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EXHIBIT 1.1
____ Shares
SGX Pharmaceuticals, Inc.
Common Stock
UNDERWRITING AGREEMENT
________, 2005
CIBC World Markets Corp.
Piper Jaffray & Co.
JMP Securities LLC
c/o CIBC World Markets Corp.
300 Madison Avenue
New York, New York 10017
Ladies and Gentlemen:
SGX
Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and
conditions contained herein, to sell to you
and the other underwriters named on
Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as
Representatives (the
"Representatives"), an aggregate of ____
shares (the "Firm Shares") of the
Company's common stock, $0.001 par value
per share (the "Common Stock"). All of
the Firm Shares are to be issued and sold
by the Company. The respective amounts
of the Firm Shares to be purchased by each
of the several Underwriters are set
forth opposite their names on Schedule I
hereto. In addition, the Company
proposes to grant to the Underwriters an
option to purchase up to an additional
____ shares (the "Option Shares") of Common
Stock from the Company for the
purpose of covering over-allotments in
connection with the sale of the Firm
Shares. The Firm Shares and the Option
Shares are collectively called the
"Shares."
The
Company has prepared and filed in conformity with the requirements
of
the Securities Act of 1933, as amended (the
"Securities Act"), and the published
rules and regulations thereunder (the
"Rules") adopted by the Securities and
Exchange Commission (the "Commission") a
Registration Statement (as hereinafter
defined) on Form S-1 (No. 333-_________),
including a preliminary prospectus
relating to the Shares, and such amendments
thereof as may have been required to
the date of this Agreement. Copies of such
Registration Statement (including all
amendments thereof) and of the related
Preliminary Prospectus (as hereinafter
defined) have heretofore been delivered by
the Company to you. The term
"Preliminary Prospectus" means any
preliminary prospectus included at any time
as a part of the Registration Statement or
filed with the Commission by the
Company pursuant to Rule 424(a) of the
Rules. The term "Registration Statement"
as used in this Agreement means the initial
registration statement (including
all exhibits and financial schedules
thereto), as amended at the time and on the
date it becomes effective (the "Effective
Date"), including the information (if
any) contained in the form of final
prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and
deemed to be part thereof at the time
of effectiveness pursuant to Rule 430A of
the Rules. If the Company has filed an
abbreviated registration statement to
register additional Shares pursuant to
Rule 462(b) under the Rules (the "462(b)
Registration Statement"), then any
reference herein to the Registration
Statement shall also be deemed to include
such 462(b) Registration Statement. The
term "Prospectus" as used in this
Agreement means the prospectus in the form
included in the Registration
Statement at the time of effectiveness or,
if Rule 430A of the Rules is relied
on, the term Prospectus shall also include
the final prospectus filed with the
Commission pursuant to Rule 424(b) of the
Rules.
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The
Company understands that the Underwriters propose to make a
public
offering of the Shares, as set forth in and
pursuant to the Prospectus, as soon
after the Effective Date and the date of
this Agreement as the Representatives
deem advisable. The Company hereby confirms
that the Underwriters and dealers
have been authorized to distribute or cause
to be distributed each Preliminary
Prospectus in connection with the offering
of the Shares and are authorized to
distribute the Prospectus (as from time to
time amended or supplemented if the
Company furnishes amendments or supplements
thereto to the Underwriters) in
connection with the sale of the Shares.
1.
Sale,
Purchase, Delivery and Payment for the Shares. On the basis of
the representations, warranties and
agreements contained in, and subject to the
terms and conditions of, this
Agreement:
(a) The Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not
jointly,
to purchase from the Company, at a purchase price of $____ per
share (the
"Initial Price"), the number of Firm Shares set forth opposite
the name
of such Underwriter under the column "Number of Firm Shares to
be
Purchased"
on Schedule I to this Agreement, subject to adjustment in
accordance
with Section 8 hereof.
(b) The Company hereby grants to the several Underwriters an
option
to
purchase, severally and not jointly, all or any part of the
Option
Shares at
the Initial Price. The number of Option Shares to be purchased
by each
Underwriter shall be the same percentage (adjusted by the
Representatives to eliminate fractions) of the total number of
Option
Shares to
be purchased by the Underwriters as such Underwriter is
purchasing
of the Firm Shares. Such option may be exercised only to cover
over-allotments in the sales of the Firm Shares by the Underwriters
and
may be
exercised in whole or in part at any time on or before 12:00
noon,
New York
City time, on the business day before the Firm Shares Closing
Date (as
defined below), and from time to time thereafter within 30 days
after the
date of this Agreement, in each case upon written, facsimile or
telegraphic notice, or verbal or telephonic notice confirmed by
written,
facsimile
or telegraphic notice, by the Representatives to the Company no
later than
12:00 noon, New York City time, on the business day before the
Firm Shares Closing
Date or at least two business days before the Option
Shares
Closing Date (as defined below), as the case may be, setting
forth
the number
of Option Shares to be purchased and the time and date (if
other than
the Firm Shares Closing Date) of such purchase.
(c) Payment of the purchase price for, and delivery of
certificates
for, the
Firm Shares shall be made at the offices of CIBC World Markets
Corp., 300
Madison Avenue, New York, New York 10017, at 10:00 a.m., New
York City
time, on the third business day following the date of this
Agreement
or at such time on such other date, not later than ten (10)
business
days after the date of this Agreement, as shall be agreed upon
by
the Company and
the Representatives (such time and date of delivery and
payment
are called the "Firm Shares Closing Date"). In addition, in the
event that
any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price, and delivery of
the
certificates, for such Option Shares 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 (such time and date of
delivery
and payment are called the "Option Shares Closing Date"). The
Firm
Shares Closing Date and any Option Shares Closing Date are
called,
individually, a "Closing Date" and, together, the "Closing
Dates."
(d) Payment shall be made to the Company by wire transfer of
immediately available funds or by certified or official bank check
or
checks
payable in New York Clearing House (same day) funds drawn to
the
order of
the Company against delivery of the respective certificates to
the
Representatives for the respective accounts of the Underwriters
of
certificates for the Shares to be purchased by them.
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(e) Certificates evidencing the Shares shall be registered in
such
names and
shall be in such denominations as the Representatives shall
request at
least two full business days before the Firm Shares Closing
Date or,
in the case of Option Shares, on the day of notice of exercise
of
the option
as described in Section 1(b) and shall be delivered by or on
behalf of
the Company to the Representatives through the facilities of
the
Depository
Trust Company ("DTC") for the account of such Underwriter. The
Company
will cause the certificates representing the Shares to be made
available
for checking and packaging, at such place as is designated by
the
Representatives, on the full business day before the Firm
Shares
Closing
Date (or the Option Shares Closing Date in the case of the
Option
Shares).
2.
Representations and Warranties of the Company. The Company
represents
and warrants to each Underwriter as of the
date hereof, as of the Firm Shares
Closing Date and as of each Option Shares
Closing Date (if any), as follows:
(a) On the Effective Date, the Registration Statement complied,
and
on the
date of the Prospectus, the date any post-effective amendment
to
the
Registration Statement becomes effective, the date any supplement
or
amendment
to the Prospectus is filed with the Commission and each Closing
Date, the
Registration Statement and the Prospectus (and any amendment
thereof or
supplement thereto) will comply, in all material respects, with
the
requirements of the Securities Act and the Rules and the
Securities
Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the
Commission thereunder. The Registration Statement did
not, as of
the Effective Date, contain any untrue statement of a material
fact or
omit to state any material fact required to be stated therein
or
necessary
in order to make the statements therein not misleading; and on
the
Effective Date and the other dates referred to above neither
the
Registration Statement nor the Prospectus, nor any amendment
thereof or
supplement
thereto, will contain any untrue statement of a material fact
or will
omit to state any material fact required to be stated therein
or
necessary
in order to make the statements therein not misleading. When
the
Preliminary Prospectus was first filed with the Commission (whether
filed
as part of
the Registration Statement or any amendment thereto or pursuant
to Rule
424(a) of the Rules) and when any amendment thereof or
supplement
thereto
was first filed with the Commission, such Preliminary
Prospectus
as amended
or supplemented complied in all material respects with the
applicable
provisions of the Securities Act and the Rules and did not
contain
any untrue statement of a material fact or omit to state any
material
fact required to be stated therein or necessary in order to
make
the
statements therein not misleading. If applicable, 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. 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. Notwithstanding the foregoing, none of the
representations and warranties in this paragraph 2(a) shall apply
to
statements
in, or omissions from, the Registration Statement or the
Prospectus
or any amendments thereof or supplements thereto made in
reliance
upon, and in conformity with, information herein or otherwise
furnished
in writing by the Representatives on behalf of the several
Underwriters for use in the Registration Statement or the
Prospectus. With
respect to
the preceding sentence and Section 5(b), the Company
acknowledges that the only information furnished in writing by
the
Representatives on behalf of the several Underwriters for use in
the
Registration Statement or the Prospectus or any amendments thereof
or
supplements thereto is the statements contained in the tenth,
thirteenth
and
fourteenth paragraphs under the caption "Underwriting" in the
Prospectus.
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(b) The Registration Statement is effective under the Securities
Act
and no stop order
preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of
the
Prospectus
has been issued by the Commission and, to the Company's
knowledge,
no proceedings for that purpose have been instituted or are
threatened
under the Securities Act. Any required filing of the Prospectus
and any
supplement thereto pursuant to Rule 424(b) of the Rules has
been
or will be
made in the manner and within the time period required by such
Rule
424(b).
(c) The financial statements of the Company (including all notes
and
schedules
thereto) included in the Registration Statement and Prospectus
present
fairly, in all material respects, 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;
and
such financial
statements and related schedules and notes thereto, and the
unaudited
financial information filed with the Commission as part of the
Registration Statement, have been prepared in conformity with
generally
accepted
accounting principles, consistently applied throughout the
periods
involved (provided that non-year-end financial statements are
subject to
normal recurring year-end audit adjustments that are not
expected
to be material in the aggregate and do not contain all
footnotes
required
by generally accepted accounting principles). The summary and
selected
consolidated financial data included in the Prospectus present
fairly, in
all material respects, the information shown therein as at the
respective
dates and for the respective periods specified and have been
presented
on a basis consistent with the consolidated financial
statements
set forth
in the Prospectus and other financial information.
(d) Ernst & Young LLP (the "Auditor"), whose reports are filed
with
the
Commission as a part of the Registration Statement, are and,
during
the
periods covered by their reports, were independent public
accountants
as
required by the Securities Act and the Rules.
(e) The Company and each of its subsidiaries is duly organized,
validly
existing and in good standing under the laws of their
respective
jurisdictions of incorporation or organization and is duly
qualified to do
business and is in
good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted by it
or
location
of the assets or properties owned, leased or licensed by it
requires
such qualification, except for such jurisdictions where the
failure to
so qualify or be in good standing, individually or in the
aggregate,
would not have a material adverse effect on the assets,
properties, condition, financial or otherwise, or in the results
of
operations, business affairs or business prospects of the Company
and its
subsidiaries considered as a whole (a "Material Adverse Effect");
and to
the
Company's knowledge, no proceeding has been instituted in any
such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit
or
curtail, such power and authority or qualification.
(f) The Company and each of its subsidiaries has all requisite
corporate
power and authority, and all necessary authorizations,
approvals,
consents, orders, licenses, certificates and permits of and
from all
governmental or regulatory bodies or any other person or entity
(collectively, the "Permits"), to own, lease and license its assets
and
properties
and conduct its business, all of which are valid and in full
force and
effect, except where the lack of such Permits, individually or
in the
aggregate, would not have a Material Adverse Effect. The
Company
and each
of its subsidiaries has fulfilled and performed in all material
respects
all of its material obligations with respect to such Permits
and,
to the
Company's knowledge, no event has occurred that allows, or
after
notice or
lapse of time would allow, revocation or termination thereof or
results in
any other material impairment of the rights of the Company
thereunder. Except as may be required under the Securities Act, the
rules
of the
National Association of Securities Dealers, Inc. (the "NASD")
and
state
and
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foreign
Blue Sky laws, no other Permits are required to enter into,
deliver
and perform this Agreement and to issue and sell the Shares.
(g) The Company and each of its subsidiaries owns or possesses
legally
enforceable rights to use all patents, patent rights,
inventions,
trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how and other
similar
rights and
proprietary knowledge necessary for the conduct of its business
(collectively, "Intangibles") as conducted on the date hereof
and
described
in the Registration Statement and Prospectus. Neither the
Company
nor any of its subsidiaries has received any written notice of
and
neither
the Company nor any of its subsidiaries has any knowledge of
any
infringement of or conflict with asserted rights of others with
respect to
any
Intangibles.
(h) The Company and each of its subsidiaries has good and
marketable
title in
fee simple to all real property, and good and marketable title
to
all
tangible personal property owned by it, in each case free and clear
of
all liens,
encumbrances, claims, security interests and defects, except as
are
disclosed in the Prospectus or such as are not material to the
Company
and its
subsidiaries, taken as a whole, and do not materially interfere
with the
use made or proposed to be made of such property, as of the
date
hereof, by
the Company and its subsidiaries. All property held under lease
by the
Company and its subsidiaries is held by them under valid,
existing
and
enforceable leases, with only such exceptions as are not material
and
do not
materially interfere with the use made or proposed to be made
of
such
property by the Company and its subsidiaries. Subsequent to the
respective
dates as of which information is given in the Registration
Statement
and the Prospectus, (i) there has not been any Material Adverse
Effect;
(ii) neither the Company nor any of its subsidiaries has
sustained
any loss
or interference with its assets, businesses or properties
(whether
owned or leased) from fire, explosion, earthquake, flood or
other
calamity,
whether or not covered by insurance, or from any labor dispute
or any
court or legislative or other governmental action, order or
decree
which
would have a Material Adverse Effect; and (iii) since the date
of
the latest
balance sheet included in the Registration Statement and the
Prospectus, except as otherwise disclosed in the Prospectus,
neither the
Company
nor its subsidiaries has (A) incurred any liability or
obligation,
direct or
contingent, for borrowed money, except such liabilities or
obligations incurred in the ordinary course of business, (B)
entered into
any
transaction not in the ordinary course of business or (C) declared
or
paid any
dividend or made any distribution on any shares of its stock or
redeemed,
purchased or otherwise acquired or agreed to redeem, purchase
or
otherwise
acquire any shares of its capital stock.
(i) There is no document, contract or other agreement required to
be
described
in the Registration Statement or Prospectus or to be filed as
an
exhibit to
the Registration Statement which is not described or filed as
required
by the Securities Act or Rules. Each description of a contract,
document
or other agreement in the Registration Statement and the
Prospectus
accurately reflects in all material respects the terms of the
underlying
contract, document or other agreement. Each contract, document
or other
agreement described in the Registration Statement and
Prospectus
or listed
in the Exhibits to the Registration Statement is in full force
and effect
and is valid and enforceable by and against the Company or its
subsidiaries, as the case may be,
in accordance with its terms. Neither
the
Company nor any of its subsidiaries, if a subsidiary is a party,
nor
to the
Company's knowledge, any other party is in default in the
observance
or performance of any term or obligation to be performed by it
under any
such contract, document or other agreement and no event has
occurred
which with notice or lapse of time or both would constitute
such
a default,
in any such case which default or event, individually or in the
aggregate,
would have a Material Adverse Effect. No default exists, and no
event has
occurred which with notice or lapse of time or both would
constitute
a default, in the due performance and observance of any term,
covenant
or condition, by the Company or its subsidiary, if a subsidiary
is a party
thereto, of any other
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agreement
or instrument to which the Company or any of its subsidiaries
is
a party or by
which Company or its properties or business of a subsidiary
or its
properties or business may be bound or affected which default
or
event,
individually or in the aggregate, would have a Material Adverse
Effect.
(j)
The statistical and market related data included in the
Registration Statement are based on or derived from sources that
the
Company
believes to be reliable and accurate.
(k) Neither the Company nor any of its subsidiaries is in
violation
of any
term or provision of its charter or bylaws or of any franchise,
license,
permit, judgment, decree, order, statute, rule or regulation,
where the
consequences of such violation, individually or in the
aggregate,
would have a Material Adverse Effect.
(l) This Agreement has been duly authorized, executed and
delivered
by the
Company.
(m) Neither the execution, delivery and performance of this
Agreement
by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance
and sale
by the
Company of the Shares) will give rise to a right to terminate
or
accelerate
the due date of any payment due under, or conflict with or
result in
the breach of any term or provision of, or constitute a default
(or an
event which with notice or lapse of time or both would constitute
a
default)
under, or require any consent or waiver under, or result in the
execution
or imposition of any lien, charge or encumbrance upon any
properties
or assets of the Company or its subsidiaries pursuant to the
terms of,
any indenture, mortgage, deed of trust or other agreement or
instrument
to which the Company or any of its subsidiaries is a party or
by which
either the Company or its subsidiaries or any of their
properties
or
businesses is bound, or any franchise, license, permit,
judgment,
decree,
order, statute, rule or regulation applicable to the Company or
any of its
subsidiaries, expect where it would not have a Material Adverse
Effect, or
violate any provision of the charter or by-laws of the Company
or any of
its subsidiaries, except for such consents or waivers which
have
already
been obtained and are in full force and effect.
(n) On the date set forth therein, the Company had the
authorized
and
outstanding capital stock as set forth under the caption
"Capitalization" in the Prospectus. The certificates evidencing the
Shares
are in due
and proper legal form and have been duly authorized for
issuance
by the Company. All of the issued and outstanding shares of
Common
Stock have been duly and validly issued and are fully paid and
nonassessable. Except as disclosed in the Registration Statement
and the
Prospectus
or as set forth in the Amended and Restated Investor Rights
Agreement
dated April 21, 2005 by and among the Company and the parties
named therein, there are no
statutory preemptive or other similar rights
granted by
the Company to subscribe for or to purchase or acquire any
shares of
Common Stock of the Company or any of its subsidiaries or any
such
rights pursuant to its Certificate of Incorporation or bylaws or
any
agreement
or instrument to or by which the Company or any of its
subsidiaries is a party or bound, other than such rights that have
been
properly
waived. The Shares, when issued and sold pursuant to this
Agreement,
will be duly and validly issued, fully paid and nonassessable
and none
of them will be issued in violation of any preemptive or other
similar
right granted by the Company. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option,
warrant or
other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any share of stock of
the
Company or
any of its subsidiaries or any security convertible into, or
exercisable or exchangeable for, such stock. The Common Stock and
the
Shares
conform in all material respects to all statements in relation
thereto
contained in the Registration Statement and the Prospectus. All
outstanding shares of capital stock of each of the Company's
subsidiaries
have been
duly authorized and validly issued, and are fully paid and
nonassessable and are owned directly by the Company or by
another
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wholly-owned subsidiary of the Company free and clear of any
security
interests,
liens, encumbrances, equities or claims, other than those
described
in the Prospectus.
(o) No holder of any security of the Company has any right,
which
has not
been waived, to have any security owned by such holder included
in
the
Registration Statement or to demand registration of any security
owned
by such
holder for a period of 180 days after the date of this
Agreement.
Each
director and executive officer of the Company and each stockholder
of
the
Company listed on Schedule II has delivered to the Representatives
his
enforceable written lock-up agreement in the form attached to
this
Agreement
as Exhibit A hereto ("Lock-Up Agreement").
(p) All necessary corporate action has been duly and validly
taken
by the
Company and to authorize the execution, delivery and performance
of
this
Agreement and the issuance and sale of the Shares by the
Company.
This
Agreement has been duly and validly authorized, executed and
delivered
by the Company and constitute and will constitute legal, valid
and
binding obligations of the Company enforceable against the Company
in
accordance
with their respective terms, except as the enforceability
thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium
or other similar laws affecting the enforcement of creditors'
rights generally and by
general equitable principles.
(q) Neither the Company nor any of its subsidiaries is involved
in
any labor
dispute nor, to the knowledge of the Company, is any such
dispute
threatened, which dispute would have a Material Adverse Effect.
The
Company is not aware of any existing or imminent labor disturbance
by
the
employees of any of its principal suppliers or contractors which
would
have a
Material Adverse Effect. The Company is not aware of any
threatened
or pending
litigation between the Company or its subsidiaries and any of
its
executive officers which, if adversely determined, could have a
Material
Adverse Effect.
(r) No transaction has occurred between or among the Company and
any
of its
officers or directors, stockholders or any affiliate or
affiliates
of any
such officer or director or stockholder that is required to be
described
in and is not described in the Registration Statement and the
Prospectus.
(s) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected
to cause
or result in, or which has constituted or which might
reasonably
be
expected to constitute, the stabilization or manipulation of the
price
of the
Common Stock or any security of the Company to facilitate the
sale
or resale
of any of the Shares.
(t) The Company and each of its subsidiaries has filed all
Federal,
state,
local and foreign tax returns which are required to be filed
through
the date hereof, which returns are true and correct in all
material
respects or has received valid extensions thereof, and has paid
all taxes
shown on such returns and all assessments received by it to the
extent
that the same are material and have become due. To the
Company's
knowledge,
there are no tax audits or investigations pending, which if
adversely
determined would have a Material Adverse Effect; nor to the
Company's
knowledge are there any material proposed additional tax
assessments against the Company or any of its subsidiaries.
(u) The Shares have been duly authorized for quotation on the
National
Association of Securities Dealers Automated Quotation
("Nasdaq")
National
Market System, subject to official Notice of Issuance. A
registration statement has been filed on Form 8-A pursuant to
Section 12
of the
Exchange Act, which registration statement complies in all
material
respects
with the Exchange Act.
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(v) The Company has taken no action designed to, or likely to
have
the effect
of, terminating the registration of the Common Stock under the
Exchange
Act or the quotation of the Common Stock on the Nasdaq National
Market,
nor has the Company received any notification that the
Commission
or the
Nasdaq National Market is contemplating terminating such
registration or quotation.
(w) The books, records and accounts of the Company and its
subsidiaries accurately and fairly reflect, in reasonable detail,
the
transactions in, and dispositions of, the assets of, and the
results of
operations
of, the Company and its subsidiaries. The Company and each of
its
subsidiaries maintains a system of internal accounting controls
sufficient
to provide reasonable assurances that (i) transactions are
executed
in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit
preparation of financial statements in accordance with generally
accepted
accounting
principles and to maintain asset accountability, (iii) access
to assets
is permitted only in accordance with management's general or
specific
authorization and (iv) the recorded accountability for assets
is
compared
with the existing assets at reasonable intervals and
appropriate
action is
taken with respect to any differences.
(x) The Company is actively taking steps to establish
disclosure
controls
and procedures (as such term is defined in Rule 13a-15 under
the
Exchange
Act), which: (i) are designed to ensure that material
information
relating
to the Company is made known to the Company's principal
executive
officer
and its principal financial officer by others within the
Company,
particularly during the periods in which the periodic reports
required
under the
Exchange Act are required to be prepared; (ii) provide for the
periodic
evaluation of the effectiveness of such disclosure controls and
procedures
at the end of the periods in which the periodic reports are
required
to be prepared; and (iii) are effective in all material
respects
to perform
the functions for which they were established.
(y) Based on the evaluation of its disclosure controls and
procedures
as established to date, the Company is not aware of (i) any
significant deficiency in the design or operation of internal
controls
which
could adversely affect the Company's ability to record,
process,
summarize
and report financial data or any material weaknesses in
internal
controls;
or (ii) any fraud, whether or not material, that involves
management
or other employees who have a role in the Company's internal
controls.
(z) Except as described in the Prospectus, there are no
material
off-balance sheet arrangements (as defined in Item 303 of
Regulation S-K)
that have
or are reasonably likely to have a material current or future
effect on
the Company's financial condition, revenues or expenses,
changes
in
financial condition, results of operations, liquidity, capital
expenditures or capital resources.
(aa) Except as described in the Prospectus and as preapproved
in
accordance
with the requirements set forth in Section 10A of the Exchange
Act, the
Auditor has not been engaged by the Company to perform any
"prohibited activities" (as defined in Section 10A of the Exchange
Act).
(bb) The Company's Board of Directors has validly appointed an
audit
committee
whose composition satisfies the requirements of Rule 4350(d)(2)
of the
Rules of the National Association of Securities Dealers, Inc.
(the
"NASD
Rules") and the Board of Directors and/or the audit committee
has
adopted a
charter that satisfies the requirements of Rule 4350(d)(1) of
the NASD
Rules.
(cc) The Company is actively taking steps to ensure that it will
be
in
compliance with all other applicable provisions of the
Sarbanes-Oxley
Act of 2002, any
related rules and regulations
8
<PAGE>
promulgated by the Commission and corporate governance requirements
under
the NASD
Rules upon the effectiveness of such provisions as may be
applicable.
(dd) The Company and its subsidiaries are insured by insurers
of
recognized
financial responsibility against such losses and risks and in
such
amounts as are customary in the businesses in which they are
engaged
or propose to engage after giving
effect to the transactions as described
in the
Prospectus; all policies of insurance insuring the Company or
any
of its
subsidiaries or the Company's or its subsidiaries' respective
businesses, assets, employees, officers and directors are in full
force
and
effect; the Company and each of its subsidiaries are in
compliance
with the
terms of such policies and instruments in all material
respects;
and
neither the Company nor any subsidiary of the Company has any
reason
to believe
that it will not be able to renew its existing insurance
coverage
as and when such coverage expires or to obtain similar coverage
from
similar insurers as may be necessary to continue its business.
Neither
the Company nor any of its subsidiaries has been denied any
insurance
coverage which it has sought or for which it has applied.
(ee) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative
or
other
governmental body necessary in connection with the execution
and
delivery
by the Company of this Agreement and the consummation of the
transactions herein contemplated required to be obtained or
performed by
the
Company (except such additional steps as may be required by the
NASD
or may be
necessary to qualify the Shares for public offering by the
Underwriters under the state securities or Blue Sky laws) has
been
obtained or made and is in full
force and effect.
(ff) There are no affiliations with the NASD among the
Company's
officers,
directors or, to the best of the knowledge of the Company, any
five
percent or greater stockholder of the Company, except as set forth
in
the
Registration Statement or otherwise disclosed in writing to the
Representatives.
(gg) (i) Neither the Company nor any of its subsidiaries are in
violation
of any applicable rules, laws and regulation relating to the
use,
treatment, storage and disposal of toxic substances and protection
of
health or
the environment ("Environmental Law") which are applicable to
its
business except for any violation which would not have a
Material
Adverse
Effect; (ii) neither the Company nor its subsidiaries has
received
any notice
from any governmental authority or third party of an asserted
claim
under Environmental Laws; (iii) each of the Company and each of
its
subsidiaries has received all permits, licenses or other
approvals
required
of it under applicable Environmental Laws to the conduct its
business
and is in compliance with all terms and conditions of any such
permit,
license or approval, except for where non-compliance would not
have a
Material Adverse Effect; (iv) to the Company's knowledge, no
facts
currently
exist that will require the Company or any of its subsidiaries
to make
future material capital expenditures to comply with
Environmental
Laws; and
(v) no property which is or has been owned, or to the Company's
knowledge,
leased or occupied by the Company or its subsidiaries has been
designated
as a Superfund site pursuant to the Comprehensive Environmental
Response,
Compensation of Liability Act of 1980, as amended (42 U.S.C.
Section
9601, et. seq.) ("CERCLA") or otherwise designated as a
contaminated site under applicable state or local law. Neither the
Company
nor any of
its subsidiaries has been named as a "potentially responsible
party"
under CERCLA.
(hh) The Company is not and, after giving effect to the offering
and
sale of
the Shares and the application of the net proceeds therefrom as
described
in the Prospectus, will not be subject to registration as an
"investment company" within the meaning of the Investment Company
Act of
1940, as
amended (the "Investment Company Act").
9
<PAGE>
(ii)
Neither the Company nor any other person associated with or
acting on
behalf of the Company including, without limitation, any
director
or officer or, to the Company's knowledge, any agent or
employee
of the
Company or its
