EXHIBIT 1.1 PLACEMENT AGENCY AGREEMENT

 

EXHIBIT 1.1

 

ISTA PHARMACEUTICALS, INC.

 

2,500,000 SHARES

 

COMMON STOCK

 

($.001 PAR VALUE PER SHARE)

 

 

 

PLACEMENT AGENCY AGREEMENT

 

Dated August 5, 2004

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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August 5, 2004

 

PLACEMENT AGENCY AGREEMENT

 

Banc of America Securities LLC

9 West 57 ^th Street, 40 ^th Floor

New York, New York 10019

 

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California 94104

 

Lazard Frères & Co. LLC

30 Rockefeller Plaza

New York, New York 10020

 

C.E. Unterberg, Towbin LLC

350 Madison Avenue

New York, New York 10017

 

Ladies and Gentlemen:

 

ISTA Pharmaceuticals, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to certain investors (collectively, the “Investors”) a minimum of 1,250,000 shares of its Common Stock, $.001 par value per share (the “Common Stock”) (the “Minimum Shares”), and a maximum of 2,500,000 shares of Common Stock (the “Maximum Shares”). The shares of Common Stock to be issued are hereinafter referred to as the “Shares”. The Company desires to engage Banc of America Securities LLC (“BofA”) and Thomas Weisel Partners LLC (“TWP” and, together with BofA, the “Representatives”), Lazard Frères & Co. LLC and C.E. Unterberg, Towbin LLC (collectively, with BofA and TWP, the “Placement Agents”) as its exclusive placement agents in connection with such issuance and sale. The Shares are described in the Prospectus that is referred to below.

 

The Company has prepared and filed, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “Act”), with the Securities and Exchange Commission (the “Commission”) a registration statement under the Act on Form S-3 (File No. 333-114815) (the “registration statement”). The registration statement has been declared by the Commission to be effective under the Act. The Company will next file with the Commission pursuant to Rule 424(b) under the Act a final prospectus supplement describing the offering of the Shares, in such form as has been provided to, discussed with, and approved, by the Placement Agents.

 

The term “Registration Statement” as used in this Agreement means the registration statement at the time it became effective and as supplemented or amended prior to the execution of this Agreement, including (i) all financial schedules and exhibits thereto and (ii) all documents incorporated by reference or deemed to be incorporated by reference therein. The term “Basic

 

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Prospectus” as used in this Agreement means the prospectus dated as of May 18, 2004 that is part of the registration statement. The term “Prospectus Supplement” as used in this Agreement means the final prospectus supplement specifically relating to the Shares, in the form filed with, or transmitted for filing to, the Commission pursuant to Rule 424 under the Act. The term “Prospectus” as used in this Agreement means the Basic Prospectus together with the Prospectus Supplement except that if such Basic Prospectus is amended or supplemented on or prior to the date on which the Prospectus Supplement was first filed pursuant to Rule 424(b), the term “Prospectus” shall refer to the Basic Prospectus as so amended or supplemented and as supplemented by the Prospectus Supplement. Any reference herein to the registration statement, the Registration Statement, the Basic Prospectus, any Prospectus Supplement or the Prospectus shall be deemed to refer to and include (i) the documents incorporated by reference therein pursuant to Form S-3 (the “Incorporated Documents”) and (ii) the copy of the Registration Statement, the Basic Prospectus, the Prospectus Supplement, the Prospectus or the Incorporated Documents filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”) and, in the case of the Basic Prospectus, the Prospectus Supplement and the Prospectus, such document in the form first delivered to the Placement Agents for use in connection with the offering of the Shares. Any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Basic Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the filing of any document under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”) after the effective date of the Registration Statement (in the case of the Registration Statement and the Basic Prospectus), or the date of the Prospectus Supplement (in the case of the Prospectus Supplement and the Prospectus), as the case may be, deemed to be incorporated therein by reference. As used herein, “business day” shall mean a day on which the New York Stock Exchange (the “NYSE”) is open for trading.

 

The Company hereby confirms its agreement with the Placement Agents as follows:

 

1.     Agreement to Act as Placement Agents . Upon the basis of the representations and warranties of the Company and subject to the terms and conditions set forth in this Agreement, the Company engages the several Placement Agents to act as its exclusive placement agents, on a best efforts basis, in connection with the offer and sale by the Company of Shares to the Investors. Subject to the terms and conditions set forth herein, offers for the purchase of Shares may be solicited by the Placement Agents as agent for the Company at such times and in such amounts as the Placement Agents shall deem advisable. The Company shall have the sole right to accept offers to purchase the Shares and may reject any such offer, in whole or in part.

 

As compensation for services rendered, at the time of purchase (as defined below) the Company shall pay to the Placement Agents, by Federal Funds wire transfer to an account or accounts designated by the Placement Agents, an amount equal to 6% of the gross proceeds received by the Company in respect of the sale of the Shares (the “Fee”), with 42% of the Fee payable to Banc of America Securities LLC, 37% of the Fee payable to Thomas Weisel Partners LLC, 16% of the Fee payable to Lazard Frères & Co. LLC and 5% of the Fee payable to C.E. Unterberg, Towbin LLC. The Shares are being sold at a price of $8.50 per share. The Placement Agents may retain other brokers or dealers to act as subagents on their behalf in connection with the offering

 

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and sale of the Shares. Anything in this Agreement to the contrary notwithstanding, the obligations of the Placement Agents under this Agreement are several and not joint.

 

This Agreement shall not give rise to any commitment by the Placement Agents or any of their affiliates to underwrite or purchase any of the Shares or otherwise provide any financing, and the Placement Agents shall have no authority to bind the Company in respect of the sale of any Shares. The sale of the Shares shall be made pursuant to purchase agreements in the form included as Exhibit A hereto (the “Purchase Agreements”).

 

2.     Payment and Delivery . Subject to the terms and conditions hereof, payment of the purchase price for, and delivery of certificates for, the Shares shall be made at the office of Stradling Yocca Carlson & Rauth a Professional Corporation (or at such other place as shall be agreed upon by the Placement Agents and the Company), at 10:00 A.M., New York City time, on August 11, 2004 (unless another time shall be agreed to by the Placement Agents and the Company). Subject to the terms and conditions hereof, payment of the purchase price for the Shares shall be made to the Company by Federal Funds wire transfer, against delivery of certificates for the Shares, through the facilities of The Depository Trust Company (“DTC”), to such persons, and shall be registered in such name or names and shall be in such denominations, as the Placement Agents may request at least one business day before the time of purchase (as defined below). Payment of the purchase price for the Shares shall be made at the time of purchase by the purchasers thereof directly to the Company. Notwithstanding anything herein or in any Purchase Agreement to the contrary, no Shares which the Company has agreed to sell pursuant to this Agreement or any Purchase Agreement shall be deemed to have been purchased and paid for, or sold by the Company, until such Shares shall have been delivered to the purchaser thereof and payment of the purchase price therefore has been received by the Company. The time at which such payment and delivery are to be made is hereinafter sometimes called “the time of purchase.” Electronic transfer of the Shares shall be made at the time of purchase in such names and in such denominations as the Placement Agents shall specify.

 

Deliveries of the documents described in Section 6 hereof with respect to the purchase of the Shares shall be made at the offices of Stradling Yocca Carlson & Rauth a Professional Corporation, at 9:00 A.M., New York City time, on the date of the closing of the purchase of the Shares.

 

3.     Representations and Warranties of the Company . The Company represents and warrants to and agrees with each of the Placement Agents, as of the date hereof, that:

 

3.1.     Effective Registration Statement. The Company meets the requirements for the use of Form S-3 under the Act and the offering of the Shares complies with Rule 415 under the Act. The Registration Statement has become effective under the Act; no stop order suspending the effectiveness of the Registration Statement or providing or suspending the use of the Basic Prospectus, the Prospectus Supplement or the Prospectus is in effect, and no proceedings for such purpose are pending before or, to the Company’s knowledge, threatened by the Commission. Any required filing of the Prospectus and any supplement thereto pursuant to Rule 424 (b) of the Act has been and will be made in the manner and within the time period required by such Rule 424(b).

 

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3.2.     Contents of Registration Statement . (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, 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, (ii) the Registration Statement complied when it became effective, complies and, as amended or supplemented, if applicable, will comply and the Prospectus complies and, as amended or supplemented, if applicable, will comply in all material respects with the Act and the applicable rules and regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Placement Agent furnished to the Company in writing by such Placement Agent through the Representatives expressly for use therein. The Chief Executive Office and the Chief Financial Officer of the Company have signed, and the Company has furnished to the Commission, all certifications required by Section 906 of the Sarbanes-Oxley Act of 2002; such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications. The Company’s Subsidiary is not required to file any forms, reports or other documents with the Commission.

 

3.3.     Incorporated Documents . The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they became effective or were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and at the time the Registration Statement and any amendments thereto become effective, when read together with the other information in the Prospectus, and at the time of purchase, did not, do not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

3.4.     Due Incorporation . The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own, lease and operate its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business as described in the Prospectus or its ownership, operation or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not cause a material adverse change, in the business, properties, assets, results of operations, condition (financial or otherwise) or operations of the Company, whether or not arising in the ordinary course of business, other than changes that affect the specialty pharmaceutical industry generally (a ”Material Adverse Effect”).

 

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3.5.     Subsidiary . The subsidiary of the Company, VisionEx (VISIONEX PTE, LTD.) (the “Subsidiary”), has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership, operation or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. All of the issued shares of capital stock of the Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; there is no outstanding option, right or agreement of any kind relating to the issuance, sale or transfer of any capital stock or other equity securities of the Subsidiary to any person except the Company, none of the outstanding shares of capital stock of the Subsidiary was issued in violation of preemptive or similar rights. The Subsidiary does not constitute a “significant Subsidiary” as defined in Rule 1-02(w) of Regulation S-X promulgated under the Exchange Act.

 

3.6.     Placement Agency Agreement . The Company has full legal right, power and authority to enter into and perform this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as rights to indemnification or contribution 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.

 

3.7.     Description of Capital Stock . The authorized capital stock of the Company, including the Shares, conforms as to legal matters to the description thereof contained in the Registration Statement and the Prospectus.

 

3.8.     Authorized Stock . As of the date of this Agreement, the Company has, and at the time of purchase will have, an authorized capitalization not materially different from that which is set forth in the Registration Statement and the Prospectus under the heading “Capitalization.” All of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, have been issued in compliance with all applicable laws (including, but not limited to, federal and state securities laws) and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right.

 

3.9.     Validly Issued Shares . The Shares to be sold by the Company have been duly authorized and, when issued and delivered against payment therefor as provided herein and in the Purchase Agreements, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. No holder of the Shares will be subject to personal liability by reason of being such a holder.

 

3.10.     No Breach . Except as described in the Prospectus, the Company is not in breach of, or in default (nor has any event occurred which with notice, lapse of time, or both would result in any breach of, or constitute a default) (i) under its certificate of incorporation or

 

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by-laws or (ii) in the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any lease, contract or other agreement or instrument to which the Company is a party or by which it or any of its properties is bound which, with respect to clause (ii) above, would reasonably be expected to result in a Material Adverse Effect.

 

3.11.     No Conflict . The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement (including, without limitation, the issuance and sale of the Shares and the consummation of the transactions contemplated hereby) will not contravene or result in any breach of or constitute a default or give rise to a right to accelerate the due date of any payment due under any provision of applicable law or the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company incorporated or deemed to be incorporated by reference in the Registration Statement, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company.

 

3.12.     Authorization . No approval, authorization, consent or order of or filing with any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency or of or with the NASDAQ, or approval of the shareholders of the Company, is required in connection with (i) the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby or (ii) the sale and delivery of the Shares being sold by the Company, other than (x) such as have been obtained, or will have been obtained as of the time of purchase, under the Act or the Exchange Act, (y) such approvals as have been obtained in connection with the approval of the listing of the Shares on the Nasdaq National Market System and (z) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered under the terms of this Agreement.

 

3.13.     Legal Proceedings; Exhibits . There are no legal or governmental proceedings pending or, to the Company’s knowledge, threatened to which the Company or the officers or directors of the Company (in their capacity as officers or directors, as the case may be), is a party, or to which any of the properties of the Company is subject, that might result in a Material Adverse Effect or materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder, that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described or incorporated by reference in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described or filed or incorporated as required. The Company is not subject to any judgment order or decree that materially restricts its business practices or its ability to acquire any property or conduct its business as described in the Prospectus in any area.

 

3.14.     Compliance with Act . Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Act, complied when so filed in all material respects with the Act and the applicable rules and regulations of the Commission thereunder.

 

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3.15.     Warrants and Options . Except as disclosed in the Registration Statement and the Prospectus, there are no outstanding (i) securities or obligations of the Company convertible into or exchangeable for any capital stock of the Company; (ii) warrants, rights or options to subscribe for or purchase from the Company any such capital stock or any such convertible or exchangeable securities or obligations; (iii) obligations of the Company to issue any shares of capital stock, any such convertible or exchangeable securities or obligation, or any such warrants, rights or options; or (iv) contractual obligation of the Company to repurchase, redeem or otherwise acquire any Shares of Common Stock of the Company or to provide funds to make any investment in any other person or entity.

 

3.16.     No Registration or Other Rights . There are no contracts, agreements or understandings between the Company and any person or entity granting such person or entity the right, contractual or otherwise, to require the Company to issue to it or to file a registration statement under the Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement other than as described in the Registration Statement or as have been waived in writing in connection with this offering. In addition, no person or entity has preemptive rights, co-sale rights, rights of first refusal or other rights to purchase any of the Shares.

 

3.17.     Offering . In connection with this offering, the Company has not offered and will not offer shares of its Common Stock or any other securities convertible into or exchangeable or exercisable for shares of Common Stock in a manner in violation of the Act; the Company has not distributed and will not distribute any offering material in connection with the offer and sale of the Shares, other than the Prospectus, the Registration Statement and other materials permitted by the Act.

 

3.18.     Price Stabilization and Manipulation . The Company and each of its officers, directors and controlling persons has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or which is otherwise proscribed by Regulation M promulgated by the Commission.

 

3.19.     Broker/Dealer . The Company (i) is not required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act or the regulations promulgated thereunder, and (ii) directly, or indirectly through one or more intermediaries, does not control any member firm of the NASD.

 

3.20.     Legal, Tax, Accounting Advice . The Company has not relied upon any of the Placement Agents or legal counsel to the Placement Agents for any legal, tax or accounting advice in connection with the offering and sale of the Shares.

 

3.21.     Agreements . All agreements between the Company and third parties filed as exhibits to the Registration Statement, incorporated or deemed to be incorporated by reference in the Registration Statement or referenced in the Prospectus are legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except to the

 

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extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.

 

3.22.     No Relationship . No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, which is required by the Act to be described in the Registration Statement or the Prospectus that is not so described.

 

3.23.     Not an Investment Company . The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an “investment company” or an entity “controlled” by an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

3.24.     Compliance with Environmental Laws . The Company (i) is in compliance in all material respects with any and all applicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees and judgments relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws, to conduct its business as described in the Prospectus; and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, have a Material Adverse Effect. There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up and any potential liabilities to third parties) which would, individually or in the aggregate, have a Material Adverse Effect. To the Company’s knowledge, there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company and there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its predecessors in interest relating to hazardous materials or any Environmental Laws. No property that is or has been owned, leased or occupied by the Company or its Subsidiary has been designated as a Superfund Site pursuant to the Comprehensive Environmental Response, Compensation of Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq. “CERCLA”) or otherwise designated as a contaminated site under applicable state or local law and the Company has not been named as a “potentially responsible party” under CERCLA.

 

3.25.     Regulatory Compliance . The Company is conducting its business in compliance with the Fair Labor Standards Act, the rules and regulations of the United States Food and Drug Administration (“FDA”), and all applicable federal, state and local laws, orders, rules, regulations, directives, decrees and judgments of each of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal laws and regulations governing health, sanitation, safety, zoning and land use, except where the failure to be so in compliance would not have a Material Adverse Effect. To the Company’s knowledge,

 

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there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings before the FDA or other federal, state, local or foreign governmental bodies that involve or affect the Company that, if the subject of an action unfavorable to the Company, would be reasonably likely to result in a Material Adverse Effect.

 

3.26.     Absence of Material Changes . Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company has not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock; (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company, except in each case as described in the Prospectus, (iv) there has not been any development, whether or not arising in the ordinary course of business, that would reasonably be expected to result in a Material Adverse Effect, and (v) there has not been any material loss or interference with the business of the Company from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree. The Company does not have any material contingent obligation which is not disclosed in the Registration Statement.

 

3.27.     Collaboration Agreements . The Company has not received any written notice of the termination or threatened termination of any consulting, licensing, marketing, research and development, cooperative or any similar agreement filed as an exhibit to the Registration Statement, incorporated or deemed to be incorporated by reference in the Registration Statement, including without limitation, the collaborative agreements listed under the sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 entitled, “Business—Collaborations”.

 

3.28.     Good Title to Properties . The Company does not own any real property. The Company has good and marketable title to all personal property owned by it which is material to the business of the Company as described in the Registration Statement and the Prospectus, in each case free and clear of all liens, encumbrances and defects except such as are described in the Registration Statement and the Prospectus or such as are not reasonably expected to result in a Material Adverse Effect, and do not interfere with the use made and proposed to be made of such property by the Company; and any real property and buildings held under lease by the Company is held by it under valid, subsisting and enforceable leases with such exceptions as are not reasonably expected to result in a Material Adverse Effect, do not interfere with the use made and proposed to be made of such property and buildings by the Company.

 

3.29.     Intellectual Property Rights .

 

3.29.1.    Trademarks. To the Company’s knowledge, all Company trademark registrations, that are used or are likely to be used in the business of the Company as described in the Registration Statement and the Prospectus, are currently in compliance in all material respects with all legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications) other than any requirement that, if not satisfied, would not result in a cancellation of any such registration or otherwise materially

 

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affect the priority and enforceability of the Company trademark in question. To the Company’s knowledge, no registered Company trademark, that is used or is likely to be used in the business of the Company as described in the Registration Statement and the Prospectus, is now involved in any opposition or cancellation proceeding in the United States Patent and Trademark Office. To the Company’s knowledge, there has been no prior use of any material Company trademark by any third party that confers upon said third party superior priority to register such Company trademark.

 

3.29.2.    Patents. To the Company’s knowledge, all issued Company patents, that are used or are likely to be used in the business of the Company as described in the Registration Statement and the Prospectus, are currently in compliance with legal requirements (including payment of filing, examination, and maintenance fee and proofs of working or use) other than any requirement that, if not satisfied, would not result in a revocation or otherwise materially affect the enforceability of the Company patent in question. To the Company’s knowledge, no Company patent, that is used or is likely to be used in the business of the Company as described in the Registration Statement and the Prospectus, is now involved in any interference, reissue, reexamination or opposing proceeding in the United States Patent and Trademark Office. To the Company’s knowledge, no such action has been threatened. To the Company’s knowledge, there is no issued patent or patent application of any person that invalidates any claim of any issued Company patent, that is used or is likely to be used in the business of the Company as described in the Registration Statement and the Prospectus.

 

3.29.3.    Trade Secrets. The Company has taken reasonable steps in accordance with normal industry practice to protect its rights in the Company’s confidential information and trade secrets, the secrecy of which is material to the business of the Company as described in the Registration Statement and the Prospectus. Without limiting the generality of the foregoing, the Company generally enforces a policy of requiring each relevant employee, consultant and contractor to execute agreements that contain provisions designed to prevent unauthorized disclosure of the Company’s confidential information and Company trade secrets. With respect to employees, such agreements assign to the Company all rights to any Intellectual Property (as defined below) relating to the Company’s business as described in the Registration Statement and the Prospectus that is developed by the employee in the course of his or her activities as an employee of the Company. With respect to contractors and consultants, the agreements either assign all rights in Intellectual Property developed pursuant to the agreement, which the Company determined at the time was material to its business or license such rights on agreed-upon terms. Except under confidentiality obligations, to the Company’s knowledge, there has been no disclosure by the Company of material confidential information or material trade secrets of Company.

 

3.29.4.    License Agreements. Except as disclosed in the Registration Statement and the Prospectus, to the Company’s knowledge, the Company is not in breach or default (nor has any event occurred which with notice, lapse of time, or both would result in any breach of, or constitute a default) under any license agreements granting to the Company any right to incorporate any Intellectual Property into any commercial product of the Company (collectively, the “Inbound License Agreements”) filed as an exhibit to the Registration Statement or any document incorporated or deemed to be incorporated by reference in the Registration Statement or the Prospectus or any license agreements under which the Company

 

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licenses or grants a third party rights to incorporate any rights under any Company Intellectual Property into any commercial product of such third party (collectively, the “Outbound License Agreements”) filed as an exhibit to the Registration Statement or any document incorporated or deemed to be incorporated by reference in the Registration Statement or the Prospectus.

 

3.29.5.    Ownership; Sufficiency of Intellectual Property Assets. The Company owns or possesses adequate licenses or other rights to use, free and clear of liens, orders and arbitration awards, all of the material patents, patent rights, licenses, inventions, copyrights (registered and unregistered), know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, the “Intellectual Property”) used in its business. The Company’s Intellectual Property constitutes all the material Intellectual Property rights used in the operation of the Company’s business as described in the Registration Statement and the Prospectus.

 

3.29.6.    Protection of Intellectual Property. The Company has taken reasonable steps to protect the material Intellectual Property of the Company.

 

3.29.7.    No Infringement or Prospective Infringement by the Company. To the Company’s knowledge, none of the products manufactured, marketed, used, sold or licensed by the Company and/or as anticipated to be manufactured, marketed, used, sold or licensed by the Company, and none of the Intellectual Property used by the Company in the conduct of the Company’s business as described in the Registration Statement and the Prospectus, infringes upon, violates or constitutes the unauthorized use of any valid and enforceable rights owned or controlled by any third party.

 

3.29.8.    No Pending or Threatened Infringement Claims. No litigation to which the Company is a party is now pending and, to the Company’s knowledge, no notice or other claim in writing has been received by the Company (i) alleging that the Company has engaged in any activity or conduct that infringes upon, violates or constitutes the unauthorized use of the Intellectual Property rights of any third party or (ii) challenging the ownership, use, validity or enforceability of any Intellectual Property owned by or exclusively licensed to or by the Company. To the Company’s knowledge, no Intellectual Property, that is used or is likely to be used in the business of the Company as described in the Registration Statement and the Prospectus (y) that is owned by the Company is subject to any outstanding order, judgment, decree, stipulation or agreement materially restricting the use, sale, transfer, assignment or licensing thereof by the Company, except as may be specifically provided in any such Outbound License Agreement or other licenses, or (z) that is the subject of an Inbound License Agreement is, to the Company’s knowledge, subject to any outstanding judgment, decree, stipulation or agreement materially restricting the use, sale, transfer, assignment or licensing thereof by the Company, except as provided in the Inbound License Agreements or other licenses or agreements.

 

3.29.9.    No Infringement by Third Parties. To the Company’s knowledge, no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned by the Company, that is used or is likely to be used in the business of the Company as

 

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described in the Registration Statement and the Prospectus, and no such claims have been brought against any third party by the Company.

 

3.30.     No Labor Disputes . No material labor dispute with the employees of the Company exists, or, to the Company’s knowledge, is imminent; and the Company does not have knowledge of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could have a Material Adverse Effect.

 

3.31.     Insurance . The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the business in which it is engaged; all policies insuring the Company are in full force and effect and the Company is in compliance with the terms of such policies in all material respects, and the Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business as described in the Registration Statement and the Prospectus at a cost that would not have a Material Adverse Effect.

 

3.32.     Governmental Permits . The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities ( “ Governmental Permits”) necessary to conduct its business, including the ownership, operation or leasing of property, and the Company is not in violation of, is not in default under or has not received any notice of proceedings relating to the possible revocation or modification of any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect. All of the Governmental Permits are valid and in full force and effect, except when the invalidity of such Governmental Permits or the failure of such Governmental Permits to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect.

 

3.33.     No Unlawful Payments . Neither the Company, nor any other person associated with or acting on behalf of the Company, including, without limitation, any director, officer, agent or employee of the Company, has, directly or indirectly, while acting on behalf of the Company (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful payment or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange Act. The Company is in compliance with the provisions of Section 13(b) of the Exchange Act.

 

3.34.     Accounting Controls . The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Board of Directors of the

 

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Company maintains an audit committee that meets the listing standards imposed by the Nasdaq National Market for companies whose stock is approved for quotation in that market and the members of which are independent of the Company as required by such listing standards. The audit committee meets regularly and has reviewed with management and Ernst & Young, as appropriate, all financial statements filed with the Commission from January 1, 2004 to the present.

 

3.35.     Financial Statements . The consolidated financial statements of the Company included in the Registration Statement and the Prospectus, together with related schedules and notes, present fairly in all material respects the financial position of the Company and its subsidiary as of the dates indicated and the results of operations, stockholders’ equity, and cash flows of the Company for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States and on a consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission; the financial statement schedules included in the Registration Statement and the Prospectus fairly present in all material respects the information required to be shown therein; all requirements of Form S-3 and the Act and the applicable rules and regulations of the Commission thereunder with respect to financial statements and schedules to be included in the Registration Statement and the Prospectus are satisfied in all material respects; the selected financial data and the summary financial information, if any, included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement; the pro forma financial statements and other pro forma financial information, if any, included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission’s rules and guidelines for pro forma financial statements, have been properly compiled on the pro forma bases set forth therein and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to reflect the transaction or circumstances referred to therein.

 

3.36.     Accountants . Ernst & Young, whose reports on the financial statements of the Company are filed with the Commission and are included in the Registration Statement and the Prospectus, are and were, during the periods covered by such reports, independent public accountants as required by the Act and the applicable rules and regulations of the Commission thereunder.

 

3.37.     Taxes . Except as described in the Registration Statement and the Prospectus, the Company has filed on a timely basis all material federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and has paid all taxes shown as due thereon; no tax deficiency has been asserted against the Company, nor does the Company know of any tax deficiency which is likely to be asserted; there are no tax audits or investigations pending or threatened that, if adversely determined, could have a Material Adverse Effect; nor are there any material proposed additional tax assessments against the Company; all tax liabilities are adequately provided for on the books of the Company.

 

3.38.     Books and Records . The books of account, minute books, stock record books and other records of the Company are complete and correct in all material respects and

 

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have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act, including an adequate system of internal controls. The minute books of the Company contain accurate and complete records of all meetings held