1
EXHIBIT 1.1
Draft Dated 11/10/97
2,500,000 SHARES(1)
PENWEST PHARMACEUTICALS CO.
COMMON STOCK
UNDERWRITING AGREEMENT
______________, 1997
BANCAMERICA ROBERTSON STEPHENS
SBC WARBURG DILLON READ INC.
As Representatives of the several Underwriters
c/o BancAmerica Robertson Stephens
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Penwest Pharmaceuticals Co., a Washington corporation (the "Company"),
and Penford Corporation, a Washington corporation (hereinafter referred to as
either "Penford" or the "Principal Stockholder"), address you as the
Representatives of each of the persons, firms and corporations listed in
Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirms their agreement with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
2,500,000 shares of its authorized and unissued Common Stock, $.001 par value
per share (the "Firm Shares"), to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 375,000
additional shares of the Company's Common Stock, $.001 par value per share (the
"Option Shares"), as provided in Section 7 hereof. As used in this Agreement,
the term "Shares" shall include the Firm Shares and the Option Shares. All
shares of Common Stock, $.001 par value per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby, including the
Shares, are hereinafter referred to as "Common Stock."
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(1) Plus an option to purchase up to 375,000 additional shares from the Company
to cover over-allotments.
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2. Representations, Warranties and Agreements of the Company and the
Principal Stockholder.
(a) The Company and the Principal Stockholder jointly and severally
represent and warrant to, and agree with, each Underwriter that:
(i) A registration statement on Form S-1 (File No. 333-38389) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements pursuant to Rule 462(b)
of the Rules and Regulations as may have been required prior to the date hereof
have been similarly prepared and filed with the Commission; and the Company will
file such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
as may hereafter be required. Copies of such registration statement and
amendments, of each related prospectus subject to completion (the "Preliminary
Prospectuses") and of any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations have been delivered to you or your counsel
and, to the extent applicable, were identical to the electronically transmitted
copies thereof filed with the Commission pursuant to the Commission's Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR"), except to the extent
permitted by Regulation S-T.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the registration
statement pursuant to Rule 430A(a) or, if BancAmerica Robertson Stephens, on
behalf of the several Underwriters, shall agree to the utilization of Rule 434
of the Rules and Regulations, the information required to be included in any
term sheet filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if BancAmerica
Robertson Stephens, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b)
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of the Rules and Regulations relating thereto after the effective date of such
registration statement, shall also mean (from and after the effectiveness of
such amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); provided, however, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of BancAmerica Robertson Stephens, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus subject to
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Underwriters by the Company and circulated by the Underwriters
to all prospective purchasers of the Shares (including the information deemed to
be a part of the Registration Statement at the time it became effective pursuant
to Rule 434(d) of the Rules and Regulations). Notwithstanding the foregoing, if
any revised prospectus shall be provided to the Underwriters by the Company for
use in connection with the offering of the Shares that differs from the
prospectus referred to in the immediately preceding sentence (whether or not
such revised prospectus is required to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use. If in reliance on Rule 434 of the Rules and
Regulations and with the consent of BancAmerica Robertson Stephens, on behalf of
the several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that
a confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
Prospectus and the term sheet, together, will not be materially different from
the prospectus in the Registration Statement. For purposes of this Agreement,
all references to the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement to any of the foregoing shall be
deemed to include the respective copies thereof filed with the Commission
pursuant to EDGAR.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased, (a)
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (b) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a
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material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (c) the Prospectus,
and any amendments or supplements thereto, did not and will not include any
untrue statement of a 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; provided, however, that none of the
representations and warranties contained in this subparagraph (ii) shall apply
to information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries considered as one
enterprise; no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification; each of the Company and its subsidiaries
is in possession of and operating in compliance in all material respects with
all authorizations, licenses, approvals, certificates, consents, orders and
permits from state, federal and other regulatory authorities including, without
limitation, the United States Food and Drug Administration (the "FDA"), which
are material to the conduct of its business, all of which are valid and in full
force and effect; there is no FDA, enforcement action pending or, to the
Company's knowledge, threatened against the Company or any of its subsidiaries;
the Company and its subsidiaries are conducting their business in compliance
with all the laws, rules and regulations of the jurisdictions in which they are
conducting business, including, without limitation, the FDA, except where
failure to be so in compliance would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise and, except as
described in the Prospectus, know of no grounds that could cause the FDA or any
foreign regulatory authority to suspend or restrict the Company's current and
planned activities, as described in the Prospectus; neither the Company nor any
of its subsidiaries is in violation of, or in default in the performance or
observance of, (1) its charter or bylaws, (2) any obligation, agreement,
covenant or condition contained in any bond, debenture, note or other evidence
of indebtedness, or in any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which its properties may be
bound and/or (3) any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties of which it has knowledge, except for such
violations or defaults that would not reasonably be expected to have,
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individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the Company and
its subsidiaries considered as one enterprise. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than those subsidiaries listed in Exhibit 21 to the Registration
Statement.
(iv) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable against
the Company in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the performance by the Company of this Agreement
and the consummation by the Company 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, (1) any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries or any of their respective properties may be bound, (2) the charter
or bylaws of the Company or any of its subsidiaries or (3) any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties, except
for such breaches, violations or defaults that would not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties is
required for the execution and delivery of this Agreement and the consummation
by the Company of the transactions herein contemplated, except such as may be
required under the Act, under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (if applicable), under state or other securities or Blue
Sky laws, or under the rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD"), all of which requirements have been
satisfied in all material respects.
(v) Except as disclosed in the Registration Statement and the
Prospectus, there is not any pending or, to the Company's knowledge, threatened
action, suit, claim or proceeding against the Company, any of its subsidiaries,
any of their respective properties, assets or rights or any of their respective
officers before any court, government or governmental agency or body, domestic
or foreign, having jurisdiction over the Company or any of its subsidiaries,
over their respective properties or over their respective officers or otherwise
which (1) is reasonably likely to result in any material adverse change in the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise or might materially
and adversely affect their properties, assets or rights, (2) seeks to prohibit
or has a reasonably foreseeable possibility of preventing consummation of the
transactions contemplated
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hereby or (3) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company or any of its subsidiaries of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by the Act
or the Rules and Regulations which have not been accurately described in all
material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement.
(vi) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the authorized and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state in all
material respects the substance of the instruments defining the capitalization
of the Company); the Firm Shares and the Option Shares have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar right
of stockholders exists with respect to any of the Firm Shares or Option Shares
or the issuance and sale thereof. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale or transfer of the Shares except as may be required under the
Act or under state or other securities or Blue Sky laws or pursuant to the rules
and regulations of the NASD. All issued and outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and are owned by the Company or one of its subsidiaries free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, as of the respective dates set forth in the Registration Statement
and Prospectus, neither the Company nor any subsidiary has outstanding options
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the options
or other rights granted thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(vii) Ernst & Young LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of December 31, 1995 and 1996 and for each of the years in the three
(3) years ended December 31, 1996 and the audited consolidated balance sheet of
the Company as of September 30, 1997 and the related
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statements of operations, stockholders' equity and cash flows of the Company for
the nine month period then ended, filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations; the
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and Prospectus, fairly
present the financial position and the results of operations of the Company and
its subsidiaries at the respective dates and for the respective periods to which
they apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may be
otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(viii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (1) any material adverse change in the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries considered
as one enterprise excluding the continued incurrence of losses by the Company in
the ordinary course of business, (2) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (3) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or any of its subsidiaries, except
obligations incurred in the ordinary course of business, (4) any change in the
capital stock or outstanding indebtedness of the Company or any of its
subsidiaries that is material to the Company and its subsidiaries considered as
one enterprise, except as described in the Registration Statement and
Prospectus, (5) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company or any of its subsidiaries, except as
described in the Registration Statement and Prospectus or (6) any loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries considered as one
enterprise.
(ix) Except as set forth in the Registration Statement and
Prospectus, (1) each of the Company and its subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries considered
as one enterprise, (2) the agreements to which the Company or any of its
subsidiaries is a party described in the Registration Statement and Prospectus
are valid agreements, enforceable by the Company and its subsidiaries (as
applicable), except as the enforcement thereof may be limited by applicable
bankruptcy,
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insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles (and
with respect to this Agreement, except as rights to indemnification hereunder
may be limited by applicable law) and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default under any of such agreements and (3) each of the Company and its
subsidiaries has valid and enforceable leases for all properties described in
the Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(x) Penford, the Company and the Company's subsidiaries have
timely filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes shown thereon as due, and there is no tax
deficiency that has been or, to Penford's and the Company's knowledge, is
reasonably likely to be asserted against Penford, the Company or any of the
Company's subsidiaries that might have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise; and all tax
liabilities of the Company and its subsidiaries are adequately provided for on
the books of the Company and its subsidiaries.
(xi) The Company and it subsidiaries maintain insurance, or
are covered by insurance maintained by Penford, with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for their businesses, including, but not limited to, insurance covering
product liability and real and personal property owned or leased by the Company
or its subsidiaries against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect; neither the Company nor any subsidiary has ever been refused
any insurance coverage sought or applied for; and neither the Company nor any
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially, and adversely affect the condition
(financial or otherwise), earnings, operations or business of the Company and
its subsidiaries considered as one enterprise.
(xii) To the Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent; and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, subcontractors, authorized dealers
or international distributors that is reasonably likely to result in a material
adverse change in the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiaries considered as one enterprise.
Except as disclosed in the Registration Statement and the Prospectus, no
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent.
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(xiii) Each of the Company and its subsidiaries owns or
possesses adequate rights to use all patents, patent rights, patent
applications, inventions, trade secrets, know-how, trademarks, trademark
applications, service marks, service mark applications, trade names or
copyrights or other intellectual property rights (collectively, "Intellectual
Property") which are necessary to conduct its businesses as now, or as proposed
to be, conducted by it as described in the Registration Statement and
Prospectus; no material Intellectual Property rights will expire by their terms
within five years from the date of this Agreement;neither the Company nor any of
its subsidiaries has received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company and its
subsidiaries by others with respect to any Intellectual Property (except as
disclosed in the Prospectus); neither the Company nor any of its subsidiaries
has received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise (except as disclosed
in the Prospectus); and to the knowledge of the Company, none of the patents
owned by the Company are unenforceable or invalid. The Company has duly and
properly filed or caused to be filed with the United States Patent and Trademark
Office (the "PTO") and applicable foreign and international patent authorities
all patent applications described or referred to in the Prospectus, and believes
it has complied with the PTO's duty of candor and disclosure for each of the
United States patent and patent applications described or referred to in the
Prospectus; the Company is unaware of any facts which would preclude the grant
of a patent from each of the patent applications described or referred to in the
Prospectus; the Company has no knowledge of any facts which would preclude it
from having clear title to its patents and patent applications referenced in the
Prospectus; and neither the Company nor any of its subsidiaries has terminated
or breached and is in violation of any material agreement covering its
Intellectual Property rights. The Company and its subsidiaries have obtained
written confidentiality and non-disclosure agreements from all of its employees
and collaborative partners acknowledging and protecting the Company's
proprietary information.
(xiv) The Common Stock has been approved for quotation on The
Nasdaq National Market, subject to official notice of issuance.
(xv) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(xvi) The Company has not distributed and will not distribute
prior to the later of (1) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (2) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
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(xvii) Neither the Company nor any of its subsidiaries has at
any time during the last five (5) years (1) made any unlawful contribution to
any candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (2) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(xviii) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(xix) (1) Penford and each officer and director of the Company
have each agreed in writing that such person will not, directly or indirectly,
without the prior written consent of BancAmerica Robertson Stephens, sell,
offer, contract to sell, pledge, grant any option to purchase or otherwise
dispose of (collectively, a "Disposition") any shares of Common Stock (or any
securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock) held by such person, acquired by such person after the
date of the lock-up letter agreement (collectively, the "Lock-Up Agreements") or
which may be deemed to be beneficially owned by such person pursuant to the
Rules and Regulations promulgated under the Act (the "Lock-Up Shares"), for a
period commencing on the date of the execution of the Lock-Up Agreement and
ending 180 days after the date appearing on the final Prospectus related to this
offering (the "Lock-Up Period"). The foregoing restriction has been expressly
agreed to preclude the holder of Lock-Up Shares from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Lock-Up Shares during the Lock-Up Period, even if
such Lock-Up Shares would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Lock-Up Shares or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Lock-Up Shares. Notwithstanding the foregoing, such
person may transfer any or all of the Lock-Up Shares (i) as a bona fide gift or
gifts or (ii) as a distribution to shareholders of such person; provided,
however, that in the case of (i) above it shall be a condition to the transfer
that the transferee execute an agreement stating that the transferee is
receiving and holding the Lock-Up Shares subject to the foregoing restrictions
and that there be no further transfer of such Lock-Up Shares except in
accordance with the aforesaid Lock-Up Agreements. Such person has also agreed to
notify BancAmerica Robertson Stephens in writing prior to any transfer of
Lock-Up Shares. Furthermore, such person has also agreed and consented to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Lock-Up Shares held by such person except in compliance with
this restriction. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the Lock-Up Agreements presently in
effect or effected hereby. The Company hereby represents and warrants that it
will not release Penford or any of its officers or directors from any Lock-Up
Agreements currently existing or hereafter effected without the prior written
consent of BancAmerica Robertson Stephens.
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(2) Each holder of an option to purchase Common Stock is
either subject to a Lock-Up Agreement, or will execute a Lock-Up Agreement
before receiving any shares of Common Stock from the Company during the Lock-Up
Period. The Company hereby represents and warrants that during the Lock-Up
Period, it will obtain an executed Lock-Up Agreement from each person who wishes
to exercise an option to purchase Common Stock prior to the issuance of such
Common Stock.
(xx) Except as set forth in the Registration Statement and
Prospectus, (1) to the Company's knowledge, the Company is in compliance in all
material respects 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, (2)
the Company has received no 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, (3) the Company
will not be required to make future material capital expenditures to comply with
Environmental Laws, except as may be required in the construction of its new
facilities and (4) no property which is owned, leased or occupied by the Company
has been designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq), or otherwise designated as a contaminated site under applicable state or
local law.
(xxi) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (1) transactions are executed in accordance with management's
general or specific authorizations, (2) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (3)
access to assets is permitted only in accordance with management's general or
specific authorization and (4) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxii) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(xxiii) Each of the Separation Agreement, the Services
Agreement, the Employee Benefits Agreement, the Excipient Supply Agreement, the
Tax Allocation Agreement and the Trademark Assignment between Penford and the
Company (hereinafter referred to as the "Intercompany Agreements") to which the
Company is a party has been duly and validly authorized, executed and delivered
by the Company and is the valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as to the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by general equitable principles.
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The execution, delivery and performance of each of the Intercompany Agreements
to which the Company is a party by the Company, the consummation of the
transactions therein contemplated and compliance by the Company with the terms
thereof do not and will not result in a violation of, or constitute a default
under, (i) any bond, debenture, note or other evidence of indebtedness, or under
any lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company is a party or by
which its properties may be bound, (ii) the charter or bylaws of the Company, or
(iii) any law, order, rule, regulation, writ, injunction, judgment or decree of
any court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or over its properties, except for such
violations or defaults that would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the Company and
its subsidiaries considered as one enterprise. The execution, delivery and
performance of each of the Intercompany Agreements to which the Company is a
party by the Company, the consummation of the transactions therein contemplated
and compliance by the Company with the terms thereof will not result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company which would be material to the Company. No
consent, approval, authorization or order of any court, governmental agency or
body or financial institution is required in connection with the consummation by
the Company of the transactions contemplated by the Intercompany Agreements to
which the Company is a party, except for such consents, approvals,
authorizations or orders that have been obtained.
Where any of the foregoing representations and warranties is made to
the Company's knowledge, the Principal Stockholder's representations and
warranties are also made to the knowledge of the Principal Stockholder.
(b) The Principal Stockholder represents and warrants to and agrees with
each Underwriter that:
(i) Penford has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as presently conducted;
Penford is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations or business of Penford and its subsidiaries considered as one
enterprise; and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(ii) Penford has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by Penford and is a
valid and binding agreement on the part of Penford, enforceable against Penford
in accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement
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hereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; the performance by Penford of this
Agreement and the consummation by Penford 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, (1) any bond, debenture, note or
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which Penford is a party or by which its properties may be bound,
(2) the charter or bylaws of Penford or (3) any law, order, rule, regulation,
writ, injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over Penford or over
its properties, except for such breaches, violations or defaults that would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of Penford and its subsidiaries considered as one enterprise. No
consent, approval, authorization or order of or qualification with any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over Penford or over its properties is required for the execution
and delivery by Penford of this Agreement and the consummation by Penford of the
transactions herein contemplated, except such as may be required under the Act,
under the Exchange Act (if applicable), under state or other securities or Blue
Sky laws, or under the rules and regulations of the NASD, all of which
requirements have been satisfied in all material respects.
(iii) Penford owns, and will own as of each Closing Date (as
defined herein), of record and beneficially, the number of shares of Common
Stock of the Company set forth in the Prospectus, free and clear of any liens,
encumbrances, claims or restrictions. Immediately prior to the first Closing
Date, such number of shares will equal 100% of the issued and outstanding shares
of Common Stock of the Company.
(iv) The transfer by Penford to the Company of certain assets,
as described in the Registration Statement and Prospectus, has been completed by
all required corporate and other action. Each of the Intercompany Agreements to
which Penford is a party has been duly and validly authorized, executed and
delivered by Penford and is the valid and binding agreement of Penford
enforceable against Penford in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as to the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by general equitable principles. The execution, delivery and
performance of each of the Intercompany Agreements to which Penford is a party
by Penford, the consummation of the transactions therein contemplated and
compliance by Penford with the terms thereof do not and will not result in a
violation of, or constitute a default under, (i) any bond, debenture, note or
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which Penford is a party or by which its properties may be bound,
(ii) the charter or bylaws of Penford or (iii) any law, order, rule, regulation,
writ, injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over Penford or over
its properties, except for such violations or defaults that would not reasonably
be expected to have, individually or in the
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aggregate, a material adverse effect on the condition (financial or otherwise),
earnings, operations or business of Penford and its subsidiaries considered as
one enterprise or of the Company and its subsidiaries considered as one
enterprise. The execution, delivery and performance of each of the Intercompany
Agreements to which Penford is a party by Penford, the consummation of the
transactions therein contemplated and compliance by Penford with the terms
thereof will not result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of Penford which would be material to
Penford. No consent, approval, authorization or order of any court, governmental
agency or body or financial institution is required in connection with the
consummation by Penford of the transactions contemplated by the Intercompany
Agreements to which Penford is a party, except for such consents, approvals,
authorizations or orders that have been obtained.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by wire transfer in
immediately available funds or certified or official bank check or checks
payable to the order of the Company , at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109 (or at such other place as may be
agreed upon among the Representatives and the Company), at 7:00 A.M., San
Francisco time (a) on the third (3rd) full business day following the first day
that Shares are traded, (b) if this Agreement is executed and delivered after
1:30 P.M., San Francisco time, the fourth (4th) full business day following the
day that this Agreement is executed and delivered or (c) at such other time and
date not later than seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to Section 10 hereof), such time and date of payment and delivery being
herein called the "Closing Date" provided, however, that if the Company has not
made available to the Representatives copies of the Prospectus within the time
provided in Section 4(d) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in New
York City, as you may reasonably request for checking at least one (1) full
business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representatives.
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It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares (and, if applicable, the
Option Shares) at an initial public offering price of $____ per share. After the
initial public offering, the several Underwriters may, in their discretion, vary
the initial public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), the last two
paragraphs on the inside front cover page of the Prospectus concerning
stabilization and over-allotment by the Underwriters, and under the first,
second, sixth and seventh paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Final Prospectus constitutes the only
information furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement, and you,
on behalf of the respective Underwriters, represent and warrant to the Company
that the statements made therein do not include any 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.
4. Further Agreements of the Company and Penford. (i) The Company agrees
with the several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best efforts
to cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if the Company files a term sheet pursuant to Rule
434 of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus and term sheet meeting the requirements of Rule
434(b) or (c), as applicable, of the Rules and Regulations, have been filed,
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within the time period prescribed, with the Commission pursuant to subparagraph
(7) of Rule 424(b) of the Rules and Regulations, if for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for the
several Underwriters ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if, at
any time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which the Prospectus
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a 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; in case any Underwriter is required
to deliver a prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations, and the provisions of this
Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later
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than the first (1st) full business day following the first day that Shares are
traded, copies of the Registration Statement (three of which will be signed and
which will include all exhibits), each Preliminary Prospectus, the Prospectus
and any amendments or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the Act, all in such
quantities as you may from time to time reasonably request. Notwithstanding the
foregoing, if BancAmerica Robertson Stephens, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the Company shall provide to you copies of a Preliminary Prospectus
updated in all respects through the date specified by you in such quantities as
you may from time to time reasonably request. To the extent applicable, such
documents shall be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
ninety (90) days following the end of the fiscal quarter first occurring after
the first anniversary of the effective date of the Registration Statement, an
earnings statement (which will be in reasonable detail but need not be audited)
complying with the provisions of Section 11(a) of the Act and covering a twelve
(12) month period beginning after the effective date of the Registration
Statement. To the extent applicable, such reports or documents shall be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(f) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal year,
and will furnish to you and the other several Underwriters hereunder, upon
request (i) concurrently with furnishing such reports to its stockholders,
statements of operations of the Company for each of the first three (3) quarters
in the form furnished to the Company's stockholders, (ii) concurrently with
furnishing to its stockholders, a balance sheet of the Company as of the end of
such fiscal year, together with statements of operations, of stockholders'
equity, and of cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate or report thereon of independent certified public
accountants, (iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders, (iv) as soon as they are available,
copies of all reports and financial statements furnished to or filed with the
Commission, any securities exchange or the NASD, (v) every material press
release in respect of the Company or its affairs which was generally released to
stockholders or prepared by the Company or any of its subsidiaries, and (vi) any
additional information of a public nature concerning the Company or its
subsidiaries, or its business which you may reasonably request; provided, that
the Company will not be required to disclose information that has not been
previously disclosed in a press release or other information filed with the
Commission. During such five (5) year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
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(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 11(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to Section 11(b)(i),
the Company will reimburse the several Underwriters for all out-of-pocket
expenses (including fees and disbursements of Underwriters' Counsel) incurred by
the Underwriters in investigating or preparing to market or marketing the
Shares. The Company will in no event be liable to any of the several
Underwriters for damages on account of anticipated profits from the sale of the
Shares.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(k) During the Lock-Up Period, the Company will not, without
the prior written consent of BancAmerica Robertson Stephens, effect the
Disposition of, directly or indirectly, any securities other than (i) the sale
of the Firm Shares and the Option Shares hereunder, (ii) the Company's issuance
of options or Common Stock under the Company's 1997 Equity Incentive Plan and
1997 Employee Stock Purchase Plan (the "Option Plans") or (iii) the issuance of
Common Stock upon the exercise of stock options issued under the Option Plans by
directors, employees, or consultants of the Company, provided, however, that
during the Lock-Up Period, the Company will obtain an executed Lock-Up Agreement
from each person who wishes to exercise an option to purchase Common Stock prior
to the issuance of such Common Stock.
(l) During the ninety (90) day period after the Registration
Statement becomes effective, the Company shall not file or cause to become
effective any registration statement relating to any securities of the Company,
including a registration statement registering shares under the Option Plans or
other employee benefit plan, without the prior written consent of BancAmerica
Robertson Stephens.
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(m) The Company agrees that it will not consent to any direct
or indirect waiver, amendment, modification or change to any of the terms,
conditions or provisions of Article IV of that certain Separation Agreement
dated __________________, 1997, the form of which has been filed as Exhibit
10.13 of the Registration Statement, without the prior written consent of
BancAmerica Robertson Stephens.
(ii) Penford agrees with the several Underwriters that:
(a) Penford will not effect a distribution to its shareholders
of Common Stock of the Company (the "Spin-off"), as contemplated in the
Intercompany Agreements, before April 1, 1998. Subject to the foregoing, Penford
also agrees to send the Representatives a written notice at least five (5)
business days before the Board of Directors of Penford announces the record date
for the Spin-off, which notice shall set forth the record date and pay date
relevant to completion of such Spin-off. In the event that the record date is
changed for any reason Penford agrees to send the Representatives a written
notice at least five (5) business days before any new record date is announced
by its Board with respect to the Spin-off.
5. Expenses.
(a) Each of the Company and Penford agrees with each
Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any
amendments or supplements thereto; the printing of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the
Preliminary Blue Sky Survey and any Supplemental Blue Sky Survey, the
Underwriters' Questionnaire and Power of Attorney, and any instruments
related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes,
if any, the cost of all certificates representing the Shares and
transfer agents' and registrars' fees; the fees and disbursements of
counsel for the Company; all fees and other charges of the Company's
independent certified public accountants; the cost of furnishing to the
several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASD filing fees
and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD
filings and Blue Sky qualifications); and all other expenses directly
incurred by the Company in connection with the performance of their
obligations hereunder.
(ii) In addition to their other obligations under Section 8(a)
hereof, the Company and, subject to Section 8(f) hereof, Penford each
agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other
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proceeding described in Section 8(a) hereof, it will reimburse the
Underwriters on a monthly basis for all reasonable legal 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 their 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 Underwriters shall promptly return
such payment to the Company 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) listed from time to
time in The Wall Street Journal which represents the base rate on
corporate loans posted by a substantial majority of the nation's thirty
(30) largest banks (the "Prime Rate"). Any such interim reimbursement
payments which are not made to the Underwriters within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(b) hereof, they will reimburse the
Company and Penford (to the extent indemnification is provided for by Penford in
Section 8(a)) on a monthly basis for all reasonable legal 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
Underwriters' obligation to reimburse the Company and Penford 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 Company and Penford
shall promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company and Penford within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii) and 5(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created
21
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by the provisions of Sections 8(a) and 8(b) hereof or the obligation to
contribute to expenses which is created by the provisions of Section 8(d)
hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Principal Stockholder
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 2:00 P.M., San Francisco time, on the date of this Agreement or such
later date as shall be consented to in writing by you; and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been initiated or, to the knowledge of the Company
or any Underwriter, threatened by the Commission, 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 the
reasonable satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the initial public offering of the Shares as
contemplated by the Prospectus; and
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, the
following opinion of the in-house counsel for the Company and Penford, Edmund O.
Belsheim, Jr., dated the Closing Date or such later date on which Option Shares
are purchased, addressed to the Underwriters and with reproduced copies or
signed counterparts thereof for each of the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation. Penford has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
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(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus. Penford has the corporate
power and authority to own, lease and operate its properties and to
conduct its business as presently conducted;
(iii) The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction, if
any, in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure
to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries considered
as one enterprise. To such counsel's knowledge, the Company does not
own or control, directly or indirectly, any corporation, association or
other entity, other than Mendell UK Ltd., Edward Mendell Finland OY and
Edward Mendell GmbH;
(iv) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and deliver
to the Underwriters the Shares to be issued and sold by it hereunder;
(v) Penford has the corporate power and authority to
enter into this Agreement;
(vi) The issued and outstanding shares of capital
stock of the Company have been duly and validly issued and are fully
paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar
right, except as described in the Registration Statement and
Prospectus;
(vii) To such counsel's knowledge, the Company owns
all of the outstanding capital stock of its Significant Subsidiaries
(as such term is defined in such opinion) free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest;
(viii) The Firm Shares or the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms of this
Agreement have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(ix) This Agreement has been duly authorized by all
necessary corporate action on the part of Penford and the Company, and
has been duly executed and delivered by Penford and the Company;
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(x) Each of the Intercompany Agreements has been duly
authorized by all necessary corporate action on the part of Penford and
the Company, as the case may be, and has been duly executed and
delivered by Penford and the Company, as the case may be, and is a
valid and binding agreement of Penford and the Company, as the case may
be, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except
as to the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(x) The form of certificate evidencing the Common
Stock filed as an exhibit to the Registration Statement complies with
Washington law;
(xi) The performance by the Company of this Agreement
and the Intercompany Agreements and the consummation of the
transactions herein and therein contemplated will not result in any
violation of the Company's charter or bylaws;
(xii) The performance by Penford of this Agreement
and the consummation by Penford of the transactions herein contemplated
(other than performance of Penford's indemnification obligations
hereunder, concerning which no opinion need be expressed) will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (1) any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument known to such counsel to which Penford is a
party or by which its properties are bound, (2) the charter or bylaws
of Penford or (3) any applicable statute, rule or regulation known to
such counsel (other than state or federal securities laws and
regulations) or, to such counsel's knowledge, any order, writ,
injunction, judgment or decree of any court, government or governmental
agency or body having jurisdiction over Penford or over its properties
or operations, except for such breaches, violations or defaults that
would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of Penford and its
subsidiaries considered as one enterprise or the Company and its
subsidiaries considered as one enterprise;
(xiii) The performance by Penford of the Intercompany
Agreements and the consummation by Penford of the transactions therein
contemplated (other than performance of Penford's indemnification
obligations thereunder, concerning which no opinion need be expressed)
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (1) any bond, debenture,
note or other evidence of indebtedness, or under any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which Penford is
a party or by which its properties are bound, (2) the charter or bylaws
of Penford or (3) any applicable statute, rule or regulation known to
such counsel (other than state or federal securities laws or tax laws
and regulations thereunder) or, to such counsel's knowledge, any order,
writ, injunction, judgment or decree of any court,
24
-24-
government or governmental agency or body having jurisdiction over
Penford or over its properties or operations, except for such breaches,
violations or defaults that would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of
Penford and its subsidiaries considered as one enterprise; and
(xiv) To such counsel's knowledge, the Company is not
presently (a) in material violation of its charter or bylaws or (b) in
material breach of any order, writ, injunction, judgment or decree of
any court or governmental agency or body having jurisdiction over the
Company or over any of its properties.
Counsel rendering the foregoing opinion may rely as
to questions of fact upon representations or certificates of officers of the
Company and of government officials, in which case his opinion is to state that
he is so relying and that he has no knowledge of any material misstatement or
inaccuracy in any such representation or certificate. Copies of any
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, the
following opinion of Hale and Dorr, LLP, counsel for the Company, dated the
Closing Date or such later date on which Option Shares are purchased, addressed
to the Underwriters and with reproduced copies or signed counterparts thereof
for each of the Underwriters, to the effect that:
(i) The authorized, issued and outstanding capital
stock of the Company is in all material respects as set forth in the
Prospectus under the caption "Capitalization" as of the dates stated
therein, and, to such counsel's knowledge, the issued and outstanding
shares of capital stock have not been issued in violation of or subject
to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right, except as described in the
Registration Statement and Prospectus;
(ii) The Firm Shares or the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms of this
Agreement have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms hereof, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right;
(iii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company, and has been
duly executed and delivered by the Company;
(iv) Each of the Intercompany Agreements has been
duly authorized by all necessary corporate action on the part of the
Company, and has been duly executed and delivered by the Company and is
a valid and binding agreement of the Company
25
-25-
enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except
as to the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(v) Such counsel has been orally advised by a member
of the staff of the Commission that 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 proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(vi) The Registration Statement and the Prospectus,
and each amendment or supplement thereto (other than the financial
statements (including supporting schedules) and financial and
statistical information derived therefrom as to which such counsel need
express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
(vii) The statements in the Prospectus under the
caption "Description of Capital Stock," to the extent that they
constitute summaries of matters of law or legal conclusions, have been
reviewed by such counsel and are in all material respects accurate and
complete statements or summaries of the matters set forth therein;
(viii) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company and of
statutes are in all material respects accurate and fairly present in
all material respects the information required to be presented by the
Act and the applicable Rules and Regulations;
(ix) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company or any
Significant Subsidiary is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(x) The performance by the Company of this Agreement
and the consummation of the transactions herein contemplated (other
than performance of the Company's indemnification obligations
hereunder, concerning which no opinion need be expressed) will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (1) any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument filed as an exhibit to the Registration
Statement to which either the Company or any Significant Subsidiary is
a party or by which the Company or any Significant Subsidiary or their
respective properties are bound or (2) any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court,
26
-26-
government or governmental agency or body having jurisdiction over the
Company or any Significant Subsidiary or over any of their respective
properties or operations, except for such breaches, violations or
defaults that would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the condition (financial
or otherwise), earnings, operations or business of the Company and its
subsidiaries considered as one enterprise;
(xi) The performance by the Company of the
Intercompany Agreements and the consummation of the transactions
therein contemplated (other than performance of the Company's
indemnification obligations thereunder, concerning which no opinion
need be expressed) will not, to such counsel's knowledge, result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, (1) any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument filed as an exhibit to the Registration
Statement to which either the Company or any Significant Subsidiary is
a party or by which the Company or any Significant Subsidiary or their
respective properties are bound or (2) any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ, injunction, judgment or decree of any court, government or
governmental agency or body having jurisdiction over the Company or any
Significant Subsidiary or over any of their respective properties or
operations, except for such breaches, violations or defaults that would
not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company and its subsidiaries
considered as one enterprise;
(xii) No consent, approval, authorization or order of
or qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
over any of their respective properties or operations is necessary in
connection with the consummation by the Company of the transactions
herein contemplated, except such as have been obtained under the Act or
as may be required by the NASD or such as may be required under state
or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters as to which such
counsel need not express an opinion;
(xiii) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement or the Prospectus by the Act or
the Rules and Regulations, other than those described therein;
(xiv) To such counsel's knowledge, neither the
Company nor any of its subsidiaries is presently in material breach of
any order, writ, injunction, judgment or decree of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or over any of its properties or operations; and
(xv) To such counsel's knowledge, except as set forth
in the
27
-27-
Registration Statement and Prospectus, no holders of Common Stock or
other securities of the Company have registration rights with respect
to securities of the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and although such counsel is not passing upon, or assuming any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, (i) the
Registration Statement, at the time the Registration Statement became effective
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) at the Closing Date or any later date on which the
Option Shares are to be purchased, as the case may be, the Prospectus and any
amendment or supplement thereto contained any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood in each case that such counsel need
not express a view as to the financial statements, including supporting
schedules and other financial and statistical information derived therefrom).
Counsel rendering the foregoing opinion may assume as to
questions of law not involving the laws of the United States or the Commonwealth
of Massachusetts that such laws are identical to the laws of the Commonwealth of
Massachusetts, in which case their opinion is to state that they are making such
assumption. Further, counsel rendering the foregoing opinion may rely upon
representations or certificates of officers of the Company and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such representation or certificate. Copies of any representation or certificate
so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, the following
opinion of Hannes & Snellman, counsel for Edward Mendell Finland OY ("Mendell
Finland"), dated the Closing Date or such later date on which Option Shares are
purchased, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) Mendell Finland has been duly incorporated and is
validly existing as a corporation under the laws of the jurisdiction of
its incorporation.
(ii) Mendell Finland has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus.
(iii) Mendell Finland is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or
28
-28-
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in
good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise. To such
counsel's knowledge, Mendell Finland does not own or control, directly
or indirectly, any corporation, association or other entity.
(iv) The issued and outstanding shares of capital
stock of Mendell Finland have been duly and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, have
not been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right.
(v) To such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened against Mendell
Finland.
(vi) To such counsel's knowledge, Mendell Finland is
not presently (a) in violation of its charter or bylaws, (b) breach of
any bond, debenture, note or other evidence of indebtedness, lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which
either Mendell Finland is a party or by which Mendell Finland or its
properties are bound or (c) in breach of any order, writ, injunction,
judgment or decree of any court or governmental agency or body having
jurisdiction over Mendell Finland or over any of its properties, except
for such violations or breaches that would not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on
the condition (financial or otherwise), earnings, operations or
business of the Company and its subsidiaries considered as one
enterprise.
Counsel rendering the foregoing opinion may rely as to
questions of fact upon representations or certificates of officers of Mendell
Finland and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such representation or certificate. Copies of
any representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, the
following opinion of , counsel for Mendell U.K. Ltd. ("Mendell
UK"), dated the Closing Date or such later date on which Option Shares are
purchased, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) Mendell UK has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation.
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(ii) Mendell UK has the corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus.
(iii) Mendell UK is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction, if
any, in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure
to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries considered
as one enterprise. To such counsel's knowledge, Mendell UK does not own
or control, directly or indirectly, any corporation, association or
other entity.
(iv) The issued and outstanding shares of capital
stock of Mendell UK have been duly and validly issued and are fully
paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar
right.
(v) To such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened against Mendell UK.
(vi) To such counsel's knowledge, Mendell UK is not
presently (a) in violation of its charter or bylaws, (b) breach of any
bond, debenture, note or other evidence of indebtedness, lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which
either Mendell UK is a party or by which Mendell UK or its properties
are bound or (c)] in breach of any order, writ, injunction, judgment or
decree of any court or governmental agency or body having jurisdiction
over Mendell UK or over any of its properties, except for such
violations or breaches that would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of
the Company and its subsidiaries considered as one enterprise.
Counsel rendering the foregoing opinion may rely as to
questions of fact upon representations or certificates of officers of Mendell UK
and of government officials, in which case their opinion is to state that they
are so relying and that they have no knowledge of any material misstatement or
inaccuracy in any such representation or certificate. Copies of any
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(h) You shall have received on the Closing Date and
on any later date on which Option Shares are to be purchased, as the case may
be, an opinion of Testa, Hurwitz & Thibeault, LLP, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such documents as they may have requested
for the purpose of
30
-30-
enabling them to pass upon such matters. The Underwriters' Counsel rendering the
foregoing opinion may rely as to questions of law not involving the laws of the
United States or the Commonwealth of Massachusetts upon the opinion of the
Company's in-house counsel referred to in Section 6(d) above.
(i) You shall have received on the Closing Date and
on any later date on which Option Shares are to be purchased, as the case may
be, a letter from Ernst & Young LLP addressed to the Company and the
Underwriters, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than five (5) business days prior to the Closing Date or
such later date on which Option Shares are to be purchased, as the case may be,
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations or business of the Company from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the initial public offering of the
Shares as contemplated by the Prospectus. The Original Letter from Ernst & Young
LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of December 31, 1995 and
1996, and related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the three years ended December 31, 1996 and the
consolidated balance sheet of the Company as of September 30, 1997 and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the nine month period ended September 30, 1997, (iii) state
that Ernst & Young LLP has performed the procedure set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information on the statements of operations and cash flow for the nine-month
period ended September 30, 1996 (the "Interim Financial Statements"), (iv) state
that in the course of such review, nothing came to their attention that leads
them to believe that any material modifications need to be made to the Interim
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by Ernst & Young LLP and
you. In addition, you shall have received from Ernst & Young LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of December 31, 1996, did not disclose any weaknesses in internal controls
31
-31-
that they considered to be material weaknesses.
(j) You shall have received on the Closing Date and
on any later date on which Option Shares are to be purchased, as the case may
be, a certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer or Chief Operating Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be reasonably satisfied that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or any later date on which Option Shares are to be purchased, as the case may
be, 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 the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or, to such officer's knowledge, threatened
under the Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus, and any amendments
or supplements thereto, contained all material information required to be
included therein by the Act and the Rules and Regulations and in all material
respects conformed to the requirements of the Act and the Rules and Regulations,
the Registration Statement, and any amendment or supplement thereto, did not and
does not include any 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 not misleading, the Prospectus, and any amendment or supplement thereto,
did not and does not include any untrue statement of a 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, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations or business of the Company, (b) any transaction that is
material to the Company, except transactions entered into in the ordinary course
of business, (c) any obligation, direct or contingent, that is material to the
Company, incurred by the Company, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or outstanding
indebtedness of the Company that is material to the Company, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company, or (f) any loss or damage (whether or not insured) to the property of
the Company which has been sustained or will have been sustained which has a
material adverse effect on the
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condition (financial or otherwise), earnings, operations or business of
the Company.
(k) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of Penford dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, signed by the Chief Executive
Officer and Chief Financial Officer of Penford, to the effect that, and you
shall be reasonably satisfied that:
(i) The representations and warranties of Penford in
this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and Penford has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date or any later date on which
Option Shares are to be purchased, as the case may be;
(l) You shall have received on the Closing Date, and on any
later date on which Option Shares are to be purchased, the opinion of Steinberg,
Raskin & Davidson, P.C., patent counsel to the Company, dated the Closing Date
and such later date on which Option Shares are to be purchased, addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for each
of the Underwriters, to the effect that they serve as patent counsel to the
Company with respect to the Company's Intellectual Property, including those
patents and patent applications referred to or described in the Prospectus, and
that:
(1) To the best of such counsel's knowledge, there are no
facts which would preclude the Company from having clear title to the
Company's U.S. patents and U.S. patent applications referred to or
described in the Registration Statement and the Prospectus and
identified in such opinion. To the best of such counsel's knowledge,
the Company has complied with required duty of candor and good faith in
dealing with the Patent and Trademark Office (the "Office"), including
the duty to disclose to the Office all information known to be material
to the patentability for each issued United States patent and will
continue to comply with the required duty of candor and good faith with
respect to currently pending U.S. patent applications. Such counsel has
no knowledge that the Company lacks any rights or licenses to use all
U.S. patents and know-how necessary to conduct the business now
conducted in the U.S. or proposed to be conducted by the Company in the
U.S. as described in the Prospectus, except as described in the
Registration Statement and the Prospectus. Such counsel has no
knowledge of any U.S. patent applications which, if issued, would limit
or prohibit the business now conducted or proposed to be conducted by
the Company as described in the Prospectus. Such counsel has no
knowledge of any facts which would form a basis for a finding that any
of the U.S. patents or U.S. patent applications owned or licensed by
the Company is unenforceable or invalid. Such counsel is not aware of
any U.S. patents of others which are or would be infringed by specific
products or processes referred to in the Prospectus as currently
marketed and/or sold in the U.S. or which are proposed to be marketed
and/or sold in the U.S. in such manner as to materially and adversely
affect the Company. Such counsel knows of no pending or threatened
action, suit, proceeding or claim by
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others that the Company is infringing any U.S. patent which could
result in any material adverse effect on the Company, except as
described in the Registration Statement and the Prospectus; and
(2) to the best of such counsel's knowledge, there are no U.S.
legal or governmental proceedings pending relating to U.S. patent
rights, other than U.S. Patent and Trademark Office review of pending
applications for patents, including the appeal proceedings, except as
described in the Registration Statement and the Prospectus, and, to the
best of such counsel's knowledge, no additional U.S. proceedings are
threatened or contemplated by U.S. governmental authorities or others.
In addition, such counsel shall state that although they have
not verified the accuracy or completeness of the statements contained in the
Prospectus, nothing has come to the attention of such counsel that caused them
to believe that, at the time the Registration Statement became effective, or at
the Closing Date or at any later date on which Option Shares are purchased, as
the case may be, the Prospectus contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(m) You shall have received on the Closing Date, and on any
later date on which Option Shares are to be purchased, the opinion of Olsson,
Frank and Weeda P.C., special regulatory counsel to the Company, dated the
Closing Date and such later date on which Option Shares are to be purchased,
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that they serve as special
regulatory counsel to the Company, and that:
(i) The statements in the Registration Statement and
Prospectus under the captions "Risk Factors -- Government Regulation;
No Assurance of Regulatory Approval" and "Business -- Government
Regulation," insofar as such statements purport to summarize applicable
provisions of United States regulatory law, have been reviewed by such
counsel and are accurate and complete statements or summaries of the
matters set forth therein; and
(ii) There are no FDA enforcement actions pending against the
Company or any of its subsidiaries and, to such counsel's knowledge, no
such actions are threatened.
In addition, such counsel shall state that although they have
not verified the accuracy or completeness of the statements contained in the
Prospectus, nothing has come to the attention of such counsel that caused them
to believe that, at the time the Registration Statement became effective, or at
the Closing Date or at any later date on which Option Shares are purchased, as
the case may be, the Prospectus contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(n) You shall have received on the Closing Date, and on any
later date on
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which Option Shares are to be purchased, the opinion of Squire,
Sanders & Dempsey, special foreign regulatory counsel to the Company, dated the
Closing Date and such later date on which Option Shares are to be purchased,
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that they serve as special
foreign regulatory counsel to the Company, and that:
(i) The statements in the Registration Statement and
Prospectus under the captions "Risk Factors -- Government Regulation;
No Assurance of Regulatory Approval" and "Business -- Government
Regulation -- Foreign Regulatory Approval," insofar as such statements
purport to summarize applicable provisions of non-United States
regulatory law, have been reviewed by such counsel and are accurate and
complete statements or summaries of the matters set forth therein.
(o) The Company shall have obtained and delivered to you an
executed Lock-Up Agreement from Penford and each officer and director of the
Company.
(p) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request, including
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and documents
as you shall reasonably request.
7. Option Shares.
(a) 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, for the
purpose of covering over-allotments in connection with the distribution and sale
of the Firm Shares only, a nontransferable option to purchase up to an aggregate
of 375,000 Option Shares at the purchase price per share for the Firm Shares set
forth in Section 3 hereof. Such option may be exercised by the Representatives
on behalf of the several Underwriters on one (1) or more occasions in whole or
in part during the period of thirty (30) days after the date on which the Firm
Shares are initially offered to the public, by giving written notice to the
Company. The number of Option Shares to be purchased by each Underwriter upon
the exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional shares.
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Delivery of definitive certificates for the Option Shares to
be purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Company (and the
Company agrees not to deposit any such check in the bank on which it is drawn,
and not to take any other action with the purpose or effect of receiving
immediately available funds, until the business day following the date of its
delivery to the Company). In the event of any breach of the foregoing, the
Company shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach. Such delivery and payment shall
take place at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, or at such other place as may be agreed upon among the
Representatives and the Company (i) on the Closing Date, if written notice of
the exercise of such option is received by the Company at least two (2) full
business days prior to the Closing Date, or (ii) on a date which shall not be
later than the third (3rd) full business day following the date the Company
receives written notice of the exercise of such option, if such notice is
received by the Company less than two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for checking
at least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, 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.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in Section 7 hereof and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements
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of the Company or the satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
(a) Subject to the provisions of paragraph (f) of
this Section 8, the Company and Penford, jointly and severally, agree to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
(including, without limitation, in its capacity as an Underwriter or as a
"qualified independent underwriter" within the meaning of Rule 2720(a)(15) of
the Conduct Rules promulgated by the NASD), under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company and Penford
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or 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 (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or 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 agree to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company and Penford 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, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof. Notwithstanding
the foregoing, Penford shall not be required to pay any amount in respect of an
indemnification claim asserted hereunder (other than with respect to any claim
asserting a breach of the representations and warranties contained in Section
2(b) hereof) until the Underwriter seeking indemnification shall have first
submitted the claim to the Company in writing (the "Company Notice"), with a
copy of said claim to Penford, and such claim shall not have been satisfied
within 30 days of the Company's receipt of the Company Notice. If the Company
fails to pay the entire amount claimed in the Company Notice within the 30 day
period specified in the preceding sentence, the claiming Underwriter may so
notify Penford in writing.
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Penford shall pay the claiming Underwriter the difference, if any, between (x)
the amount claimed in the Company Notice and (y) the aggregate amount paid by
the Company, within 10 days of receipt thereof. Penford may seek
cross-indemnification from the Company with respect any amounts paid by Penford
pursuant to the preceding sentence.
The indemnity agreement in this Section 8(a) shall
extend upon the same terms and conditions to, and shall inure to the benefit of,
each person, if any, who controls any Underwriter within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company and/or Penford may otherwise have.
(b) Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company and Penford against any
losses, claims, damages or liabilities, joint or several, to which the Company
or Penford may become subject under the Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any breach of any representation, warranty,
agreement or covenant of such Underwriter herein contained, (ii) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto, or 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 (iii) any
untrue statement or alleged untrue statement of any material fact contained in
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 8(b) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter, directly or through you, specifically for use
in the preparation thereof, and agrees to reimburse the Company or Penford for
any legal or other expenses reasonably incurred by the Company or Penford in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(b) shall
extend upon the same terms and conditions to, and shall inure to the benefit of,
each officer of the Company who signed the Registration Statement and each
director of the Company, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity agreement
shall be in addition to any liabilities which each Underwriter may otherwise
have.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it shall elect by
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written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 8(a) or 8(b) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, 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) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
8 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company and Penford are responsible for the remaining
portion, provided, however, that (i) no Underwriter shall be required to
contribute any amount in excess of the amount by which the underwriting discount
applicable to the Shares purchased by such Underwriter exceeds the amount of
damages which such Underwriter is otherwise required to pay and (ii) no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such
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fraudulent misrepresentation. The contribution agreement in this Section
8(d) shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter or the Company
within the meaning of the Act or the Exchange Act and each officer of the
Company who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
(f) Except for the liability of Penford under the
representations and warranties contained in Section 2(b) of this Agreement,
which liability shall not be limited, the liability of Penford under the
representations and warranties contained in Section 2(a) and under the
indemnification and contribution provisions contained in this Section 8 (except
with respect to any breach of representations and warranties contained in
Section 2(b) hereof) shall remain in full force and effect after the Closing
Date until the close of business on the Distribution Date (as such term is
defined in that certain Separation Agreement dated October __, 1997 by and
between Penford and the Company); provided, however, any liability regarding the
representations and warranties contained in Section 2(a) hereof and under the
indemnification and contribution provisions contained in this Section 8 in
respect of which indemnity or contribution may be sought under Section 8(a)
hereof shall survive such expiration pursuant to this paragraph (f), if notice
of the claim shall have been given to Penford prior to such expiration. The
remedies set forth herein are not exclusive of any other remedy conferred hereby
or by law or equity.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company, Penford and the Underwriters herein or in certificates delivered
pursuant hereto, and the indemnity and contribution agreements contained in
Section 8 hereof shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter within the meaning of the Act or the Exchange Act,
or by or on behalf of the Company or any of its officers, directors or
controlling persons within the meaning of the Act or the Exchange Act, and shall
survive the delivery of the Shares to the several Underwriters hereunder or
termination of this Agreement, except as provided in Section 8(f) of this
Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number 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 if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining
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Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such defaulting
Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed to take up and pay for exceeds 10% of the Firm
Shares, the remaining Underwriters shall have the right, but shall not be
obligated, to take up and pay for (in such proportions as may be agreed upon
among them) the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing Date
shall be postponed for twenty-four (24) hours to allow the several Underwriters
the privilege of substituting within twenty-four (24) hours (including
non-business hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such underwriter
or underwriters shall have been substituted as aforesaid by such postponed
Closing Date, the Closing Date may, at the option of the Company, be postponed
for a further twenty-four (24) hours, if necessary, to allow the Company the
privilege of finding another underwriter or underwriters, satisfactory to you,
to purchase the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriter or underwriters to take up the Firm
Shares of the defaulting Underwriter or Underwriters as provided in this Section
10, (i) the Company shall have the right to postpone the time of delivery for a
period of not more than seven (7) full business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees promptly to file any amendments to the Registration Statement,
supplements to the Prospectus or other such documents which may thereby be made
necessary, and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to
the preceding paragraph of this Section 10, neither the Company shall be liable
to any Underwriter (except as provided in Sections 5 and 8 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 number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any
person substituted for an Underwriter under this Section 10.
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11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 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 as provided in Sections 4(i), 5 and 8 hereof.
(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 on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, (i)
if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations or business of the Company from that set forth
in the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse, or (ii) if additional material governmental restrictions,
not in force and effect on the date hereof, shall have been imposed upon trading
in securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the initial public offering of the Shares as
contemplated by the Prospectus. In the event of termination pursuant to
subparagraph (i) above, the Company shall remain obligated to pay costs and
expenses pursuant to Sections 4(i), 5 and 8 hereof. Any termination pursuant to
any of subparagraphs (ii) through (v) above shall be without liability of any
party to any other party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective
or to terminate
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this Agreement as provided in this Section 11, you shall promptly notify the
Company by telephone, telecopy or telegram, in each case confirmed by letter. If
the Company shall elect to prevent this Agreement from becoming effective, the
Company shall promptly notify you by telephone, telecopy or telegram, in each
case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o BancAmerica Robertson Stephens, 555 California
Street, Suite 2600, San Francisco, California 94104, telecopier number (415)
781-0278, Attention: General Counsel; if sent to the Company, such notice shall
be mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 2981 Route 22, Patterson, New York 12563-9970,
telecopier number (914) 878-3498, Attention: General Counsel; and if sent to
Penford, such notice shall be mailed, delivered, telegraphed (and confirmed by
letter) or telecopied (and confirmed by letter) to 777 108th Avenue N.E., Suite
2390, Bellevue, Washington 98004-5193, Attention: Chief Executive Officer.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and Penford and their
respective executors, administrators, successors and assigns. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and Penford under this
Agreement, you shall act on behalf of each of the several Underwriters, and the
Company and Penford shall be entitled to act and rely upon any statement,
request, notice or agreement made or given by you jointly or by BancAmerica
Robertson Stephens on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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If the foregoing correctly sets forth the understanding among the
Company, Penford and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company, Penford and the several Underwriters.
Very truly yours,
PENWEST PHARMACEUTICALS CO.
By: _____________________________
Name:
Title:
PENFORD CORPORATION
By: _____________________________
Name:
Title:
Accepted as of the date first above written:
BANCAMERICA ROBERTSON STEPHENS
SBC WARBURG DILLON READ INC.
On their behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
BANCAMERICA ROBERTSON STEPHENS
By: ____________________________________
Authorized Signatory
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SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
BancAmerica Robertson Stephens........................
SBC Warburg Dillon Read Inc...........................
[NAMES OF OTHER UNDERWRITERS]
---------------
Total......................................................
===============