-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UNZtW7GcIqkXcWLqDXuMr3Nw5P0OOZB4PELJnhsEfoTc/e2M7EYctbUxVwMxpCXO 1LLMAZ0PCM2gaw4F82Q5Dg== /in/edgar/work/20000912/0000940180-00-001071/0000940180-00-001071.txt : 20000922 0000940180-00-001071.hdr.sgml : 20000922 ACCESSION NUMBER: 0000940180-00-001071 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000911 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERYX BIOPHARMACEUTICALS INC CENTRAL INDEX KEY: 0001114220 STANDARD INDUSTRIAL CLASSIFICATION: [8731 ] IRS NUMBER: 134087132 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-30929 FILM NUMBER: 720818 BUSINESS ADDRESS: STREET 1: 216 JAFFA ROAD STREET 2: SHAAREI HAIR JERUSALEM CITY: ISRAEL 94383 BUSINESS PHONE: 9722534997 10-Q 1 0001.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended June 30, 2000 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 000-30929 KERYX BIOPHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 134087132 (State or Other Jurisdiction of (I.R.S. Employer Identification Number) Incorporation or Organization) 5 Kiryat Mada, Har Hotzvim Jerusalem 91236 Israel (Address Including Zip Code of Principal Executive Offices) +972-2-541-2700 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes NO X (the registrant became subject to the filing requirements of the Securities Exchange Act of 1934 on July 28, 2000.) --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of September 11, 2000. Common Stock, $0.001 par value, 19,423,268 shares outstanding KERYX BIOPHARMACEUTICALS, INC. AND SUBSIDIARY INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets............................................. 1 Consolidated Statements of Operations................................... 2 Consolidated Statements of Cash Flows................................... 3 Notes to Consolidated Financial Statements.............................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................................ 11 PART II. OTHER INFORMATION 11 Item 2. Changes in Securities and Use of Proceeds Item 4. Submission of Matters to a Vote of Security Holders..................... 12 Item 6. Exhibits and Reports on Form 8-K........................................ 12 SIGNATURES....................................................................... 13
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KERYX BIOPHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1999 2000 ---------------- ------------ (Audited) (Unaudited) Assets Current assets Cash and cash equivalents $ 4,126,735 $ 5,033,424 Other receivables 85,685 89,122 Prepaid expenses 166,137 117,965 ---------------- ------------ 4,378,557 5,240,511 Long-term investments in respect of fundings for severance benefits 64,047 88,720 Fixed assets 160,141 176,819 Deferred costs in respect of initial public offering - 723,894 Patents 345,471 605,863 ---------------- ------------ $ 4,948,216 $ 6,835,807 ================ ============ Liabilities and stockholders' equity Current liabilities Accounts payable and accrued expenses $ 252,934 $ 741,278 Due to related party 141,483 - ---------------- ------------ 394,417 741,278 Long-term liabilities Liability in respect of employee severance benefits 117,736 159,103 ---------------- ------------ 512,153 900,381 Stockholders' equity Series A convertible preferred stock, $0.001 par value each (liquidation preference - $100 per share plus all declared but unpaid dividends, 170,000 shares authorized, 79,465 and 118,645 issued and fully paid at December 31, 1999 and June 30, 2000 respectively) 79 118 Common stock, $0.01 par value each (20,000,000 shares authorized, 1,208,306 and 8,108,306 shares issued and fully paid at December 31, 1999 and June 30, 2000 respectively) 1,208 8,108 Additional paid-in capital 19,712,951 30,221,175 Unearned compensation (2,854,280) (6,169,433) Accumulated deficit (12,423,895) (18,124,542) ---------------- ------------ Total stockholders' equity 4,436,063 5,935,426 ---------------- ------------ Total liabilities and stockholders'equity $ 4,948,216 $ 6,835,807 ================ ============
The accompanying notes are an integral part of the condensed consolidated financial statements 1 KERYX BIOPHARMACEUTICALS, INC. AND SUBSIDIARY STATEMENT OF OPERATIONS (UNAUDITED) Condensed Consolidated Statements of Operations for the Three Months and Six - ---------------------------------------------------------------------------- Months Ended June 30, 1999 and 2000 - -----------------------------------
Amounts Accumulated During the Development Three months ended Six months ended Stage --------------------------- ---------------------------- ------------ June 30, June 30, June 30, June 30, June 30, 1999 2000 1999 2000 2000 ------------ ------------ ----------- ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ----------- ------------ ------------ Management fees from related company $ - $ - $ - $ - $ 299,997 ------------ ------------ ----------- ------------ ------------ Expenses Research and development expenses $ 369,763 $ 1,128,791 $ 784,184 $ 2,529,670 $ 11,428,319 General and administrative expenses 265,592 2,175,083 528,897 3,268,596 6,617,934 ------------ ------------ ----------- ------------ ------------ Operating loss (635,355) (3,303,874) (1,313,081) (5,798,266) (17,746,256) Financing income (expenses) (90,305) 97,947 (99,904) 152,619 (273,091) ------------ ------------ ----------- ------------ ------------ Net loss before income taxes (725,660) (3,205,927) (1,412,985) (5,645,647) (18,019,347) Taxes on income - 27,879 - 55,000 105,195 ------------ ------------ ----------- ------------ ------------ Net loss (725,660) (3,233,806) (1,412,985) (5,700,647) (18,124,542) Accumulated deficit at beginning of period (4,108,458) (14,890,736) (3,421,133) (12,423,895) - ------------ ------------ ----------- ------------ ------------ Accumulated deficit at end of period $(4,834,118) $(18,124,542) $(4,834,118) $(18,124,542) $(18,124,542) ============ ============ =========== ============ ============ Earnings (losses) per share Basic and diluted losses per common share $ (0.09) $ (0.40) $ (0.17) $ (0.70) $ (2.24) Weighted average shares used in computing basic and diluted net loss per common share 8,108,306 8,108,306 8,108,306 8,108,306 8,108,306 Pro forma net loss per common share $ (0.05) $ (0.23) $ (0.10) $ (0.40) $ (1.27) Weighted average shares used in computing pro forma net loss per common share 14,223,268 14,223,268 14,223,268 14,223,268 14,223,268
The accompanying notes are an integral part of the condensed consolidated financial statements. 2 KERYX BIOPHARMACEUTICALS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Amounts Accumulated During the Development Six months ended Stage ------------------------------- ------------- June 30, June 30, June 30, 1999 2000 2000 ------------ ------------ ------------- (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------- Cash flows from operating activities Net loss $(1,412,985) $(5,700,647) $(18,124,542) Adjustments to reconcile net loss to net cash used in operating activities: Employee stock compensation expense - 2,695,555 7,660,352 Consultants' stock compensation expense - 736,810 1,785,721 Interest on convertible notes 95,864 - 252,966 Provision for employee severance benefits (18,623) 41,367 181,103 Depreciation 20,843 16,124 92,292 Changes in assets and liabilities: Decrease (increase) in other receivables 21,259 (3,437) (62,768) Decrease (increase) in prepaid expenses (6,882) 48,172 (139,841) Decrease in related party - (141,483) - Increase (decrease) in accounts payable and accrued expenses (70,160) 488,344 730,370 ----------- ----------- ------------ Net cash used for operating activities (1,370,684) (1,819,195) (7,624,347) ----------- ----------- ------------ Cash flows from investing activities Investment in fixed assets (602) (32,802) (268,371) Purchases in other assets (93,477) (260,392) (606,832) Fundings in respect of employee severance benefits - (24,673) (110,720) ----------- ----------- ------------ Net cash used for investing activities (94,079) (317,867) (985,923) ----------- ----------- ------------
The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Keryx Biopharmaceuticals, Inc. (Development Stage Company) Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 1999 and 2000 - --------------------------------------------------------------------------------
Amounts Accumulated During the Development Six Months Ended Stage ---------------------------- ----------- June 30, June 30, June 30, 1999 2000 2000 ------------ ------------- ----------- (Unaudited) (Unaudited) (Unaudited) ------------ ------------- ----------- Cash flows from financing activities Proceeds from short-term loans - - 500,000 Proceeds from long-term loans 124,861 - 3,250,902 Issuance of convertible notes, net 2,150,000 2,150,000 Issuance of shares, net and contributed capital 52 3,767,647 8,459,980 Issuance costs relating to initial public offering - (723,894) (723,894) ---------- --------- ---------- Net cash provided by financing activities 2,274,913 3,043,753 13,636,988 ---------- --------- ---------- Effect of exchange rate on cash 378 (232) 6,476 Net increase (decrease) in cash and cash equivalents 809,772 906,459 5,026,949 Cash and cash equivalents at beginning of period 127,872 4,126,735 - ---------- ---------- ----------- Cash and cash equivalents at end of period $ 938,022 $5,033,425 $ 5,033,425 ========== ========== =========== Non-cash transactions Conversion of short-term loans into contributed capital $ - $ - $ 500,000 Conversion of long-term loans into contributed capital - - 2,680,541 Conversion of long-term loans into convertible notes of Partec 570,361 - 570,361 Conversion of convertible notes of Partec and accrued interest into stock in Keryx - - 2,973,376 Declaration of stock dividend - - 402 Supplementary disclosures of cash flow information Cash paid during the period for interest - - 134,055 Cash paid during the period for income taxes - - -
The accompanying notes are an integral part of the condensed consolidated financial statements. 4 KERYX BIOPHARMACEUTICALS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - General: Basis of Presentation The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10Q and, therefore, do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. All adjustments which are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the interim financial statements, have been included. The results of operations for the period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period. The accompanying consolidated financial statements for the period ended June 30, 2000 have been prepared in order to present the financial position, results of operations and cash flows relating to the Company's activities for all periods covered by the statements. Until November 1999, most of the Company's activities were carried out by Partec Limited, an Israeli corporation, and its subsidiaries (hereinafter collectively referred to as "Partec"). The subsidiaries of Partec during the period prior to November 1999 were SignalSite Inc. (85% owned) and its wholly owned subsidiary SignalSite Israel Ltd., and Vectagen Inc. (87.25% owned) and its wholly owned subsidiary, Vectagen Israel Ltd. In November 1999, the Company and its subsidiary acquired substantially all of the assets and liabilities of Partec and as of that date, the activities formerly carried out by Partec are now performed by the Company and its subsidiary. Consequently, these financial statements include the activities performed in previous periods by Partec by aggregating the relevant historical financial information with the financial statements of the Company as if they had formed a discrete operation under common management for the entire development stage. This has been effected by means of an "as if" pooling and Partec is being presented as a "predecessor" company. Earnings per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the effect of common shares issued upon exercise of stock options and warrants. The dilutive effect of stock options is considered in earnings per share calculations if dilutive, using the treasury stock method. Unaudited Pro Forma Net Loss Per Share The Company completed its initial public offering as described in Note 4 below. The unaudited pro forma net loss per share included in these financial statements reflects the conversion of all shares of Series A convertible preferred stock, which were automatically converted upon consummation of the initial public offering, to 6,114,962 shares of common stock at a 51.54:1 ratio. The weighted average number of shares used to calculate the unaudited pro forma net loss per share reflects the conversion of the preferred stock as though it occurred on January 1, 1999. Note 2 - Recent Accounting Pronouncements: The Financial Accounting Standards Board ("FASB") Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No. 133" ("Statement 137") was issued in June 1999. Statement 137 defers the effective date of FASB 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133") for one year. Statement 133 generally requires that changes in fair value of a derivative be recognized currently in earnings unless specific hedge accounting criteria are met. The Company does not expect the adoption of Statement 133 to have a significant impact on its financial statements. In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation" (FIN No. 44). This interpretation clarifies the definition of employee for purposes of applying APB 25, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and the accounting for an exchange of stock compensation awards in a business combination. This interpretation is effective July 1, 2000, but certain conclusions in this interpretation cover specific events that occur after either December 15, 1998 or January 15, 2000. The Company does not expect FIN No. 44 to have a material effect on its financial statements. 5 Note 3 - Stockholders' Equity: A. In January 2000, 39,180 shares of Series A convertible preferred stock were issued as part of the continuation of the private placement commenced in 1999 in consideration for $3.9 million. B. In March 2000, the board of directors amended the vesting terms of 19,999 options granted in November 1999 as part of the Company's stock option plan. These options were to vest on the effective date of the Company's initial public offering on Nasdaq instead of upon start of a specific clinical trial. The options were subsequently cancelled upon termination of the optionee's employment before the options had vested. C. In June 2000, the stockholders approved an increase in authorized capital stock by 20,000,000 to 40,000,000 of common stock, par value $0.001, which increase took effect on the completion of an initial public offering. D. In June 2000, the board of directors declared a 3:2 common stock dividend to be effective in conjunction with the Company's initial public offering, whereby the stockholders receive one share of common stock for each two shares of common stock held at July 15, 2000. These financial statements have been prepared to retroactively reflect the stock dividend. E. In June 2000, the Company adopted a stock option plan (the "New Plan") pursuant to which the compensation committee of the Company's board of directors may grant stock options to directors, consultants, and employees. The new plan authorizes option grants to purchase up to 4,455,000 shares of authorized but unissued common stock. As of June 2000, the compensation committee issued incentive stock options to purchase 10,000 shares of common stock to employees and non-qualified options to purchase 84,500 shares of common stock to employees and consultants at an exercise price equal to the share price of the Company's initial public offering. 4,360,500 shares of common stock remain available for grant. Note 4 - Subsequent Events Initial public offering The Company completed its initial public offering of 4.6 million shares of its common stock at $10 per share pursuant to a Registration Statement on Form S-1 (Registration no. 333-37402) on July 28, 2000. Additionally, the underwriters exercised a portion of their over-allotment option and purchased an additional 600,000 shares of the Company's common stock, at $10 per share, on August 30, 2000. Total proceeds of this offering, including the exercise of the over-allotment option, were approximately $46.9 million, net of underwriting fees and estimated offering expenses of approximately $5.1 million. As a result of the offering, all outstanding shares of Series A Convertible Preferred Stock automatically converted into 6,114,962 shares of common stock. Stock Options In August 2000, the Company's compensation committee granted non-qualified options to consultants to purchase 4,500 shares of common stock, under the New Plan. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We were incorporated as a Delaware corporation in October 1998. Since commencing operations, our activities have been primarily devoted to developing our technologies as well as business development, raising capital, purchasing assets and recruiting personnel. We are a development stage company and have no product sales to date. Our major sources of working capital have been proceeds from various private financings. We have a 100% wholly owned subsidiary, Keryx (Israel) Limited, which engages in research and development activities and administrative functions in Israel. Research and development expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and organizational affairs and other expenses relating to the design, development, testing, and enhancement of our product candidates. We expense our research and development costs as they are incurred. General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including business development and general legal activities. Our results include non-cash compensation expense as a result of the issuance of stock and stock option grants. Compensation expense for options granted to employees represents the difference between the fair value of our common stock and the exercise price of the options at the date of grant. We account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and comply with the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Compensation for options granted to consultants has been determined in accordance with SFAS No. 123 as the fair value of the equity instruments issued. APB Opinion No. 25 has been applied in accounting for fixed and milestone-based stock options to employees and directors as allowed by SFAS No. 123. This amount is being recorded over the respective vesting periods of the individual stock options. The expense is included in the respective categories of expense in the statement of operations. We expect to record additional non-cash compensation expense in the future, which may be significant. However, because some of the options are milestone-based, the total expense is uncertain. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999 Revenues. We are a development stage company and have not had revenues from our planned principal operations. 7 Research and Development Expenses. Research and development expenses increased by $759,000 to $1,129,000 for the quarter ended June 30, 2000 as compared to $370,000 for the quarter ended June 30, 1999. This increase was primarily attributable to the non-cash compensation expense of $846,000 during the period related to stock options. We expect our research and development costs to increase significantly over the next several years as we expand our research and product development efforts and implement our business strategy. General and Administrative Expenses. General and administrative expenses increased by $1,909,000 to $2,175,000 for the quarter ended June 30, 2000 as compared to $266,000 for the quarter ended June 30, 1999. This increase was primarily attributable to non-cash compensation expense of $1,243,323 during the period related to stock options. We expect general and administrative expenses to continue to increase over the next several years as we implement our business strategy and commercialize our products. Income Taxes. Most of our operating losses are attributable to our predecessor company and stock-based compensation, and accordingly, as of June 30, 2000, we had a minimal net operating loss carryforward for US federal income tax purposes. This loss carryforward is available to offset against future federal taxable income, if any, and begins expiring in 2019. Our net operating loss carryforward for tax purposes could significantly increase as a result of the exercise of options granted to employees, consultants and directors. However, utilization of net operating losses and credits in the US may be substantially limited due to the change in ownership provisions of the Internal Revenue Code of 1986 and similar state provisions. In addition, an annual limitation may result in the expiration of net operating losses and credits before utilization. Management believes that there is sufficient uncertainty regarding the realization of deferred tax assets such that a full valuation allowance is appropriate, and accordingly, no asset was recorded. Income tax expense attributable to income from the continuing operations of our subsidiary in Israel was $28,000 for the quarter ended June 30, 2000. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999 Revenue. As a development stage company, we did not have any revenues for either of the six-month periods ending June 30, 2000 or June 30, 1999. Research and Development Expenses. Research and development expenses increased by $1,746,000 to $2,530,000 for the six months ended June 30, 2000 as compared to $784,000 for the six months ended June 30, 1999. This increase was primarily attributable to non-cash compensation expense of $1,375,000 related to stock options for the six months ended June 30, 2000, as well as to the expansion of our existing research and development activities during the period. We expect our research and development costs to increase significantly over the next several years as we expand our research and product development efforts and implement our business strategy. General and Administrative Expenses. General and administrative expenses increased by $2,740,000 to $3,269,000 for the six months ended June 30, 2000 as compared to $529,000 for the six months ended June 30, 1999. This increase was primarily attributable to non-cash compensation expense of $2,057,000 related to stock options for the six months ended June 30, 2000. We expect general and administrative expenses to continue to increase over the next several years as we implement our business strategy and commercialize our products. 8 Income Taxes. Most of our operating losses are attributable to our predecessor company and stock-based compensation, and accordingly, as of June 30, 2000, we had a minimal net operating loss carryforward for US federal income tax purposes. This loss carryforward is available to offset against future federal taxable income, if any, and begins expiring in 2019. Our net operating loss carryforward for tax purposes could significantly increase as a result of the exercise of options granted to employees, consultants and directors. However, utilization of net operating losses and credits in the US may be substantially limited due to the change in ownership provisions of the Internal Revenue Code of 1986 and similar state provisions. In addition, an annual limitation may result in the expiration of net operating losses and credits before utilization. Management believes that there is sufficient uncertainty regarding the realization of deferred tax assets such that a full valuation allowance is appropriate, and accordingly, no asset was recorded. Income tax expense attributable to income from the continuing operations of our subsidiary in Israel was $55,000 for the six months ended June 30, 2000. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations from inception primarily through various private financings. As of June 30, 2000, we had received gross proceeds of $11.6 million from issuances of common and preferred stock and $3.2 million through the contribution of notes by holders in our predecessor company. As of June 30, 2000, we had $5.0 million in cash and cash equivalents. Cash used in operating activities for the six-month period ended June 30, 2000 was $1.8 million as compared to $1.37 million for the six-month period ended June 30, 1999. This increase was due primarily to increased losses associated with the expansion of our business. Net cash used in investing activities was $0.32 million for the six-month period ended June 30, 2000, consisting primarily of prosecution of patent applications and related capital expenditures. In connection with research services provided to us, we are obligated to make annual payments totaling $466,000 to Yissum until December 15, 2001. In addition, in connection with our license agreement for KRX-101, we are obligated to make milestone payments to Alfa Wassermann of up to $2,950,000 and annual payments in the aggregate of up to $900,000. We have incurred negative cash flow from operations since we started our business. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials, and our research and discovery efforts. Based on our current plans, we believe that the net proceeds of approximately $46.9 million from our July 2000 initial public offering of 5,200,000 shares of common stock, which includes the exercise of a portion of the underwriters' overallotment option, together with our existing cash and cash equivalents immediately prior to our initial public offering will be sufficient to enable us to meet our planned operating needs for at least the next 22 months. Over the next 22 months we expect to spend approximately $14 million on clinical trials, $15 million on discovery research (including $1.2 million in connection with sponsored research arrangements), $12.5 million on general corporate expenditures, $4 million on capital expenditures, $900,000 on patents and $500,000 on facilities rent, including a four-year operating lease obligation amounting to approximately $200,000. We expect to fund the $4 million estimated capital expenditures through financial leasing arrangements. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. 9 These factors include the following: . the progress of our research activities; . the number and scope of our research programs; . the progress of our pre-clinical and clinical development activities; . the progress of the development efforts of parties with whom we have entered into research and development agreements; . our ability to maintain current research and development programs and to establish new research and development and licensing arrangements; . our ability to achieve our milestones under licensing arrangements; . the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and . the costs and timing of regulatory approvals. We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed. FORWARD LOOKING STATEMENTS Statements contained or referenced in this filing that are not historical facts may be forward-looking statements, as the term is defined in the Private Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "anticipate", "estimate", "expect", "project", "intend", "plan", "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Our actual results and the timing of certain events may differ significantly from the results discussed in forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the risks outlined in our Registration Statement on Form S-1 filed with the Securities and Exchange Commission. The forward-looking statements contained in this filing or in our Registration Statement on Form S-1 include, among other things, statements relating to our drug development and regulatory strategy, growth strategy, use of proceeds, projected capital expenditures, research and development expenditures, other costs and expenses, revenue, profitability, and liquidity and capital resources. 10 Any and all of our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Our actual future results may vary materially. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. We currently maintain an investment portfolio of primarily money market investments and certificates of deposits with maturities of less than 90 days. We expect to maintain our portfolio in cash equivalents and short-term, interest bearing securities, including commercial paper, money market funds and government debt securities. The average duration of all of our investments in 1999 was less than one year. Due to the short-term nature of these investments, we believe we have no material exposure to interest rate risk arising from our investments. Therefore, no quantitative tabular disclosure is required. Foreign Currency Rate Fluctuations. While our Israeli subsidiary primarily operates in New Israel Shekels or NIS, most operating expenses and commitments are linked to the US dollar. As a result, there is currently minimal exposure to foreign currency rate fluctuations. Any foreign currency revenues and expenses are translated using the daily average exchange rates prevailing during the year and any transaction gains and losses are included in net income. In the future, our subsidiary may enter into NIS-based commitments that may expose us to foreign currency rate fluctuations. We may use hedging instruments, including forward contracts, to minimize any foreign currency rate fluctuation exposure. Any hedging transactions that we enter into may not adequately protect us against currency rate fluctuations and may result in losses to us. Impact of Inflation. The effects of inflation and changing prices on our operations were not significant during the periods presented. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) Changes in Securities. During the quarter ended June 30, 2000, we issued options to an officer and two consultants of the company to purchase 93,000 shares of our common stock under our 2000 Stock Option Plan. These options are exercisable at an exercise price of $10.00 per share. The shares underlying these options have not been registered under the Securities Act of 1933, as amended. We believe that the issuance of these options was exempt from registration under the Securities Act of 1933, as amended, because they were issued pursuant to a compensatory benefit plan pursuant to Rule 701 under that Act. We believe all option grantees had adequate access, through their relationships with us, to information about us. (d) Use of Proceeds 11 Our registration statement on Form S-1 (Registration No. 333-37402) relating to our initial public offering of common stock was declared effective by the SEC on July 28, 2000. We registered a total of 5,290,000 shares of common stock at a maximum aggregate offering price of $52,900,000. In our initial public offering, we sold 4,600,000 shares of common stock at a price of $10.00 per share. Our initial public offering was managed on behalf of the underwriters by Roth Capital Partners (in the United States) and WestLB Panmure Limited (in the United Kingdom). The offering commenced on July 28, 2000 and closed on August 3, 2000. On August 30, 2000, the underwriters purchased an additional 600,000 shares of our common stock in connection with the exercise of their over- allotment option. Proceeds to us from our initial public offering (including those derived from the exercise of the underwriters' over-allotment option), after deduction of the underwriting discounts and commissions of approximately $3.64 million and offering expenses of approximately $1.5 million, totaled approximately $46.9 million. We paid the amount of approximately $60,000 to Pennie & Edmonds, LLP for legal services rendered in connection with the initial public offering. S. Leslie Misrock, one of our directors, is a senior partner of Pennie & Edmonds. Apart from that payment to Pennie & Edmonds, none of the expenses incurred in our initial public offering were direct or indirect payments to our directors, officers or their associates, to persons owning 10% or more of any class of our equity securities or to our affiliates. We did not use any of the proceeds from our initial public offering in the quarter to which this report relates because the offering closed subsequent to the quarter end. We have not used any offering proceeds to date. We have invested the proceeds in short term money market accounts. The balance of the offering proceeds remains available to us to use for the purposes specified in our registration statement on Form S-1 including (1) to fund clinical trials for KRX-101 for diabetic nephropathy; (2) to fund clinical trials for KRX-123 for hormone-resistant prostate cancer; (3) to fund expansion of our KinAce platform and to further develop the compounds we have generated with it; and (4) for working capital and general corporate purposes. The occurrence of unforeseen events or changed business conditions could cause us to use the proceeds of our initial public offering in a manner other than as described above. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Pursuant to our By Laws and Section 228(a) of the Delaware General Corporation Law, stockholders owning a majority of our common and Series A preferred stock, acting by written consent dated June 26, 2000, voted to approve the 2000 Stock Option Plan and to increase our authorized share capital by 20,000,000 shares of common stock so that, after such increase, our authorized share capital would be 40,000,000 shares of common stock and 5,000,000 shares of preferred stock. A total of 7,001,118 votes were cast in favor of the approval of the 2000 Stock Option Plan and the increase of our authorized share capital. Proper notice was give to all stockholders of the foregoing actions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 1.1 Underwriting Agreement (without exhibits) 3.1 Amendment to Certificate of Incorporation 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K 12 None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KERYX BIOPHARMACUTICALS, INC. Date: September 11, 2000 By: /s/ Morris Laster ----------------- Morris Laster Chief Executive Officer and Chairman Date: September 11, 2000 By: /s/ Robert Gallahue, Jr. ------------------------ Robert Gallahue, Jr. Chief Financial Officer and Treasurer 13 EX-1.1 2 0002.txt U.S. AND INT'L UNDERWRITING AGREEMENT EXHIBIT 1.1 U.S. and International Underwriting Agreement July 27, 2000 Roth Capital Partners, Inc. Gruntal & Co., L.L.C. As Representatives of the Several U.S. Underwriters c/o Roth Capital Partners, Inc. 24 Corporate Plaza Newport Beach, CA 92660 -and- WestLB Panmure Limited New Broad Street House 35 New Broad Street London EC2M 1SQ United Kingdom Ladies and Gentlemen: Introductory. On the terms and subject to the conditions hereinafter set forth, Keryx Biopharmaceuticals, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the several U.S. Underwriters (as ------- defined below) and to the placees procured by the International Underwriter (as defined below), shares of its common stock, $.001 par value per share (the "Common Shares"). It is understood that, on the terms and subject to the - -------------- conditions hereinafter stated: (a) 1,150,000 Common Shares (the "U.S. Firm --------- Shares") will be sold to the several U.S. underwriters named in Schedule A - ------ hereto (the "U.S. Underwriters") in connection with the offering (the "U.S. ----------------- ---- Offering") and sale of such U.S. Firm Shares in the United States, and (b) - -------- 3,450,000 Common Shares (the "International Firm Shares") will be issued to the ------------------------- placees procured by WestLB Panmure Limited (the "International Underwriter" or ------------------------- "WestLB") in connection with the offering (the "International Offering" and, - ------- ---------------------- together with the U.S. Offering, the "Offering") and sale of such International -------- Firm Shares outside the United States. Roth Capital Partners, Inc. (the "U.S. ---- Lead Manager" or "Roth") and Gruntal & Co., L.L.C. (together with the U.S. Lead - ------------ ---- Manager, the "U.S. Representatives") shall act as the representatives of the -------------------- several U.S. Underwriters. The U.S. Representatives and the International Underwriter are hereinafter collectively referred to as the "Representatives." U.S. Lead Manager and the International Underwriter will also serve as the joint global coordinators of the Offering (the "Global Coordinators"). The U.S. ------------------- Underwriters and the International Underwriter are hereinafter collectively referred to as the "Underwriters." In addition, for the sole purpose of covering over-allotments from the sale of the U.S. Firm Shares and the International Firm Shares, the Company proposes to issue and sell, at the option of Roth: to the U.S. Underwriters an aggregate of not more than 690,000 Common Shares (the "Option Shares"). The ------------- U.S. Firm Shares and the Option Shares are hereinafter called the "U.S. Shares;" ----------- the U.S. Firm Shares and the International Firm Shares are hereinafter collectively referred to as the "Firm Shares." The U.S. Shares and the ----------- International Firm Shares are hereinafter collectively referred to as the "Shares." - ------- The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 (File No. ---------- 333-37402), which contains the form of prospectus, subject to completion, to be used in connection with the public offering and sale of the Shares (it being understood that all of the Shares are being registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the "Securities Act")). Each such prospectus, subject to -------------- completion, used in connection with such public U.S. Offering and International Offering is called a "preliminary prospectus." Such registration statement, as ---------------------- amended, including the financial statements, exhibits and schedules thereto, in the form in which it was declared effective by the Commission under the Securities Act, including any information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A under the Securities Act, is called the "Registration Statement." Any registration statement filed by the Company ---------------------- pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b) ----------- Registration Statement," and from and after the date and time of filing of the - ---------------------- Rule 462(b) Registration Statement the term "Registration Statement" shall ---------------------- include the Rule 462(b) Registration Statement. The form of prospectus relating to the Shares, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Securities Act or, if no such filing ----------- is required, the form of final prospectus included in the Registration Statement at the time the Registration Statement is declared effective, is called the "Prospectus." All references in this underwriting agreement (the "Agreement") - ----------- --------- to the Registration Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the Prospectus or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"). ----- The Company hereby confirms its agreements with the Underwriters as follows: SECTION 1. Representations and Warranties of the Company. The Company hereby represents, warrants and covenants to each Underwriter as follows: (a) Compliance with Registration Requirements. (i) The Registration Statement has been declared effective by the Commission under the Securities Act. The Company has complied with all requests of the Commission for additional or supplemental information. No stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the Company's knowledge, contemplated or threatened by the Commission. (ii) Each preliminary prospectus and the Prospectus, when filed, complied in all material respects with the Securities Act and complied in all respects with the Public Offers of Securities Regulations 1995 (the "Pos Regs"), -------- and, if filed by electronic transmission pursuant to EDGAR (except as may be permitted by Regulation S-T under the Securities Act), was identical to the copy thereof delivered to the Underwriters for use in connection with the offer and sale of 2 the Shares. Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto, at the time it became or becomes effective, complied or will comply in all material respects with the Securities Act and in all respects with the Pos Regs and did not or will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each preliminary prospectus, as of its date, and the Prospectus, as of its date, each as amended or supplemented, did not and will not contain any untrue statement of a material fact or 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. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment thereto, preliminary prospectus or the Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by the Global Coordinators expressly for use therein. The expert reports (the "Expert Reports") prepared by each of PA Consulting Group -------------- and Gill Jennings & Every, as of their date, each as amended or supplemented, as of their date and at all subsequent times through the 30th day after the date hereof, did not and will not contain any untrue statement of a material fact or 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. (iii) The Prospectus and the press announcement to be released on July 28, 2000 announcing the Offering (the "Press Announcement") contain all ------------------ information required by, and the allotment and issue of the Shares and the issue of the Press Announcement and the issue and distribution of the Prospectus in the manner proposed will comply with, the Financial Services Act 1986 (the "FSA"), the Pos Regs, the applicable rules and regulations of the London Stock --- Exchange and all other applicable laws, rules and regulations of the United Kingdom and all other relevant jurisdictions. (iv) There are no contracts, agreements, instruments, leases, licenses, certifications or permits or other arrangements, whether written or oral, or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement, which have not been described or filed as required. The statements in the Registration Statement, preliminary prospectuses and the Prospectus summarizing the provisions of laws, rules, regulations, contracts, or other arrangements, whether written or oral, including, without limitation, the statements set forth under the captions "Risk Factors--Our drug candidates are in early stages of development and may never receive necessary regulatory approvals," "Risk Factors--Because we license our primary proprietary technologies and rely on sponsored research agreements with third parties, termination of these agreements would prevent us from developing our lead drug candidates," "Business-Government Regulation," "Business-- Agreements" and "Business-Intellectual Property" accurately reflect in all material respects the provisions of laws, rules, regulations, contracts, leases and other arrangements purported to be summarized and, to the Company's knowledge, there are no proposed amendments or additions to any such provisions of laws, rules, regulations, contracts, leases or other arrangements. 3 (v) In light of the matters referred to in paragraph 9(3) of the Pos Regs, the Prospectus contains all such information as investors would reasonably require and reasonably expect to find there for the purpose of making an informed assessment of the assets and liabilities, financial position, profits or losses and prospects of the Company and the rights attaching to the Common Shares. (b) Offering Materials Furnished to Underwriters. The Company has delivered to the Representatives four complete conformed (and four original) copies of the Registration Statement and of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and each of the preliminary prospectuses and the Prospectus, as amended or supplemented, in such quantities and at such places as the Representatives have reasonably requested for each of the Underwriters. The Company will deliver one copy of the Prospectus to the registrar of companies (the "Registrar of Companies") in England and Wales in accordance with paragraph ---------------------- 4(2) of the Pos Regs. (c) Distribution of Offering Material by the Company. The Company has not distributed and will not distribute, prior to the Second Closing Date (as defined below) and the completion of the Underwriters' distribution of the Shares, any offering material in connection with the offering and sale of the Shares other than the preliminary prospectus, the Prospectus or the Registration Statement. (d) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (e) Authorization of the Shares to be Sold by the Company. The Shares to be purchased by or issued to the Underwriters or persons nominated by the Underwriters from the Company have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company against payment therefor as provided pursuant to this Agreement, will be validly issued, fully paid and nonassessable. None of the Shares will be issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. (f) No Applicable Registration or Other Similar Rights. Except as expressly disclosed in the Prospectus, there are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offerings contemplated by this Agreement. (g) No Material Adverse Change. Subsequent to the respective dates as of which information is given in the Prospectus: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and the Subsidiary (as defined below), considered as one entity (any such change or effect, where the 4 context so requires, is called a "Material Adverse Change" or a "Material ----------------------- -------- Adverse Effect"); (ii) the Company and the Subsidiary, considered as one entity, - -------------- have not incurred any liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any transaction or agreement not in the ordinary course of business; and (iii) there has been (A) no dividend or distribution of any kind declared, paid or made by the Company or the Subsidiary on any class of capital stock, or (B) no repurchase or redemption by the Company or the Subsidiary of any class of capital stock. (h) Independent Accountants. Somekh Chaikin (a member firm of KPMG International), whose report on the consolidated financial statements (which term as used in this Agreement includes the related notes thereto) of the Company and its subsidiary, Keryx (Israel) Biopharmaceuticals Limited (the "Subsidiary"), is filed with the Commission as a part of the Registration - ----------- Statement and included in the Prospectus, are independent public or certified public accountants as required by the Securities Act. (i) Preparation of the Financial Statements. The financial statements filed with the Commission as a part of the Registration Statement and included in the Prospectus present fairly the consolidated financial position of the Company and the Subsidiary as of and at the dates indicated and the results of their operations and cash flows for the periods specified. The financial statements of the Company and the Subsidiary have been prepared in conformity with generally accepted accounting principles in the U.S. applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required by the Securities Act to be included in the Registration Statement. The financial data set forth in the Prospectus under the captions "Prospectus Summary--Summary Consolidated Financial Information," "Capitalization" and "Selected Financial Data" fairly present the information set forth therein on a basis consistent with that of the audited financial statements contained in the Registration Statement. The as adjusted condensed financial statements of the Company and the Subsidiary and the related notes thereto included under the captions "Prospectus Summary--Summary Consolidated Financial Information," "Selected Financial Data" and elsewhere in the Prospectus and in the Registration Statement present fairly the information contained therein, have been prepared in accordance with the Commission's rules and guidelines with respect to such financial statements, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (j) Company's Accounting Systems. Each of the Company and the Subsidiary maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the U.S. and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with 5 existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (k) Subsidiaries of the Company. Except as otherwise disclosed in the Prospectus, the Company does not own or control, directly or indirectly, any corporation, association or other entity other than the Subsidiary. (l) Incorporation and Good Standing of the Company and the Subsidiary. Each of the Company and the Subsidiary has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is organized with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect. (m) Capitalization of the Company's Subsidiary. All the outstanding shares of capital stock of the Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable and all outstanding shares of capital stock of the Subsidiary are owned by the Company free and clear of any security interests, claims, liens or encumbrances. (n) No Prohibition from Paying Dividends or Making Other Distributions. The Subsidiary is not currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary's capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary's property or assets to the Company. (o) Capitalization and Other Capital Stock Matters. The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus under the caption "Capitalization." The Common Shares (including the Shares) conform in all material respects to the description thereof contained in the Prospectus. All of the issued and outstanding Common Shares have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding Common Shares were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. The Underwriters (or the placees procured by WestLB) will receive good and valid title to the Shares purchased or subscribed for by them, free and clear of all liens, claims, security interests, pledges, charges, encumbrances and other defects of title. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or the Subsidiary as accurately described in the Prospectus. The description of the Company's stock option and other stock plans and arrangements, and the options or other rights granted thereunder, in each case as set forth in the Prospectus, accurately and fairly presents, in all material respects, the information required to be shown with respect to such plans, arrangements, options and rights. 6 (p) Stock Exchange Listing. The Shares have been approved for inclusion on The Nasdaq National Market ("Nasdaq") and the Alternative ------ Investment Market of the London Stock Exchange ("AIM"), subject only to official notice of issuance. (q) No Consents, Approvals or Authorizations Required. No consent, approval, authorization, filing with or order of any court or governmental agency or regulatory body is required in connection with the transactions contemplated herein, except such as have been obtained or made under the Securities Act and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act") and such as ------------ may be required (and which have been obtained) (i) under the securities or blue sky laws of any jurisdiction in connection with the purchase and distribution of the Shares by the Underwriters in the manner contemplated herein and in the Prospectus, (ii) by the National Association of Securities Dealers, Inc. (the "NASD"), and (iii) by or with the Nasdaq Stock Market, Inc. - ----- (r) Non-Contravention of Existing Instruments Agreements. Neither the issue and sale of the Shares nor the consummation of the Offering or any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of, or will result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Subsidiary pursuant to (i) the charter or by-laws of the Company or the Subsidiary, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or the Subsidiary is a party or is bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or the Subsidiary of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or the Subsidiary or any of its respective properties. (s) No Defaults or Violations. Neither the Company nor the Subsidiary is in violation or default of (i) any provision of its charter or by-laws, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or is bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or the Subsidiary or any of its respective properties, except such violation or default as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (t) No Actions, Suits or Proceedings. No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiary or any of their respective properties is pending or, to the knowledge of the Company, is threatened. (u) All Necessary Permits, Etc. Each of the Company and the Subsidiary possesses such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies as is necessary to conduct its business 7 other than those certificates, authorizations or permits the absence of which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect, and neither the Company nor the Subsidiary has received any notice of proceedings relating to the revocation or modification of, or noncompliance with, any such certificate, authorization or permit. (v) Title to Properties. Each of the Company and the Subsidiary has good and marketable title to all the properties and assets reflected as owned in the financial statements of the Company and the Subsidiary referred to in Section 1(i) above (or elsewhere in the Prospectus), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company or the Subsidiary. The real property, improvements, equipment and personal property held under lease by the Company or the Subsidiary, as the case may be, are held under valid and enforceable leases. (w) Tax Law Compliance. Each of the Company and the Subsidiary has filed all necessary federal, state and foreign income, franchise and other applicable tax returns and has paid all taxes required to be paid by such entity and, if due and payable, any related or similar assessment, fine or penalty levied against any of them. The Company has made adequate charges, accruals and reserves in the financial statements of the Company and the Subsidiary referred to in Section 1(i) above in respect of all federal, state and foreign income, franchise and other applicable taxes for all periods as to which the tax liability of the Company and the Subsidiary has not been paid. The Company is not aware of any tax deficiency that has been or might be asserted or threatened against the Company or the Subsidiary. (x) Intellectual Property Rights. Each of the Company and the Subsidiary own or possess adequate rights to use all patents, patent applications, patent rights or licenses, inventions, collaborative research agreements, trade secrets, know-how, trademarks, service marks, trade names and copyrights which are necessary to conduct its businesses as described in the Registration Statement and Prospectus; the expiration of any patents, patent applications, patent rights, trade secrets, trademarks, service marks, trade names or copyrights would not result in a Material Adverse Change that is not otherwise disclosed in the Prospectus; neither the Company nor the Subsidiary has received any notice of, nor has knowledge of, any infringement of or conflict with asserted rights of the Company or the Subsidiary by others with respect to any patents, patent applications, patent rights, inventions, trade secrets, know-how, trademarks, service marks, trade names or copyrights; and neither of the Company nor the Subsidiary has received any notice of, nor has knowledge of, any infringement of or conflict with asserted rights of others with respect to any patents, patent applications, patent rights, inventions, trade secrets, know-how, trademarks, service marks, trade names or copyrights. There is no claim being made against the Company or the Subsidiary regarding patents, patent rights or licenses, inventions, collaborative research, trade secrets, know-how, trademarks, service marks, trade names or copyrights. Each of the Company and the Subsidiary do not, in the conduct of its business as now conducted or proposed to be conducted, in each case as described in the Prospectus, infringe or conflict with any right or patent of any third party, or any discovery, invention, product or process which is the subject of a patent application filed by any third party, known to the Company or the Subsidiary. 8 (y) No Transfer Taxes or Other Fees. There are no stamp or transfer taxes or other similar fees or charges under Federal law or the laws of any country or any state or county, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance and sale by the Company of the Shares. (z) Company not an "Investment Company." The Company has been advised by Morgan, Lewis & Bockius LLP of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The ---------------------- Company is not, and after receipt of payment for the Shares will not be, an "investment company" or an entity "controlled" by an "investment company" within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. (aa) Insurance. Each of the Company and the Subsidiary are insured by nationally recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for its business including, but not limited to, policies covering real and personal property owned or leased by the Company or the Subsidiary, as the case may be, product liability, clinical trial liability, theft, damage, destruction, acts of vandalism and earthquakes and general liability, directors and officers liability and key man life insurance for each of Morris Laster and Shmuel Ben-Sasson (in the case of key man life insurance in the amount of U.S. $2 million for each of Morris Laster and Shmuel Ben-Sasson). The Company has no reason to believe that it or the will not be able (i) to renew its existing insurance coverage as and when such policies expire, or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. Neither the Company nor the Subsidiary has been denied any insurance coverage, which it has sought or for which it has applied. (bb) Labor Matters. No labor disturbance by the employees of the Company or the Subsidiary exists or, to the Company's knowledge, is imminent. The Company is not aware of any existing or threatened labor disturbance by the employees of any of its or the Subsidiary's principal suppliers that might be expected to result in a Material Adverse Change. (cc) No Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Shares to facilitate the sale or resale of the Shares. (dd) Lock-Up Agreements. The persons listed on Schedule C have signed an agreement substantially in the form attached hereto as Exhibit A-1 (the "12- -- Month Lock-up Agreement"). The persons listed on Schedule D have signed an - ----------------------- agreement substantially in the form attached hereto as Exhibit A-2 (the "Six- --- Month Lock-up Agreement" and together with the 12-Month Lock-up Agreement, the - ----------------------- "Lock-Up Agreements"). The Company has provided to counsel for the Underwriters - ------------------- a complete and accurate list of all securityholders of the Company and the number and type of securities held by each securityholder as of the date of this 9 Agreement. The Company has provided to counsel for the Underwriters true, accurate and complete copies of all of the Lock-up Agreements presently in effect or effected hereby. (ee) Related-Party Transactions. There are no business relationships or related-party transactions involving the Company or the Subsidiary or any other person of a nature required to be described in the Prospectus that have not been described as required. (ff) Officers' Certificates. Any certificate signed by an officer of the Company and delivered to the Representatives or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters set forth therein. (gg) No Unlawful Contributions or Other Payments. Neither the Company, nor the Subsidiary, nor, to the knowledge of the Company, any employee or agent of the Company or any Subsidiary, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of the character required to be disclosed in the Prospectus. (hh) ERISA Compliance. Each of the Company and the Subsidiary and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by ----- the Company, the Subsidiary or their "ERISA Affiliates" (as defined below) is in compliance in all material respects with ERISA and similiar applicable foreign laws and regulations. "ERISA Affiliate" means, with respect to the Company or the Subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which ---- the Company or such Subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, the Subsidiary or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by the Company, the Subsidiary or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfounded benefit liabilities" (as defined under ERISA). Neither the Company, the Subsidiary nor any of their ERISA Affiliates has incurred, or reasonably expects to incur, any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, the Subsidiary or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (ii) Brokers and Finders. Other than as expressly provided for by this Agreement, the Company has not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. (jj) Working Capital. The cashflow and working capital projections prepared by the Company to support the statements contained in the Prospectus, including those 10 statements in paragraph 7 under the heading "Additional Information for the Alternative Investment Market" have been prepared by the Company and its directors on the basis of the assumptions set out in such projections and such assumptions are fair and reasonable and there are no facts known or which could on reasonable inquiry have been known to the Company or its directors which have not been taken into account in the preparation of such projections and which could reasonably be expected to have a material effect thereon and all information supplied to the Representatives for the purpose of their examination and review of the working capital projections of the Company was when given and remains true and accurate in all material aspects and not misleading in any material respect. Taking into consideration the proceeds of the Offering, the Company will have sufficient working capital for its present and reasonably foreseeable future requirements. (kk) Y2K. There are no Y2K issues related to the Company or any of its subsidiaries that (i) are of a character required to be described or referred to in the Registration Statement or Prospectus by the Securities Act or by the Exchange Act which have not been accurately described in all material respects in the Registration Statement or Prospectus or (ii) might reasonably be expected to result in any Material Adverse Change or that might materially affect their properties, assets or rights. (ll) Environmental Laws. (i) The Company is in compliance with all rules, laws and regulations relating to the use, treatment, storage and disposal of toxic substances and protection of health or the environment ("Environmental Laws") which are applicable to its business, except where the failure to comply would not reasonably be expected to result in a Material Adverse Change, (ii) the Company has received no notice from any governmental authority or third party of an asserted claim under Environmental Laws, which claim is required to be disclosed in the Registration Statement or the Prospectus, (iii) the Company is not currently aware that it will be required to make future material capital expenditures to comply with Environmental Laws and (iv) to the knowledge of the Company, no property that is owned, leased or occupied by the Company has been designated as a Superfund site pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated site under applicable state or local law. SECTION 2. Purchase, Sale and Delivery of the U.S. Shares and the International Shares. (a) The Firm Shares. The Company agrees to issue and sell to the several U.S. Underwriters and agrees to issue to persons nominated by the International Underwriter (or failing which, to the International Underwriter itself) the U.S. Firm Shares and the International Firm Shares, respectively, upon the terms and subject to the conditions herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, (i) the several U.S. Underwriters agree, severally and not jointly, to purchase from the Company the respective number of U.S. Firm Shares set forth opposite their names on Schedule A hereto, and (ii) the International Underwriter agrees to procure placees to subscribe (or failing which, agrees to subscribe itself) from the Company the number of International Firm Shares set forth opposite its name on Schedule B hereto. The 11 purchase price per U.S. Firm Share to be paid by the several U.S. Underwriters to the Company shall be $9.30 and the subscription price per International Firm Share to be paid by the International Underwriter shall be (Pounds)6.15 (in each case, the "Offer Price"). The subscription price per International Firm Share to ----------- be paid by persons nominated by the International Underwriter shall be (Pounds)6.62 (the "Placing Price"). By way of clarification, the purchase price ------------- has been translated for convenience purposes from U.S. dollars to pounds sterling at an exchange rate of (Pounds) 1.00 to U.S. 1.5116, which was the noon buying rate in New York City on the date hereof for cable transfers in U.S. dollars as certified for customs purposes by the Federal Reserve Bank of New York. (b) The First Closing Date. Delivery of the Firm Shares to be purchased by the Underwriters and payment therefor shall be made by the Company and the Representatives at 9:30 a.m. New York time, at the offices of Morgan, Lewis & Bockius LLP, New York, New York (or at such other place as may be agreed upon among the Representatives and the Company), on the third (3/rd/) business day following the first day that the Shares are admitted to trading on Nasdaq on a "when issued" basis (or at such time and date to which payment and delivery shall have been postponed pursuant to Section 8 hereof), such time and date of payment and delivery being herein called the "First Closing Date;" ------------------ provided, however, that if the Company has not made available to the - -------- ------- Representatives copies of the Prospectus within the time provided in Sections 2(g) and 3(e) hereof, the Global Coordinators may, in their sole discretion, postpone the Closing Date until no later that two (2) full business days following delivery of copies of the Prospectus to the Representatives. (c) The Option Shares; the Second Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to Roth to purchase up to an aggregate of 690,000 Option Shares from the Company at the Offer Price. The option granted hereunder is for use by the Underwriters solely in covering any over-allotments in connection with the sale and distribution of the Firm Shares. The option granted hereunder may be exercised at any time or times upon notice by Roth to the Company, which notice may be given at any time within 30 days from the date of this Agreement. The time and date of delivery of the Option Shares, if subsequent to the First Closing Date, is called the "Second Closing Date" and shall be determined by the ------------------- Global Coordinators, and shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. If any Option Shares are to be purchased, (i) each U.S. Underwriter agrees, severally and not jointly, to purchase the number of Option Shares (subject to such adjustments to eliminate fractional shares as determined by the Global Coordinators that bears the same proportion to the total number of Option Shares to be purchased as the number of U.S. Firm Shares set forth on Schedule A opposite the name of such U.S. Underwriter bears to the total number of U.S. Firm Shares, and (ii) the Company agrees to sell the number of Option Shares which Roth shall specify upon exercise of the option as set forth in the paragraph "Introductory" of this Agreement. (d) Public Offering of the Shares. The U.S. Representatives hereby advise the Company that the U.S. Underwriters intend to offer for sale to the public, as described in the Prospectus, their respective portions of the Shares as soon after this Agreement has been 12 executed and the Registration Statement has been declared effective as the U.S. Representatives, in their sole judgment, have determined is advisable and practicable. (e) Payment for the Shares. Payment for the Firm Shares shall be made at the First Closing Date (and, if applicable, payment for the Option Shares shall be made at the Second Closing Date) by wire transfer in immediately available funds in U.S. dollars to the order of the Company. The International Underwriter shall be entitled to deduct and retain for its own benefit a commission of 7 percent of the aggregate value at the Placing Price of the International Firm Shares bought by persons procured by it pursuant to Section 2(a) above. It is understood that the Representatives have been authorized, for their own account and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Shares and any Option Shares the Underwriters have agreed to purchase. The Representatives, individually and not as a representative of the Underwriters, may (but shall not be obligated to) make payment for any Shares to be purchased by any Underwriter whose funds shall not have been received by the Representatives by the First Closing Date or the Second Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such defaulting Underwriter from any of its obligations under this Agreement. (f) Delivery of the Shares. The Company shall deliver, or cause to be delivered, a credit representing the Firm Shares to an account or accounts at The Depository Trust Company, as designated by the Global Coordinators for the accounts of the Representatives and the several Underwriters at the First Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. In the event Roth has exercised the over-allotment option with respect to the Option Shares, the Company shall also deliver, or cause to be delivered, a credit representing the Option Shares the Underwriters have agreed to purchase at the First Closing Date (or the Second Closing Date, as the case may be), to an account or accounts at The Depository Trust Company as designated by the Global Coordinators for the accounts of the Representatives and the several Underwriters at the Second Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. (g) Delivery of Prospectus to the Underwriters. Not later than 12:00 noon on the second business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Prospectus in such quantities and at such places as the Representatives shall request. The Company shall deliver one copy of the Prospectus to the Registrar of Companies in England and Wales as required by Regulation 4(2) of the Pos Regs on the day the Prospectus is first published, together with a letter addressed to the Registrar of Companies confirming that the Prospectus had not been published or distributed prior to that date. The Company shall use its best efforts to deliver to WestLB 50 copies of the Prospectus no later than 9:00 a.m. (London time) on July 28, 2000. (h) Stabilization. In connection with the distribution of the Shares, the Global Coordinators on behalf of the Underwriters may, to the extent permitted by applicable laws, regulations and the rules of the Commission and the Financial Services (Conduct of Business) 13 Rules 1990 as amended by the Financial Services (Conduct of Business) Rules 1994, over-allot and effect transactions in the Shares in any over-the-counter market or otherwise, with a view to stabilizing or maintaining the market price of the Shares at a level other than that which might otherwise prevail in the open market, but in doing so, the Global Coordinators shall, as between the Underwriters on the one hand and the Company on the other hand, act as principal and not as agent for the Company and any loss resulting from over-allotment or stabilization shall be borne, and any profit arising therefrom shall be beneficially retained, by the Global Coordinators on behalf of the Underwriters. One of the Global Coordinators shall act as stabilization agent in connection with actions taken in accordance with this paragraph (h). SECTION 3. Covenants of the Company. The Company further covenants and agrees with each Underwriter as follows: (a) Registration Statement Matters. The Company will (i) use its best efforts to cause a registration statement on Form 8-A (the "Form 8-A -------- Registration Statement") as required by the Exchange Act, to become effective - ---------------------- simultaneously with the Registration Statement, (ii) use its best efforts to cause the Registration Statement to become effective and, if the procedure in Rule 430A of the Securities Act is followed, to prepare and timely file with the Commission under Rule 424(b) under the Securities Act a Prospectus in a form approved by the Global Coordinators containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Securities Act, and (iii) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Global Coordinators shall not previously have been advised and furnished with a copy or to which the Global Coordinators shall have reasonably objected in writing or which is not in compliance with the Securities Act. If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Securities Act prior to the time confirmations are sent or given, as specified by Rule 462(b)(2) under the Securities Act, and shall pay the applicable fees in accordance with Rule 111 under the Securities Act. (b) Securities Act Compliance. The Company will advise the Representatives promptly (i) when the Registration Statement or any post- effective amendment thereto shall have become effective, (ii) of receipt of any comments from the Commission, (iii) of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of either of the Prospectus or of the institution of any proceedings for that purpose and will promptly provide them with copies of all correspondence including summaries of all oral correspondence. The Company will use its best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (c) Blue Sky Compliance. The Company will cooperate with the Representatives and counsel for the Underwriters in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions (both national and foreign) as the Representatives 14 may reasonably have designated in writing on or prior to July 28, 2000 and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Shares. (d) Amendments and Supplements to the Prospectus and Other Securities Act Matters. The Company will comply with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder, the Pos Regs and the Rules of the London Stock Exchange, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If prior to the Second Closing Date any event shall occur which does or may constitute a significant change or new matter for the purposes of Regulation 10 of the Pos Regs, the Company shall notify the Representatives forthwith upon the Company becoming aware of the same, and without prejudice to Section 9 of this Agreement shall procure that any such change or new matter shall be dealt with in accordance with the Securities Act and the Exchange Act and the rules and regulation of the Commission thereunder, the Pos Regs and the Rules of the London Stock Exchange, and shall prepare and file with the Commission and the Registrar of Companies in England and Wales, and furnish at its own expense to the Underwriters and to dealers an appropriate amendment to the Registration Statement or supplement to such Prospectus so that such Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that such Prospectus will comply with all applicable laws and regulations. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Global Coordinators or counsel for the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company promptly will prepare and file with the Commission, and furnish at its own expense to the Underwriters and to dealers, an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. (e) Copies of any Amendments and Supplements to the Prospectus. The Company agrees to furnish the Representatives, without charge, during the period beginning on the date hereof and ending on the later of the First Closing Date or such date, as in the opinion of counsel for the Underwriters, the Prospectus is no longer required by law to be delivered in connection with sales by an Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the -------------------------- Prospectus and any amendments and supplements thereto as the Representatives may request. (f) Notice of Subsequent Events; Public Statements. 15 (i) Until the 25/th/ day following the date of the Prospectus, the Company shall obtain the written consent of the Global Coordinators prior to making any public presentations, statements or announcements regarding the Company or its affiliates or any terms of the Offering. If at any time during the ninety (90) day period after the Registration Statement becomes effective, any rumor, publication or event relating to or affecting the Company shall occur as a result of which, in the opinion of the Global Coordinators, the market price of the Common Shares has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus), the Company will, after written notice from the Global Coordinators advising the Company to the effect set forth above, forthwith prepare, consult with the Representatives concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to the Global Coordinators, responding to or commenting on such rumor, publication or event. (ii) Until June 30, 2001, the Company hereby undertakes to the Representatives for itself and on behalf of the Underwriters that the Company will use all reasonable efforts to: (1) notify the Representatives in advance of, and discuss with the Global Coordinators both the content and timing and manner of making or dispatch of, any announcement concerning the financial position or affairs of the Company or the Subsidiary or any announcement of profits or losses and dividends in respect of any financial period or part thereof and discuss with the Representatives any other material information which is likely to affect the general character or nature of the business of the Company or the Subsidiary or may be necessary to be made known to the public in order to enable the shareholders of the Company and the public to appraise the position of the Company and to avoid the establishment of a false market in its securities; (2) forward to the Representatives for their review all proofs or drafts of all documents proposed to be dispatched to holders of the Company's securities and all press announcements; and (3) notify the Representatives forthwith of any proposal to make any material alteration, revision or release in respect of any of the service agreements of the Company's officers or directors and of any material breach of any covenant, undertaking or warranty in any such agreement by any officer or director and consult with the Representatives prior to taking any action with regard to the foregoing. (g) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Shares in the manner described under the caption "Use of Proceeds" in the Prospectus. (h) Transfer Agent and Registrar. The Company shall engage and maintain, at its expense, registrars and transfer agents for the Common Shares both in the United States and in the United Kingdom. (i) Earnings Statement. As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement 16 (which need not be audited) covering the twelve-month period ending June 31, 2001 that satisfies the provisions of Section 11(a) of the Securities Act. (j) Nasdaq Reporting Obligations. The Company shall file, on a timely basis, with Nasdaq all reports and documents required to be filed under the Exchange Act or the rules and regulations of Nasdaq. (k) Agreement Not to Offer or Purchase or Sell Additional Securities. The Company will not, without the Global Coordinators prior written consent, offer, sell or contract to sell, or otherwise dispose of or enter into any transaction which is designed to, or could be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, or announce the offering of, any Common Shares or any securities convertible into, or exchangeable for, Common Shares other than the Shares; provided, however, that the Company may (i) issue and sell Common Shares -------- ------- pursuant to any employee stock option plan of the Company in effect at the date of the Prospectus and described in the Prospectus so long as none of those shares may be transferred, the options are granted or issued at an exercise price not less than the fair market value of the Common Shares on the date of grant and the Company shall enter stop transfer instructions with its transfer agent and registrar against the transfer of any such Common Shares, and (ii) issue Common Shares issuable upon the conversion of securities or the exercise of warrants outstanding at the date of the Prospectus and described in the Prospectus. The Company will not, without the Global Coordinators' prior written consent, purchase or contract to purchase or enter into any transaction which is designed to, or could be expected to, result in the acquisition, directly or indirectly, of any Common Shares or any securities convertible into or exchangeable for Common Shares. The restrictions set forth in this Section 3(k) shall terminate after the close of trading of the Shares on the 90/th/ day following the day the Shares commenced trading on Nasdaq. (l) AIM Reporting Obligations. The Company shall file, on a timely basis, with the London Stock Exchange all reports, documents and announcements required to be filed or released by the Rules of the London Stock Exchange. (m) Future Reports to the Representatives. During the period of five years hereafter, the Company will furnish to the Representatives: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock. (n) Regulatory Compliance. During the Prospectus Delivery Period, the Company will file all documents required to be filed with the Commission pursuant to 17 Section 13, 14 or 15 of the Exchange Act in the manner and within the time periods required by the Exchange Act. Following the Offering, the Company shall use its best efforts to continue to comply with the rules and regulations of the Commission, Nasdaq, the London Stock Exchange, and the Pos Regs. (o) Management and Directors. It is the Company's current intention that the management, as disclosed in the Registration Statement, will continue to be in place after the Offering for a reasonable period of time. Additionally, the Company will maintain a professional board of directors that will include at least three independent directors, as such term is used pursuant to rules and regulations of Nasdaq, and complies with the Commission's Release No. 34-42266. The Representatives acknowledge that the Company's board of directors as it exists on the date hereof meets this requirement. (p) Future Advertisements. The Company agrees that the Global Coordinators have the right to place advertisements in financial and other newspapers and journals at their own expense describing their services to the Company hereunder. SECTION 4. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase (or cause to be purchased) and pay (or procure payment) for the Shares as provided herein on the First Closing Date and, with respect to the Option Shares, on the Second Closing Date, shall be subject to (i) the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the First Closing Date as though then made and, with respect to the Option Shares, as of the Second Closing Date as though then made, (ii) the timely performance by the Company of its covenants and other obligations hereunder, and (iii) each of the following additional conditions: (a) Compliance with Registration Requirements; No Stop Order, No Objection from the NASD. The Registration Statement shall have become effective prior to the execution of this Agreement, or at such later date as shall be consented to in writing by the Representatives; and no stop order suspending the effectiveness thereof shall have been issued and no proceedings for that purpose shall have been initiated or, to the knowledge of the Company or any Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the satisfaction of Underwriters' counsel; and the NASD shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements. (b) Corporate Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, the form of Registration Statement and the Prospectus, and the registration, authorization, issue, sale and delivery of the Shares, shall have been reasonably satisfactory to Underwriters' counsel, and such counsel shall have been furnished with such papers and information as they may reasonably have requested to enable them to pass upon the matters referred to in this Section. 18 (c) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to the First Closing Date or the Second Closing Date, as the case may be, there shall not have been any Material Adverse Change from that set forth in the Registration Statement or Prospectus, which, in the sole judgment of the Global Coordinators, is material and adverse and that makes it, in the sole judgment of the Global Coordinators, impracticable or inadvisable to proceed with the public offering of the Shares as contemplated by the Prospectus. (d) Opinion of Counsel for the Company. (i) You shall have received on the First Closing Date, and the Second Closing Date, as the case may be, an opinion of Morgan, Lewis & Bockius, LLP, U.S. counsel for the Company, and Yigal Arnon & Co., counsel to the subsidiary, in the form of Exhibits B-1 and B-2 attached hereto, dated the First Closing Date, and the Second Closing Date, as the case may be, addressed to the Underwriters and with reproduced copies or signed counterparts thereof for each of the Underwriters. (ii) Counsel rendering the opinion contained in Exhibits B-1 and B-2 may rely as to questions of fact upon representations or certificates of officers of the Company and of government officials, in which case their opinion is to state that they are so relying and that they have no knowledge of any material misstatement or inaccuracy in any such opinion, representation or certificate. Copies of any opinion, representation or certificate so relied upon shall be delivered to you, as Representatives of the Underwriters, and to Underwriters' counsel. (e) Opinion of Intellectual Property Counsel for the Company. You shall have received on the First Closing Date and the Second Closing Date, as the case may be, an opinion of Pennie & Edmonds LLP, patent counsel for the Company, in the form of Exhibit C hereto, dated the First Closing Date and the Second Closing Date, as the case may be. The Company shall have furnished to such counsel such documents as they may have requested for the purpose of enabling them to pass upon such matters. (f) Accountants' Comfort Letter. You shall have received on the First Closing Date and on the Second Closing Date, as the case may be, a letter from Somekh Chaikin addressed to the U.S. Representatives and the International Underwriter, dated the First Closing Date, or the Second Closing Date, as the case may be, confirming that they are independent certified public accountants with respect to the Company and the Subsidiary within the meaning of the Securities Act and the applicable published rules and regulations and based upon the procedures described in such letter delivered to you concurrently with the execution of this Agreement (herein called the "Original Letter"), but carried --------------- out to a date not more than four (4) business days prior to the First Closing Date or the Second Closing Date, as the case maybe, (A) confirming, to the extent true, that the statements and conclusions set forth in the Original Letter are accurate as of the First Closing Date or the Second Closing Date, as the case may be, and (B) setting forth any revisions and additions to the statements and conclusions set forth in the Original Letter which are necessary to reflect any changes in the facts described in the Original Letter since the date of such letter, or to reflect the availability of more recent financial statements, data or information. The letter shall disclose any change in the condition (financial or otherwise), earnings, operations, business or business prospects of the Company and the Subsidiary considered as one enterprise, from that set forth in the Registration Statement or 19 Prospectus. The Original Letter shall be addressed to or for the use of the Underwriters in form and substance satisfactory to the Underwriters and shall (A) represent, to the extent true, that they are independent certified public accountants with respect to the Company and its subsidiaries, within the meaning of the Securities Act and the applicable published rules and regulations thereto and (B) set forth their opinion with respect to their examination of the consolidated balance sheet of the Company as of December 31, 1999 and 1998 and related consolidated statements of operations, shareholders' equity, and cash flows for the three years ended December 31, 1999. In addition, you shall have received from KPMG London in a letter addressed to the Company, and made available to the Underwriters for the use of the Underwriters, stating that their review of the Company's systems of internal accounting controls, to the extent they are deemed necessary in establishing the scope of the examination of the Company's consolidated financial statements as of December 31, 1999 and 1998, did not disclose any weaknesses in internal controls that they considered to be material weaknesses. (g) Officers' Certificate. You shall have received on the First Closing Date and the Second Closing Date, as the case may be, a certificate of the Company, dated the First Closing Date and the Second Closing Date, as the case may be, signed by the Chief Executive Officer and Chief Financial Officer of the Company, to the effect that, and the Global Coordinators shall be satisfied that: (i) The representations and warranties of the Company in this Agreement are true and correct, as made on and as of the First Closing Date and the Second Closing Date, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the First Closing Date and the Second Closing Date, as the case may be; (ii) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, are pending or threatened under the Act; (iii) When the Registration Statement became effective and at all times subsequent thereto up to the delivery of such certificate, the Registration Statement and the Prospectus, and any amendments or supplements thereto, conformed in all material respects to the requirements of the Securities Act, and the applicable rules and regulations of the Commission thereunder, the Pos Regs and the Rules of the London Stock Exchange, (A) the Registration Statement and any amendments thereto, did not and does not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (B) the Prospectus and any amendments or supplements thereto, did not and does not include any untrue statement of a material fact or omit the statement of material fact required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances under which they were made; and, since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended or supplemented Prospectus which has not been so set forth; and 20 (iv) Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been (a) any material adverse change in the condition (financial or otherwise), earnings, operations, business or business prospects of the Company and the Subsidiary considered as one enterprise, (b) any transaction involving the Company and the Subsidiary, except transactions entered into in the ordinary course of business, (c) any obligation, direct or contingent, incurred by the Company or the Subsidiary, except obligations incurred in the ordinary course of business consistent with past practices, (d) any change in the capital stock or outstanding indebtedness of the Company or the Subsidiary, (e) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or the Subsidiary, or (f) any loss or damage (whether or not insured) to the property of the Company or the Subsidiary which has been sustained or will have been sustained. (h) Lock-up Agreement from Certain Stockholders of the Company. The Company shall have obtained and delivered to you agreements, in the form of Exhibit A-1 attached hereto, from the persons listed in Schedule C attached hereto, and agreements, in the form of Exhibit A-2, from the persons listed on Schedule D which is annexed hereto. (i) Stock Exchange Listing. The Common Shares shall have been approved for quotation on Nasdaq, subject only to official notice of issuance, and AIM shall have admitted the Common Shares, that are issued and are to be issued pursuant to the Offering, to trading on AIM. (j) Compliance with Prospectus Delivery Requirements. The Company shall have complied with the provisions of Sections 2(g) and 3(e) hereof with respect to the furnishing of the Prospectus. (k) Opinion of Counsel for the Underwriters. You shall have received on the First Closing Date and the Second Closing Date, as the case may be, an opinion of Baer Marks & Upham LLP, counsel for the Underwriters, substantially in the form of Exhibit D hereto. The Company shall have furnished to such counsel such documents as they may have reasonably requested for the purpose of enabling them to pass upon such matters. (l) Deliveries to the Representatives. The Company shall deliver to the Underwriters the following documents: (i) three original signed copies of the Expert's Report of PA Strategy Partners Ltd and the Patent Agent's Report of Gill Jennings & Every; (ii) three original signed copies of the written consent of Somekh Chaikin to the inclusion in the Registration Statement of the Report set out on page F-1 of the Prospectus and to their name in the form and context in which they are included; (iii) three original signed responsibility statements and powers of attorney executed by each director of the Company in the form previously approved by the Global Coordinators; 21 (iv) three original signed copies of the nominated advisor's agreement and the nominated broker's agreement; (v) one certified copy of each of the employment agreements described in the Prospectus under the caption "Management"; (vi) three original copies of the Original Letter; (vii) three original signed copies of a letter from the Company addressed to the Representatives confirming that the working capital available to the Company is sufficient for its present requirements in the agreed form; (viii) three original letters, referencing paragraph 16.30 of the Rules of the London Stock Exchange, from each of the Company, Morgan, Lewis & Bockius LLP, Somekh Chaikin, PA Strategy Partners Ltd. and Gill Jennings & Every; and (ix) three original signed copies of the written consent of PA Strategy Partners Ltd. to the inclusion in the Prospectus of their report set out on pages A-1 to A-14 of the Prospectus. (m) Additional Documents. On or before each of the First Closing Date and the Second Closing Date, as the case may be, the Representatives and counsel for the Underwriters shall have received such information, documents, certificates and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Shares as contemplated herein, and in order for them to determine the accuracy of any of the representations and warranties and the satisfaction of any of the conditions or agreements herein contained. If any condition specified in this Section 4 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representatives by notice to the Company at any time on or prior to the First Closing Date and, with respect to the Option Shares, at any time prior to the Second Closing Date which termination shall be without liability on the part of any party to any other party, except that Section 5 (Payment of Expenses), Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification and Contribution) and Section 12 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination. Section 5. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Common Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Common Shares, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection 22 with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each preliminary prospectus and the Prospectus, and all amendments and supplements thereto, and this Agreement, (vi) all filing fees and expenses incurred by the Company and the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Shares for offer and sale in the U.S. under the state securities or blue sky laws or the securities laws, including any Blue Sky fees of the Underwriters' counsel in an amount not to exceed $10,000, and applicable laws in the U.K., (vii) the filing fees incident to, and the reasonable fees and expenses of counsel for the Underwriters in connection with, the NASD review and approval of the Underwriters' participation in the offering and distribution of the Common Shares, (viii) the fees and expenses associated with including the Common Shares on Nasdaq and AIM, (ix) all expert reports related to the listing of the Common Shares on AIM or as otherwise required by the Representatives (including those reports prepared by PA Consulting Group and Gill, Jennings & Every), (x) the costs of preparing up to eight bound volumes of the Offering documents for the Representatives and their counsel, (xi) all costs and expenses incident to the travel and accommodation of the Company's employees on the "roadshow," and (xii) all other fees, costs and expenses referred to in Item 12 and Item 13 of Part II of the Registration Statement. All fees shall be payable together with all value added tax or other local taxes thereon, if any. Except as provided in Sections 5, 6, 7 and 10 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel. Section 6. Reimbursement of Underwriters' Expenses. If this Agreement is terminated by the Representatives pursuant to Section 4, Section 8 or Section 9, or if the sale to the Underwriters (or to persons nominated by the International Underwriter) of the Shares is not consummated, the Company agrees to reimburse the Representatives and the other Underwriters (or such Underwriters as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses (and any related value added tax) that shall have been reasonably incurred by the Representatives and the other Underwriters in connection with the proposed purchase and the offering and sale of the Shares, including but not limited to fees and disbursements of counsel, including Blue Sky legal fees not to exceed $10,000, printing expenses, travel and accommodation expenses, postage, facsimile and telephone charges, provided, however, that the Company's -------- ------- obligation for reimbursement hereunder shall be limited to an aggregate of $600,000. Section 7. Indemnification and Contribution. (a) Indemnification of the Underwriters. (i) The Company agrees to indemnify and hold harmless each Underwriter, its officers and employees, and each person, if any, who controls any Underwriter within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter or such controlling person may become subject, under the Securities Act, the Exchange Act, the Pos Regs or other federal, state or foreign statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company, which consent shall not be unreasonably withheld), insofar as such 23 loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, including any information deemed to be a part thereof pursuant to Rule 430A under the Securities Act, 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 (ii) upon any untrue statement or alleged untrue statement of a material fact contained 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; or (iii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iv) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; or (v) any untrue statement or alleged untrue statement of any fact contained in any audio or visual materials provided by the Company or based upon written information furnished by or on behalf of the Company including, without limitation, slides, videos, films or tape recordings, used in connection with the marketing of the Shares, including without limitation, statements communicated to securities analysts employed by the Underwriters; or (vi) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i), (ii), (iii), (iv) or (v) above, provided that the Company shall not be liable under this clause (vi) to the extent that a court of competent jurisdiction shall have determined by a final non-appealable judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its bad faith or willful misconduct; and to reimburse each Underwriter and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by the Representatives) as such expenses are reasonably incurred by such Underwriter or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not -------- ------- apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); and provided, further, that with respect to any preliminary prospectus, the - -------- ------- foregoing indemnity agreement shall not inure to the benefit of any Underwriter from whom the person asserting any loss, claim, damage, liability or expense purchased Shares, or any person controlling such Underwriter, if copies of the Prospectus were timely delivered to the Underwriter pursuant to Section 2(g) and a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or expense. The indemnity agreement set forth in this Section 7(a) shall be in addition to any liabilities that the Company may otherwise have. 24 (b) Indemnification of the Company, its Directors and Officers. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or the Pos Regs or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any preliminary prospectus, the Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that in no case shall any -------- ------- Underwriter be liable or responsible for any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter. The indemnity agreement set forth in this Section 7(b) shall be in addition to any liabilities that each Underwriter may otherwise have. (c) Information Provided by the Underwriters. The Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, hereby acknowledges that the only information that the Underwriters (including the Representatives) have furnished to the Company expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) are the statements set forth in the fourth paragraph under the caption "Underwriting" in the Prospectus; and the Underwriters confirm that such statements are correct. (d) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel 25 reasonably satisfactory to such indemnified party; provided, however, if the -------- ------- defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties at the expense of the indemnifying party. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (the Representatives in the case of Section 7(b) and Section 12), representing the indemnified parties who are parties to such action), (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (e) Settlements. The indemnifying party under this Section 7 shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding 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. (f) Contribution. (i) If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under Section 7(a) or (b) 26 above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party in such proportion as is appropriate to reflect the relative benefits received by such party on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such party on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or its "control" stockholders on the one hand, or the Underwriters on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (ii) The Company and Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 7(f) 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(f). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 7(f) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (f), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f) to contribute are several in proportion to their respective underwriting obligations and not joint. (g) Timing of Any Payments of Indemnification. Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred, but in all cases, no later than forty-five (45) days of invoice to the indemnifying party. All sums payable to any indemnified party under this Section 7 shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by law, in which event the person making payment shall pay such additional amount as shall be required to ensure that the net amount received by the indemnified party will equal the full amount which would have been received by it had no such deduction or withholding been made. If the United Kingdom Inland Revenue or any other taxing authority in any jurisdiction brings into any charge to tax (or into any computation of income, profits or gains for the purposes of any charge to tax) any sum payable to any indemnified party under this Section 7 then the amount so payable shall be grossed up by such amount as will 27 ensure that after deduction of the taxation so chargeable there shall remain a sum equal to the amount that would otherwise be payable (additional payments being made on demand as may be necessary). (h) Survival. The indemnity and contribution agreements contained in this Section 7 of this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, or (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 7. (i) Acknowledgments of Parties. The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 7 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Registration Statement and Prospectus as required by the Securities Act, the Exchange Act and the Pos Regs. Section 8. Default of One or More of the Several Underwriters. (i) If, on the First Closing Date or the Second Closing Date, as the case may be, any one or more of the several U.S. Underwriters shall fail or refuse to purchase Shares that it or they have agreed to purchase hereunder on such date, and the aggregate number of Common Shares which such defaulting U.S. Underwriter or U.S. Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Shares to be purchased on such date, the other U.S. Underwriters shall be obligated, severally, in the proportions that the number of Firm Shares set forth opposite their respective names on Schedule A hereto bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as may be specified by the Representatives with the consent of the non-defaulting U.S. Underwriters, to purchase the Shares which such defaulting U.S. Underwriter or U.S. Underwriters agreed but failed or refused to purchase on such date. If, on the First Closing Date or the Second Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares and the aggregate number of Shares with respect to which such default occurs exceeds 10% of the aggregate number of Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Shares are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party other than the defaulting Underwriter, except that the provisions of Sections 5, 6, 7, 10 and 12 shall at all times be effective and shall survive such termination. In any such case either the Global Coordinators or the Company shall have the right to postpone the First Closing Date or the Second Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, 28 if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected. (ii) As used in this Agreement, the term "Underwriter" shall be deemed to include any person substituted for a defaulting Underwriter under this Section 8. Any action taken under this Section 8 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. Section 9. Termination of this Agreement. This Agreement may be terminated by either of the Global Coordinators by notice given to the Company if: (a) at any time after the execution and delivery of this Agreement and prior to the First Closing Date (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission, Nasdaq, the London Stock Exchange or AIM, or trading in securities generally on either Nasdaq, AIM, the London Stock Exchange or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission, the NASD, the New York Stock Exchange or otherwise; (ii) a general banking moratorium shall have been declared by any of federal or State of New York or U.K. authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States, the U.K. or international financial markets, or any substantial change or development involving a prospective change in the political, financial or economic conditions of the United States, the U.K. or internationally, as in the judgment of the Representatives is material and adverse and makes it impracticable or inadvisable to market the Shares in the manner and on the terms contemplated in the Prospectus or to enforce contracts for the sale of securities; (iv) in the judgment of the Representatives there shall have occurred any Material Adverse Change; or (v) the Company shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Representatives may interfere materially with the conduct of the business or operations of the Company regardless of whether or not such loss shall have been insured; or (b) in the case of any of the events specified in Section 9(i) through (v), such event singly or together with any other event, makes it, in the judgment of the Representatives, impracticable or inadvisable to market the Shares in the manner and on the terms contemplated in the Prospectus. Any termination pursuant to this Section 9 shall be without liability on the part of (x) the Company to any Underwriter, except that the Company shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Sections 5, 6, 7 and 10 hereof, (y) any Underwriter to the Company or any person controlling the Company, or (z) of any party hereto to any other party except that the provisions of Sections 5, 6, 7 and 10 shall at all times be effective and shall survive such termination. SECTION 10. Pre-Offering Transaction Involving the Company. If (i) the Offering does not proceed and (ii) the Company is acquired, merges or sells all or substantially all of its assets or otherwise effects a corporate reorganization or other business combination or extraordinary corporate transaction, including a private or public financing (collectively, a "Transaction") on or prior to September 30, 2000, then the ----------- Company 29 shall promptly reimburse the Underwriters for all accountable out-of-pocket expenses incurred by the Underwriters and persons associated with such Underwriters (and any related value added tax), without giving effect to the limitations contained in Section 6, above, in immediately available funds. Section 11. Value Added Tax. (a) Where, pursuant to this Agreement, a sum (a "Relevant Sum") ------------ is to be paid or reimbursed to the Representatives in respect of any cost or expense paid or incurred by the Representatives and that cost or expense includes an amount in respect of value added tax (the "VAT Element"), the ----------- Company shall pay an amount to the Representatives in respect of the VAT Element that shall be determined as follows: (i) if the Relevant Sum constitutes for value added tax purposes payment to the Representatives for the supply by it of goods or services to the Company, a sum equal to the proportion of the VAT Element that the Representatives certify as representing irrecoverable input tax in the hands of the Representatives, that certificate to be conclusive except in the case of manifest error; and (ii) if the Relevant Sum constitutes for value added tax purposes the reimbursement of a cost or expense incurred by the Representatives as agent, for the Company, a sum equal to the whole of the VAT Element, and where a sum equal to the VAT Element has been reimbursed to the Representatives under paragraph (ii) above, the Representatives shall provide the Company with a proper tax invoice in respect of the supply to which the Relevant Sum relates, that is to say a tax invoice naming the Company as the recipient of the supply and issued either by the Representatives or, if the Representatives have treated the relevant cost or expense as a disbursement for value added tax purposes, by the person making the supply. (b) If the performance by the Representatives of any of their obligations under this Agreement shall represent for value added tax purposes the making by the Representatives of any supply of goods or services to the Company that is taxable at a positive rate, the Company shall pay to the Representatives, in addition to the amounts otherwise payable by the Company to the Representatives pursuant to this Agreement (including, without limitation, amounts payable by the Company to the Representatives pursuant to clause (a), above, an amount equal to the value added tax chargeable on any such supply, that payment to be made within seven days of the Representatives requesting the same and against production by the Representatives of a proper tax invoice. Section 12. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company or any person controlling the Company, of its officers, and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, as the 30 case may be, and will survive delivery of and payment for the Shares sold hereunder and any termination of this Agreement. Section 13. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered, delivered by a nationally recognized overnight delivery service or telecopied and confirmed to the parties hereto as follows: If to the Representatives: Roth Capital Partners, Inc. 24 Corporate Plaza Newport Beach, CA 92660 Telephone: (949) 720-5700 Facsimile: (949) 720-7223 Attention: Lisa Walters-Hoffert, Managing Director Gruntal & Co., L.L.C. One Liberty Plaza New York, NY 10006-1487 Telephone: 35 New Broad Street Attention: Roger C. Kahn, Senior Mananging Director WestLB Panmure Limited New Broad Street House 35 New Broad Street London EC2M 1SQ United Kingdom Telephone: +44 207 860 3645 Facsimile: +44 207 860 1370 Attention: Chris Collins, Managing Director with a copy to: Baer Marks & Upham LLP 805 Third Avenue 20/th/ Floor New York, New York 10022 Telephone: (212) 702-5700 Facsimile: (212) 702-5941 Attention: Steven S. Pretsfelder, Esq. and Jonathan J. Russo, Esq. 31 If to the Company: Keryx Biopharmaceuticals, Inc. Kiryat Mada 5 Har Hotzvim Jerusalem 91326 Israel Telephone: +972 (2) 537 4997 Facsimile: +972 (2) 671 8946 Attention: Bob Trachtenberg, Esq. with a copy to: Morgan, Lewis & Bockius LLP 101 Park Avenue 45th Floor New York, NY 10178-0060 Telephone: (212) 309-6000 Facsimile: (212) 309-6273 Attention: Robert G. Robison, Esq. Any party hereto may change the address for receipt of communications by giving written notice to the others. Section 14. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 8 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 7, and to their respective successors and assigns, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Shares as such from any of the Underwriters merely by reason of such purchase. Section 15. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. Section 16. Governing Law Provisions. (a) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in such state. 32 (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (a "Related Proceedings") may be instituted in the federal courts of the ------------------- United States of America located in the City and County of New York or the courts of the State of New York in each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably ---------------- submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a "Related ------- Judgment"), as to which such jurisdiction is non-exclusive) of such courts in - -------- any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. Section 17. General Provisions. This Agreement constitutes the entire agreement of the parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. Section 18. Blue Sky Compliance. Each Underwriter severally covenants and agrees with the Company not to distribute the Prospectus or offer the Shares in any jurisdiction in which, subject to the Company's compliance with Section 3(c) hereof, such distribution or offer would conflict with applicable law. Each Underwriter further severally covenants and agrees not to request that the Company offer Shares to any person to whom, subject to the Company's compliance with Section 3(c) hereof, such offer would conflict with applicable law. [The remainder of this page has been intentionally left blank.] 33 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. Very truly yours, KERYX BIOPHARMACEUTICALS, INC. By:/s/ Morris Laster ----------------- Morris Laster, M.D. Chief Executive Officer The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representatives as of the date first above written. On their behalf and on behalf of each of the several U.S. Underwriters named in Schedule A hereto. BY: ROTH CAPITAL PARTNERS, INC. On its own behalf: By: /s/ Lisa Walters-Hoffert BY: WESTLB PANMURE LIMITED ------------------------ Lisa Walters-Hoffert Managing Director By: /s/ C.I. Collins ---------------- C.I. Collins BY: GRUNTAL & CO., L.L.C. Managing Director By: /s/ Roger C. Kahn By: /s/ J. Ronald Openshaw ----------------- ---------------------- Roger C. Kahn J. Ronald Openshaw Senior Managing Director Executive Director 34 EX-3.1 3 0003.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 State of Delaware AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF KERYX BIOPHARMACEUTICALS, INC. KERYX BIOPHARMACEUTICALS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The Certificate of Incorporation for KERYX BIOPHARMACEUTICALS, INC. was filed in the Office of the Secretary of State of Delaware on October 22, 1998. 2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation amends, restates and integrates the Certificate of Incorporation of this corporation. 3. The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated and further amended to read in its entirety as follows: State of Delaware AMENDED AND RESTATED CERTIFICATE OF INCORPORATION A Stock Corporation . First: The name of this corporation is KERYX BIOPHARMACEUTICALS, INC. . Second: Its registered office in the State of Delaware is located at 1013 Centre Road, City of Wilmington 19805, County of Now Castle; and the name of the registered agent of the corporation in the State of Delaware at such address is Corporation Service Company. . Third: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. . Fourth: The total number of shares of stock which the corporation shall have the authority to issue is 40,000,000 shares of Common Stock with a par value of $ 0.001 per share and 5,000,000 shares of Common Stock, par value $0.001 per share. . Fifth: The name and mailing address of the incorporator are as follows: John S. Hoenigmann Two World Trade Center Suite 8746 New York, New York 10048 . Sixth: The corporation is to have perpetual existence. . Seventh: Wehnever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under section 291 of Title 8 of the Delaware Code or ont hte application of trustees in dissolution or of any receiver or receivers appointed for this corporation under section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of htis corporation, as the case may be, agree to any compromise or arrangement, and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class or creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. . Eighth: For the managment of the business and for the conduct of the affairs of the corporation, and in further definition, limitation, and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The managment of the business and hte conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 2. After the original or other Bylaws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of section 109 of the General Corporation Law of the the State of Delaware, and, after the corporation has received any payments for any of its stock, the power to adopt, amend, or repeal the Bylaws of the corporation may be exercised by the Board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provisions of subsection (d) of section 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be set forth inthe certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding shares of any class of stock which is denied voting power under the provisions of the certificate of incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (2) of subsection (b) of section 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. . Ninth: The personal liability of the directors of the corporatioin is hereby eliminated to the fullest extent permitted by the provisions of paragraph (7) of subsection (b) of section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. . Tenth: The corporation shall, to the fullest extend permitted by the provisions of section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnity under said section from and agains any and all of the expenses, liabilities, or other realtors referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under and Bylaw, agreement, vote of stockholders or disintegrated directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, adn administrators of such person. . Eleventh: From time to time any of the provisions of this certificate of incorporation may be amended, altered, or repaired, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article Eleventh. EX-27.1 4 0004.txt FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 3-MOS 3-MOS DEC-31-1999 DEC-31-1999 JAN-01-1999 MAR-01-2000 DEC-31-1999 JUN-30-2000 0 0 4,126,735 5,033,424 0 0 166,137 89,122 0 0 0 0 4,378,557 5,240,621 160,141 176,819 0 0 4,948,216 6,835,807 394,417 741,278 0 0 0 0 79 118 1,208 8,108 4,436,063 5,935,426 4,948,216 6,835,807 0 0 0 0 0 0 8,735,305 3,303,874 257,487 (97,947) 8,992,742 0 0 0 0 (3,205,927) 9,970 27,879 (9,002,762) (3,233,806) 0 0 0 0 0 0 (9,002,762) (3,233,806) (1.11) (0.40) (1.11) (0.40)
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