EXHIBIT 1.1
Draft of August 10, 1999
ORATEC INTERVENTIONS, INC.,
a Delaware corporation
__________ Shares of Common Stock/1/
(Par Value $0.001 Per Share)
PURCHASE AGREEMENT
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.
U.S. Bancorp Piper Jaffray, Inc.
as Representative of the several Underwriters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
ORATEC Interventions, Inc., a Delaware corporation (the "Company"),
addresses you as Representatives of each of the persons, firms and corporations
listed on Schedule A hereto (herein collectively called the "Underwriters") and
confirms its agreement with the several Underwriters with respect to the issue
and sale by the Company and the purchase by the Underwriters, acting severally
and not jointly, of the respective numbers of shares of Common Stock, par value
$0.001 per share, of the Company ("Common Stock") set forth in said Schedule A,
and with respect to the grant by the Company to the Underwriters, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of ______ additional shares of Common Stock to cover
over-allotments, if any. The aforesaid ______ shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part of
the ______ shares of Common Stock subject to the option described in Section
2(b) hereof (the "Option Securities") are hereinafter called, collectively, the
"Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to ___ shares of the
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association
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/1/ Plus an option to purchase up to ___________ additional shares from the
Company to cover over-allotments.
of Securities Dealers, Inc. and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such eligible employees and persons having business
relationships with the Company by the end of the first business day after the
date of this Agreement, such Reserved Securities may be offered to the public
as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-82511) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
The information included in such prospectus or in such Term Sheet, as the case
may be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (x) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (y) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated _____, 1999 together with the Term
Sheet and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
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(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:
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(i) Compliance with Registration Requirements. Each of the
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Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and any
request on the part of the Commission for additional information has been
complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, any preliminary prospectus and any
supplement thereto or prospectus wrapper prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws or
regulations of foreign jurisdictions in which the Prospectus and such
preliminary prospectus, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved Securities.
Neither the Prospectus nor any amendments or supplements thereto, at the
time the Prospectus or any such amendment or supplement was issued and at
the Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. If Rule 434 is used, the Company will
comply with the requirements of Rule 434 and the Prospectus shall not be
"materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective. The representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
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the financial statements and supporting schedules included in the
Registration Statement are
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independent public accountants as required by the 1933 Act and the 1933
Act Regulations.
(iii) Financial Statements. The financial statements included
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in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data
and the summary financial information included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement.
(iv) No Material Adverse Change in Business. Since the respective
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dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "Material Adverse Effect"), (B) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered
as one enterprise, and (C) there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its
capital stock.
(v) Good Standing of the Company. The Company has been duly
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organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. The Company has no subsidiaries.
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(vii) Capitalization. The authorized, issued and outstanding
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capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to
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in the Prospectus). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital stock
of the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
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authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities
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have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set forth
herein, will be validly issued and fully paid and non-assessable; the
Common Stock conforms to all statements relating thereto contained in the
Prospectus and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and the
issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. The Company is not
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in violation of its charter or by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus
under the caption "Use of Proceeds") and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute
a breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company pursuant to, the Agreements
and Instruments (except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not result in a Material
Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of their assets, properties
or operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company.
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(xi) Absence of Labor Dispute. No labor dispute with the
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employees of the Company exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
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proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company,
which is required to be disclosed in the Registration Statement (other
than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder;
the aggregate of all pending legal or governmental proceedings to which
the Company is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or other
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material documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which have
not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company owns or
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possesses, or can acquire on reasonable terms, adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated
by them, and the Company has not received any notice and is not otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company.
(xv) Absence of Further Requirements. No filing with, or
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authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale
of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and (ii) such as have been obtained
under the laws and regulations of jurisdictions outside the United States
in which the Reserved Securities are offered.
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(xvi) Possession of Licenses and Permits. The Company possesses
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such permits, licenses, approvals, consents and other authorizations
including, but not limited to, any and all 510(k) clearances relating to
the Company's products, (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by it and to sell
the products described in the Prospectus; the Company is in compliance
with the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be
in full force and effect would not have a Material Adverse Effect; and
the Company has not received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses.
(xvii) Title to Property. The Company has good and marketable
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title to all real property owned by it and good title to all other
properties owned by them, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances
of any kind except such as (a) are described in the Prospectus or (b) do
not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company; and all of the leases and subleases
material to the business of the Company, and under which the Company
holds properties described in the Prospectus, are in full force and
effect, and the Company has no notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
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with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) Investment Company Act. The Company is not, and upon
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the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the
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Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) the Company is not in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land
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surface or subsurface strata) or wildlife, including, without limitation,
laws and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company has all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company relating to Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. There are no persons with
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registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the 1933 Act other than as contained in the Amended
and Restated Investors Rights Agreement, dated as of December 7, 1998.
(xxii) The Company has reviewed its operations and that of any
third parties with which the Company has a material relationship as
described in the Prospectus to evaluate the extent to which the business
or operations of the Company will be affected by the Year 2000 Problem.
As a result of such review, the Company has no reason to believe, and
does not believe, that the Year 2000 Problem will have a material adverse
effect on the Company taken as a whole. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software used
in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representative or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
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(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number
of Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any
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additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional _______ shares of Common
Stock at the price per share set forth in Schedule B, less an amount per share
equal to any dividends or distributions declared by the Company and payable on
the Initial Securities but not payable on the Option Securities. The option
hereby granted will expire 30 days after the date hereof and may be exercised
in whole or in part from time to time only for the purpose of covering over-
allotments which may be made in connection with the offering and distribution
of the Initial Securities upon notice by the Representatives to the Company
setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment
and delivery for such Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the Representatives, but shall not
be later than seven full business days after the exercise of said option, nor
in any event prior to the Closing Time, as hereinafter defined. If the option
is exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion
of the total number of Option Securities then being purchased which the number
of Initial Securities set forth in Schedule A opposite the name of such
Underwriter bears to the total number of Initial Securities, subject in each
case to such adjustments as the Representatives in their discretion shall make
to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Latham & Watkins, 75 Willow Road, Menlo Park, California 94025-3656 or at such
other place as shall be agreed upon by the Representatives and the Company, at
7:00 A.M. (California time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be agreed
upon by the Representatives and the Company (such time and date of payment and
delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually
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and not as Representative of the Underwriters, may (but shall not be obligated
to) make payment of the purchase price for the Initial Securities or the
Option Securities, if any, to be purchased by any Underwriter whose funds have
not been received by the Closing Time or the relevant Date of Delivery, as the
case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at
least one full business day before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination and
packaging by the Representatives in The City of New York not later than 10:00
A.M. (Eastern time) on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
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Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Representatives
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or
of the initiation or threatening of any proceedings for any of such purposes.
The Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 424(b) was received
for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus
will furnish the Representative with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representative or counsel
for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the
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Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also
deliver to the Representatives, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will 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) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion
of the distribution of the Securities as contemplated in this Agreement and in
the Prospectus. If at any time when a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Securities, any event shall
occur or condition shall exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statements of a material fact or omit
to state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and
the Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate and
to maintain such qualifications in effect for a period of not less than one
year from the later of the effective date of the Registration Statement and
any Rule 462(b) Registration Statement; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in
11
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which
it is not otherwise so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and reports as
may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b) Registration
Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Securities on the Nasdaq National Market and will file
with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are traded in
the over-the-counter market and quotations for which are reported by the
Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the foregoing
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the Securities to be sold hereunder.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the 1934 Act within the time periods required by the 1934 Act and the rules
and regulations of the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD
rules from sale, transfer, assignment, pledge or hypothecation for a period of
three months following the date of this Agreement. The Underwriters will
notify the Company as to which persons will need to be so restricted. At the
request of the Underwriters, the Company will direct the transfer agent to
place a stop transfer restriction upon such securities for such period of
time. Should the Company release, or seek to release, from such restrictions
any of the Reserved Securities, the Company agrees to reimburse
12
the Underwriters for any reasonable expenses (including, without limitation,
legal expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the Commission
such reports on Form SR as may be required pursuant to Rule 463 of the 1933
Act Regulations.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of
this Agreement, any Agreement among Underwriters and such other documents as
may be required in connection with the offering, purchase, sale, issuance or
delivery of the Securities, (iii) the preparation, issuance and delivery of
the certificates for the Securities to the Underwriters, including any stock
or other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(f) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectus and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities and (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the
Securities, (x) the fees and expenses incurred in connection with the
inclusion of the Securities in the Nasdaq National Market and (xi) all costs
and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, in connection with matters related to the
Reserved Securities which are designated by the Company for sale to employees
and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
13
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and
other obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with
the requirements of Rule 430A) or, if the Company has elected to rely upon
Rule 434, a Term Sheet shall have been filed with the Commission in accordance
with Rule 424(b).
(b) Opinion of Securities Counsel for Company. At Closing Time, the
Representatives shall have received the following opinion, dated as of Closing
Time, from Venture Law Group, counsel for the Company:
(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.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to the Purchase Agreement or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus); the shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
14
(v) The Securities have been duly authorized for issuance and sale
to the Underwriters pursuant to the Purchase Agreement and, when issued
and delivered by the Company pursuant to the Purchase Agreement against
payment of the consideration set forth in the Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability by reason of being
such a holder.
(vi) The issuance of the Securities is not subject to preemptive or
other similar rights of any securityholder of the Company.
(vii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus and each amendment or supplement
to the Registration Statement and Prospectus as of their respective
effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to which we
need express no opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
(x) If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective.
(xi) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and by-laws
of the Company and the requirements of the Nasdaq National Market.
(xii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which
the Company is a party, or to which the property of the Company is subject,
before or brought by any court or governmental agency or body, domestic or
foreign, which might reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by
the Company of its obligations thereunder.
15
(xiii) The information in the Prospectus under "Description of
Capital Stock--Common Stock," "Description of Capital Stock--Preferred
Stock," and in the Registration Statement under Item 14, to the extent that
it constitutes matters of law, summaries of legal matters, the Company's
charter and bylaws or legal proceedings, or legal conclusions, has been
reviewed by us and is correct in all material respects.
(xiv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that are
not described as required.
(xv) All descriptions in the Registration Statement of contracts
and other documents to which the Company is a party are accurate in all
material respects; to the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described
or referred to therein or filed or incorporated by reference as exhibits
thereto, and the descriptions thereof or references thereto are correct
in all material respects.
(xvi) To the best of our knowledge, the Company is not in violation
of its charter or by-laws and no default by the Company exists in the due
performance or observance of any material obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is described
or referred to in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement.
(xvii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and
the 1933 Act Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as to which we
need express no opinion) is necessary or required in connection with the
due authorization, execution and delivery of the Purchase Agreement or for
the offering, issuance or sale of the Securities.
(xviii) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption
"Use Of Proceeds") and compliance by the Company with its obligations under
the Purchase Agreement do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of
the Purchase Agreement) under or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known
to us, to which the Company is a party or by which it may be bound, or to
which any of the property or assets of the Company is subject (except for
such conflicts, breaches or defaults or liens,
16
charges or encumbrances that would not have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of its respective properties,
assets or operations.
(xix) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the 1933 Act.
(xx) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule
430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included
therein or omitted therefrom, as to which we need make no statement), at
the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included therein or omitted therefrom,
as to which we need make no statement), at the time the Prospectus was
issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) Opinion of Patent Counsel. At Closing Time, the Representatives shall
have received, dated as of Closing Time, the following opinion from Wilson,
Sonsini, Goodrich & Rosati, patent and trademark counsel for the Company
("Patent Counsel"):
(i) The Company is listed in the records of the Patent and Trademark
Office as the sole holder of record of each of the patents listed under the
heading "U.S. Patents Held by the Company" on Schedule C hereof (the "U.S.
Patents") and each of the patent applications listed under the heading
"U.S. Patent Applications Submitted by the Company" on Schedule C hereof
(the U.S. Applications"). The Company owns 5 issued U.S. Patents and 21
pending U.S. Applications. Such counsel knows of no claims of third
parties to any ownership interest or lien with respect to any of the U.S.
Patents or U.S. Applications. To such counsel's knowledge, none of the
U.S. Applications has been rejected.
(ii) The Company is listed in the records of the appropriate foreign
office as the sole holder of record of each of the foreign patents listed
under the heading "Non-U.S. Patents Held by the Company" on Schedule D
hereof (the "Non-U.S. Patents") (collectively, the U.S. Patents and Non-
U.S. Patents are referred to herein as the
17
"Patents") and each of the foreign patent applications listed under the
heading "Non-U.S. Patent Applications Submitted by the Company" on
Schedule D hereof (the "Non-U.S. Applications") (collectively, the U.S.
Applications and the Non-U.S. Applications are referred to herein as the
"Applications"). Such counsel knows of no claims of third parties to any
of such Non-U.S. Patents or Non-U.S. Applications. To such counsel's
knowledge, none of the Non-U.S. Applications has been rejected.
(iii) The statements under the Prospectus captions "Risk Factors--If
we do not protect our intellectual property rights, our competitive
position may be impaired," "Risk Factors--We may be sued for violating the
intellectual property rights of others," "Business--Technology" and
"Business--Patents and Proprietary Technology" (collectively, the
"Intellectual Property Portion") in the Registration Statement and the
Prospectus and any amendment or supplement thereto, insofar as such
statements constitute a summary of the Company's Patents and Applications,
are in all material respects accurate summaries and fairly summarize in all
material respects the legal matters, documents and proceedings relating to
such Patents and Applications described therein.
(iv) Such counsel is not aware of any facts that would lead such
counsel to conclude that any of the Patents are invalid or that any patent
issued in respect of an Application would be invalid.
(v) Except as disclosed in the Intellectual Property Portion of the
Registration Statement and the Prospectus, such counsel is not aware that
any valid patent is infringed by the activities of the Company described in
the Prospectus or by the manufacture, use or sale of any product, device,
instrument, drug or other material made and used according to the
Applications or the Patents.
(vi) Such counsel is not aware of any material defects of form in
the preparation or filing of the Applications on behalf of the Company.
The Applications are being diligently pursued by the Company.
(vii) Such counsel knows of no pending or threatened action, suit,
proceeding or claim by others that the Company is infringing or otherwise
violating any patents or trade secrets.
(viii) Such counsel is not aware of any pending or threatened
actions, suits, proceedings or claim by others challenging the validity or
scope of the Applications or the Patents.
(ix) Such counsel is not aware of any infringement on the part of
any third party of the Patents, Applications, trade secrets, know-how or
other proprietary rights of the Company.
(x) Nothing has come to the attention of such counsel which causes
such counsel to believe that the information contained in the Intellectual
Property Portion of
18
(a) the Registration Statement, or any amendments thereof contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, or of (b) the Prospectus, or any
amendments thereof, contained or contains an untrue statement of a
material fact or omitted or omits to state any material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(xi) Such counsel is not aware of any contracts or other documents
relating to the Patents and Applications that should be filed as an exhibit
to the Prospectus that are not already filed or described as required.
(d) Additional Patent Information. At Closing Time, the Representatives
shall have received from the Patent Counsel, dated as of the Closing Time, an
opinion addressed to the Representatives as to the invalidity of the Sluijter
patent, or such other documentation as is acceptable to Underwriters' counsel,
entitling the Representatives to rely on the Patent Counsel opinion delivered
to the Company as to the invalidity of the Sluijter patent.
(e) Opinion of Regulatory Counsel. At Closing Time, the Representatives
shall have received, dated as of Closing Time, the following opinion from
Covington & Burling, regulatory counsel for the Company:
(i) The statements under the captions "Risk Factors--Complying with
FDA and other regulations is an expensive and time-consuming process, and
any failure to comply could result in substantial penalties," "Risk
Factors--Product introductions or modifications may be delayed or cancelled
as a result of the FDA regulatory process, which could cause our sales to
decline," "Business--Manufacturing" and "Business--Government Regulation"
(collectively, the "Regulatory Portion") in the Registration Statement and
the Prospectus and any amendment or supplement thereto, to the extent that
they reflect matters of law, summaries of law or regulations, or regulatory
status, are correct in all material respects;
(ii) To such counsel's knowledge, there are no FDA enforcement
actions pending against the Company and no such actions are threatened;
and
(iii) Nothing has come to the attention of such counsel that would
lead such counsel to believe that the information contained in the
Regulatory Portion of (a) the Registration Statement, or any amendments
thereof contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or of (b) the
Prospectus or any amendments thereof, contained or contains any untrue
statement of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
19
(f) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Latham & Watkins, counsel for the Underwriters, together with signed
or reproduced copies of such letter for each of the other Underwriters with
respect to the matters set forth in clauses (i), (ii), (v), (vi) (solely as to
preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Company), (viii) through (x), inclusive, (xii),
(xiv) (solely as to the information in the Prospectus under "Description of
Capital Stock--Common Stock") and the last paragraph of Section 5(b) hereto.
In giving such opinion such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the State of New York and the
federal law of the United States and the General Corporation Law of the State
of Delaware, upon the opinions of counsel satisfactory to the Representatives.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates
of officers of the Company and its subsidiaries and certificates of public
officials.
(g) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in Section
1(a) hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the Company has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) 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 are contemplated by
the Commission.
(h) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young a letter
dated such date, in form and substance satisfactory to the Representative,
together with signed or reproduced copies of such letter for each of the other
Underwriters containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(i) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from Ernst & Young a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (h) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to Closing Time.
(j) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
20
(k) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(l) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit D hereto signed by all holders of the Company's equity securities or
other instruments convertible into equity securities.
(m) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date
---------------------
of Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company confirming
that the certificate delivered at the Closing Time pursuant to Section
5(g) hereof remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
------------------------------
Venture Law Group, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion required by
Section 5(b) hereof.
(iii) Opinion of Patent Counsel for Company. The favorable opinion
-------------------------------------
of Covington & Burling in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Sections 5(c) and 5(d) hereof.
(iv) Opinion of Regulatory Counsel for Company. The favorable
-----------------------------------------
opinion of Wilson, Sonsini, Goodrich & Rosati, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion required by
Section 5(e) hereof.
(v) Opinion of Counsel for Underwriters. The favorable
-----------------------------------
opinion of Latham & Watkins, counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(f) hereof.
(vi) Bring-down Comfort Letter. A letter from Ernst & Young,
-------------------------
in form and substance satisfactory to the Representatives and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Representatives
21
pursuant to Section 5(g) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and substance
to the Representatives and counsel for the Underwriters.
(o) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representative by notice to the Company
at any time at or prior to Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
(p) The statements set forth in the prospectus under the captions "Risk
Factors--We may be sued for violating the intellectual property rights of
others" and "--If we do not protect our intellectual property rights, our
competitive position may be impaired" and "Business--Patents and Proprietary
Technology" shall have been reviewed and approved by Wilson Sonsini Goodrich &
Rosati, a Professional Corporation, patent counsel to the Company, as experts in
such matters, and included therein in reliance upon its review and approval.
(q) The Company shall have been reincorporated in the State of Delaware
and shall have filed such Certificate of Incorporation and have adopted such
Bylaws as are consistent with the description set forth in the preliminary
prospectus and the Financial Statements included therein and otherwise
reasonably satisfactory to the Representatives and their counsel.
(r) The Company shall have affected the stock split described in Note 14
to the Financial Statements included in the preliminary prospectus.
(s) All of the Company's outstanding preferred stock shall have converted
into common stock as described in the prospectus.
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
22
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in connection with the reservation and sale of the Reserved
Securities to the directors, officers, employees, business associates and
related persons of the Company or the omission or alleged omission
therefrom of a material fact necessary to make the statements therein, when
considered in conjunction with the Prospectus or preliminary prospectus,
not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i), (ii) or (iii)
above;
provided, however, that this indemnity agreement shall not apply
-------- -------
to any loss, liability, claim, damage or expense to the extent arising out
of any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished
to the Company by any Underwriter through Merrill Lynch which is
accompanied by a written confirmation that it is expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
23
(b) Indemnification of Company, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors,
each of its officers who signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through Merrill Lynch which is accompanied by written confirmation
that it is expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party
of any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
by Section 6(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such
indemnifying party of the
24
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of the eligible persons to pay for and
accept delivery of Reserved Securities which, by the end of the first business
day following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for
------------
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet, bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
25
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or
in certificates of officers of the Company submitted pursuant hereto, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or controlling person, or by or on
behalf of the Company, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National
Market, or
26
if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such
system or by order of the Commission, the National Association of Securities
Dealers, Inc. or any other governmental authority, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. Default by One or More of the Underwriters. If one or
------------------------------------------
more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of
all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of
the Underwriters to purchase and of the Company to sell the Option
Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
27
SECTION 11. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the Underwriters shall be directed to the Representatives at World Financial
Center--North Tower, 250 Vesey Street, New York, New York 10281, attention of
Mark Robinson; with a copy to Latham & Watkins, 650 Town Center Drive, Suite
2000, Costa Mesa, California 92626-1925, attention of Charles Ruck, and
notices to the Company shall be directed to it at 3700 Haven Court, Menlo
Park, California 94025, attention of Kenneth Anstey.
SECTION 12. Parties. This Agreement shall inure to the benefit
-------
of and be binding upon each of the Underwriters and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT
AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.
SECTION 14. Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
28
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
ORATEC INTERVENTIONS, INC.
By _____________________________________
Kenneth Anstey
Chief Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
J.P. MORGAN SECURITIES INC.
U.S. BANCORP PIPER JAFFRAY, INC.
By
________________________________________
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
29
SCHEDULE A
Number of
Name of Underwriter Initial Securities
------------------- ------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................
J.P. Morgan Securities Inc................................................
U.S. Bancorp Piper Jeffray, Inc...........................................
---------------------
Total.....................................................................
=====================
Schedule A - 1
SCHEDULE B
ORATEC INTERVENTIONS, INC.
______ Shares of Common Stock
(Par Value $0.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $_________.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $________, being an amount equal to the
initial public offering price set forth above less $______ per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any dividends
or distributions declared by the Company and payable on the Initial
Securities but not payable on the Option Securities.
Schedule B - 1
SCHEDULE C
List of U.S. Patents Held by Company and
List of U.S. Patent Applications
Submitted by the Company
Schedule C - 1
SCHEDULE D
List of Non-U.S. Patents Held by Company and
List of Non-U.S. Patent Applications
Submitted by the Company
Schedule D - 1