capital stock of
the Company, or any other securities convertible, exchangeable or exercisable
for Common Shares or derivative of Common Shares owned by such person or request
the registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a period of 90 days
after the date of this Agreement, directly or indirectly, except with the prior
written consent of DBSI ("Lockup Agreements").
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<PAGE> 13
(xi) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company to register as an investment company under the 1940
Act.
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by the Selling Shareholder or request the
registration for the offer or sale of any of the foregoing (or as to which the
Selling Shareholder has the right to direct the disposition of) will be made for
a period of 90 days after the date of this Agreement, directly or indirectly, by
such Selling Shareholder otherwise than hereunder or with the prior written
consent of DBSI.
(ii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance Act of
1983 with respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Option Closing Date a
properly completed and executed United States Treasury Department Form W-8 or
W-9 (or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(iii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for the
Company and the Selling Shareholders, except as provided below with respect to
the Selling Shareholders; the cost of printing and delivering to, or as
requested by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Invitation
Letter, the Blue Sky Memorandum and any supplements or amendments thereto; the
filing
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<PAGE> 14
fees of the Commission; the filing fees and expenses (including legal fees and
disbursements) incident to securing any required review by the NASD of the terms
of the sale of the Shares; the fees and expense incurred in connection with the
designation of the Shares on the Nasdaq Stock Market; the expenses, including
the fees and disbursements of counsel for the Underwriters, incurred in
connection with the qualification of the Shares under State securities or Blue
Sky laws; the costs of preparing stock certificates; and the costs and fees of
any registrar or transfer agent. The Selling Shareholders have agreed with the
Company to reimburse the Company for a portion of such expenses. To the extent,
if at all, that any of the Selling Shareholders engage special legal counsel to
represent them in connection with this offering, the fees and expenses of such
counsel shall be borne by such Selling Shareholder. Any transfer taxes imposed
on the sale of the Shares to the several Underwriters will be paid by the
Sellers pro rata. The Company shall not be required to pay for any of the
Underwriters' expenses (other than those related to qualification under NASD
regulation and State securities or Blue Sky laws) except that, if this Agreement
shall not be consummated because the conditions in Section 6 hereof are not
satisfied, or because this Agreement is terminated by the Representatives
pursuant to Section 11 hereof (other than by reason of Section 9 hereof), or by
reason of any failure, refusal or inability on the part of the Company or the
Selling Shareholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and the
Selling Shareholders shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm Shares
on the Closing Date and the Option Shares, if any, on the Option Closing Date
are subject to the accuracy, as of the Closing Date or the Option Closing Date,
as the case may be, of the representations and warranties of the Company and the
Selling Shareholders contained herein, and to the performance by the Company and
the Selling Shareholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.
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<PAGE> 15
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Faegre & Benson LLP,
counsel for the Company and the Selling Shareholders, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; the Company is
duly qualified to transact business in all jurisdictions in which the conduct of
its business requires such qualification, or in which the failure to qualify
would have a material adverse effect upon the business of the Company taken as a
whole.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly authorized; the
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; all of the Shares conform
to the description thereof contained in the Prospectus; the certificates for the
Shares, assuming they are in the form filed with the Commission, are in due and
proper form; the shares of Common Stock, including the Option Shares, if any, to
be sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and, to such counsel's knowledge, no
preemptive rights of stockholders exist with respect to any of the Shares or the
issue or sale thereof.
(iii) Except as described in or contemplated by the
Prospectus, to such counsel's knowledge, there are no outstanding securities of
the Company convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order proceedings with respect
thereto have been instituted or are pending or threatened by the Commission.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto and document incorporated by reference therein
comply as to form in all material respects with the requirements of the Act or
the Exchange Act and the applicable rules and regulations thereunder
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<PAGE> 16
(except that such counsel need express no opinion as to the financial statements
and related schedules and statistical information included or incorporated by
reference therein). The conditions for the use of Form S-3, set forth in the
General Instructions thereto, have been satisfied.
(vi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to or incorporated by reference in the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described as
required, and such contracts and documents as are summarized in the Registration
Statement or the Prospectus are fairly summarized in all material respects.
(vii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company except as set forth in the
Prospectus.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or By-Laws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
(ix) This Agreement has been duly authorized, executed and
delivered by the Company.
(x) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xi) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(xii) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xiii) Each Selling Shareholder has full legal right, power
and authority, and any approval required by law (other than as may be required
by the NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion), to sell, assign, transfer and deliver the
portion of the Shares to be sold by such Selling Shareholder.
(xiv) The Custodian Agreement and the Power of Attorney
executed and delivered by each Selling Shareholder is valid and binding.
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<PAGE> 17
(xv) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by each Selling Shareholder on the
Option Closing Date free and clear of all liens, encumbrances, equities and
claims.
(xvi) Each of the options to be exercised by the Selling
Shareholders have been duly and validly issued by the Company to the Selling
Shareholders, are currently exercisable in full by the Selling Shareholders, and
the shares of Common Stock issuable upon exercise of such options, when issued
upon exercise of such options in accordance with the terms thereof, shall be
duly authorized, validly issued, fully paid and non-assessable.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, at the
time it became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act) and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to such
statement, Faegre & Benson LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(c) The Representatives shall have received from Dorsey & Whitney LLP,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
(ii) The authorized capital stock of the Company is as set
forth under the caption "Capitalization" in the Prospectus. The outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. The Shares have been duly
authorized and, upon issuance, delivery and payment therefore as described in
this Agreement, will be validly issued, fully paid and nonassessable. The
certificates representing the Shares are in proper form under the Delaware
General Corporation Law.
(iii) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order proceedings with respect
thereto have been instituted or are pending or threatened by the Commission.
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<PAGE> 18
(iv) The execution and delivery of this Agreement and issue
and sale of the Shares will not violate or conflict with the Certificate of
Incorporation or By-laws of the Company, or any agreement or instrument filed as
an exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
(v) No consent, approval, authorization or order of, and
notice to or filing with, any governmental agency or body or any court is
required to be obtained or made by the Company for the issuance and sale of the
Shares pursuant to the terms of this Agreement, (other than as may be required
by the NASD or as required by State securities and Blue Sky laws), expect as
have been obtained or made, specifying the same.
In rendering such opinion Dorsey & Whitney LLP may rely as to all
matters governed other than by the laws of the State of Delaware or Federal laws
on the opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Dorsey & Whitney LLP may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Dorsey & Whitney LLP a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State securities
or Blue Sky laws of such jurisdictions as the Representatives may reasonably
have designated to the Company.
(e) You shall have received, on each of the date hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
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(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has performed all of
its obligations under this Agreement to be performed at or prior to the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company taken as a whole or the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company taken as a whole, whether or not arising in the ordinary course of
business.
(g) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market.
(i) The Lockup Agreements described in Section 4(a)(x) are in full
force and effect.
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The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Dorsey & Whitney
LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholders of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees:
(i) to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (A) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, (B) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any alleged act or failure to act by
any Underwriter in connection with, or relating in any manner to, the Shares or
the offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (A) or (B) above (provided, that the Company shall not
be liable under this clause (C) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct); provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability 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
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such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof.
(ii) to reimburse each Underwriter and each such controlling
person upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling person is
a party to any action or proceeding. In the event that it is finally judicially
determined that the Underwriters were not entitled to receive payments for legal
and other expenses pursuant to this subparagraph, the Underwriters will promptly
return all sums that had been advanced pursuant hereto.
(b) The Selling Shareholders agree to indemnify the Underwriters and
each person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
controlling person may become subject under the Act or otherwise to the same
extent as indemnity is provided by the Company pursuant to Section 8(a) above.
In no event, however, shall the liability of any Selling Shareholder for
indemnification under this Section 8(b) exceed the proceeds received by such
Selling Shareholder from the Underwriters in the offering. This indemnity
obligation will be in addition to any liability which the Company may otherwise
have.
(c) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such
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<PAGE> 22
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a), (b) or (c) shall be available to
any party who shall fail to give notice as provided in this Section 8(d) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a), (b) or (c). In case any such proceeding 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 therein 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 shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) or (b) and by the Company and the Selling Shareholders in the case
of parties indemnified pursuant to Section 8(c). The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(e) To the extent the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by
22
<PAGE> 23
applicable law then each indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Selling Shareholders on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Shareholders 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 and the Selling Shareholders 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 Selling
Shareholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 8(e) were 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 above in this Section 8(e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 8(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section (e), (i) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter, (ii) 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, and (iii) no
Selling Shareholders shall be required to contribute any amount in excess of the
proceeds received by such Selling Shareholder from the Underwriters in the
offering. Underwriters' obligations in this Section 8(e) to contribute are
several in proportion to their respective underwriting obligations and not
joint.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
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<PAGE> 24
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: (a) if to the
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<PAGE> 25
Underwriters, to Deutsche Bank Securities Inc., 101 California Street, San
Francisco, California 94111. Attention: [H. Michael Cohen]; with a copy to
Deutsche Bank Securities Inc., 31 West 52nd Street, New York, New York 10019,
Attention: General Counsel and a copy to Dorsey & Whitney LLP, Pillsbury Center
South, 220 South Sixth Street, Minneapolis, Minnesota, 55402, Attention: Amy E.
Ayotte; (b) if to the Company and the Selling Shareholders, to CIMA Labs, Inc.,
10000 Valley View Road, Eden Prairie, Minnesota 55344, Attention: John M.
Siebert; with a copy to Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South
Seventh Street, Minneapolis, Minnesota 55402, Attention: Gale R. Mellum.
11. TERMINATION.
This Agreement may be terminated (a) by you by notice to the
Sellers at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company taken as a whole or the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company taken as a whole,
whether or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration, emergency,
calamity, crisis or change on the financial markets of the United States would,
in your reasonable judgment, make it impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares, or (iii) suspension
of trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or limitation on prices (other than limitations on hours
or numbers of days of trading) for securities on either such Exchange, (iv) the
enactment, publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (v) declaration of a banking moratorium
by United States or New York State authorities, (vi) any downgrading, or
placement on any watch list for possible downgrading, in the rating of the
Company's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Exchange Act);
(vii) the suspension of trading of the Company's Common Stock by the Nasdaq
Stock Market, the Commission, or any other governmental authority or, (viii) the
taking of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any
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<PAGE> 26
right or obligation hereunder. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of: (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers, and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
CIMA LABS, INC.
By
-----------------------------------------
Its
-----------------------------------------
Selling Shareholders listed on Schedule II
By
-----------------------------------------
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<PAGE> 27
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
DEUTSCHE BANK SECURITIES INC.
SG COWEN SECURITIES CORPORATION
FAHNESTOCK & CO. INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Deutsche Bank Securities Inc.
By:
----------------------------
Authorized Officer
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<PAGE> 28
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
<S> <C>
Deutsche Bank Securities Inc.
SG Cowen Securities Corporation
Fahnestock & Co. Inc.
-------------
Total 2,500,000
-------------
</TABLE>
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SCHEDULE II
SCHEDULE OF OPTION SHARES
<TABLE>
<CAPTION>
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
-------------- ---------------- ---------------
<S> <C> <C>
------- ---
Total 375,000 100%
------- ---
</TABLE>
29
