EXECUTION COPY
10,000,000 Shares
VION PHARMACEUTICALS, INC.
Common Stock
PLACEMENT AGENCY AGREEMENT
--------------------------
January 25, 2005
CIBC World Markets Corp.
Leerink Swann & Company
as placement agents
c/o CIBC World Markets Corp.
300 Madison Avenue, 3rd Floor
New York, New York 10017
Ladies and Gentlemen:
Vion Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions contained herein, to
issue and
sell 10 million shares (the "Shares") of common stock, $0.01 par
value per share
(the "Common Stock"), directly to certain investors (collectively,
the
"Investors"). The Company desires to engage you as its placement
agents (the
"Placement Agents") in connection with such issuance and sale. The
Shares are
more fully described in the Registration Statement (as hereinafter
defined).
The Company has prepared and filed in conformity with the
requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and
the published
rules and regulations thereunder (the "Rules") adopted by the
Securities and
Exchange Commission (the "Commission") a Registration Statement (as
hereinafter
defined) on Form S-3, as amended (No. 333-121251), including a base
prospectus
relating to the Shares (the "Base Prospectus") and such amendments
thereof as
may have been required to the date of this Agreement. Copies of
such
Registration Statement (including all amendments thereof) and of
the related
Base Prospectus (as hereinafter defined) have heretofore been
delivered by the
Company to you. The term "Registration Statement" as used in this
Agreement
means the initial registration statement (including all exhibits,
financial
schedules and all documents and information deemed to be a part of
the
Registration Statement through incorporation by reference or
otherwise)), as
amended, at the time and on the date it becomes effective (the
"Effective
Date"), including the
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information (if any) contained in the form of final prospectus
filed with the
Commission pursuant to Rule 424(b) of the Rules and deemed to be
part thereof at
the time of effectiveness pursuant to Rule 430A of the Rules. If
the Company has
filed an abbreviated registration statement to register additional
Shares
pursuant to Rule 462(b) under the Rules (the "462(b) Registration
Statement"),
then any reference herein to the Registration Statement shall also
be deemed to
include such 462(b) Registration Statement. The prospectus
supplement relating
to the Shares as filed with the Commission pursuant to and in
accordance with
Rule 424(b) under the Securities Act is hereinafter referred to as
the
"Prospectus Supplement." The term "Prospectus" as used in this
Agreement means
the Base Prospectus together with the Prospectus Supplement. As
used herein, the
terms "Base Prospectus," "Prospectus," "Registration Statement,"
"Rule 462
Registration Statement," and "Prospectus Supplement" shall include
any documents
incorporated by reference therein and any reference to any
amendment or
supplement to the Registration Statement or the Prospectus shall be
deemed to
refer to and include any document filed under the Securities
Exchange Act of
1934, as amended (the "Exchange Act"), after the date of the Base
Prospectus by
the Company with the Commission, that are deemed to be incorporated
by reference
in the Prospectus.
The Company hereby confirms that the Placement Agents, in
connection with
their duties in such capacity, are authorized to distribute or
cause to be
distributed the Prospectus (as from time to time amended or
supplemented if the
Company furnishes amendments or supplements thereto to the
Placement Agents).
1. Agreement to Act as Placement Agent, Delivery and Payment. On
the basis
of the representations, warranties and agreements contained in, and
subject to
the terms and conditions of, this Agreement:
(a) The Placement Agents agree to act as the Company's exclusive
placement agents in connection with the issuance and sale, on a
reasonable
efforts basis, by the Company of the Shares to the Investors. The
Company
acknowledges and agrees that the Placement Agents' engagement
hereunder is
not an agreement by the Placement Agents or any of their affiliates
to
underwrite or purchase any securities or otherwise provide any
financing.
As compensation for their services hereunder, the Company agrees to
pay on
the Closing Date (as defined below) the Placement Agents by wire
transfer
of immediately available funds $1,478,750 pursuant to this
Agreement and
the letter between CIBC and the Company, dated the date hereof.
(b) Payment of the purchase price for, and delivery of the Shares
shall be made at a closing (the "Closing") at the offices of
Skadden, Arps,
Slate, Meagher & Flom LLP, at 9:00 a.m., New York time, on the
Closing Date
to take place on the third or fourth business day (as permitted
under Rule
15c6-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange
Act")) after the determination of the sales price of the Shares
(such time
and date of payment and delivery being herein called the "Closing
Date").
All actions taken at the Closing shall be deemed to have occurred
simultaneously.
(c) Payment of the purchase price for the Shares shall be made by
the
Investors directly to or upon the order of the JPMorgan Chase Bank,
as
escrow agent (the "Escrow Agent") by wire transfer in immediately
available
funds to the Escrow Agent, upon delivery of the Shares through the
facilities of The Depository Trust Company, to the
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Investors, and shall be registered in such name or names and shall
be in
such denominations, as the Investors may request at least one
business day
before the Closing Date.
(d) The several purchases of the Shares by the Investors shall be
evidenced by the execution of one or more purchase agreements each
substantially in the form attached hereto as Exhibit A (the
"Purchase
Agreement").
(e) Prior to the earlier of (i) the date on which this Agreement is
terminated and (ii) the Closing Date, the Company shall not,
without the
prior consent of the Placement Agents, solicit or accept offers to
purchase
Shares (other than pursuant to the exercise of options or warrants
to
purchase shares of Common Stock that are outstanding at the date
hereof)
otherwise than through the Placement Agents.
2. Representations and Warranties of the Company. The Company
represents
and warrants to each Placement Agent as of the date hereof, and as
of the
Closing Date, as follows:
(a) The Company meets the requirements for use of Form S-3 under
the
Securities Act. On the Effective Date, the Registration Statement
complied,
and on the date of the Prospectus, the date any post-effective
amendment to
the Registration Statement becomes effective, the date any
supplement or
amendment to the Prospectus is filed with the Commission and the
Closing
Date, the Registration Statement and the Prospectus (and any
amendment
thereof or supplement thereto) will comply, in all material
respects, with
the requirements of the Securities Act and the Rules and the
Exchange Act
and the rules and regulations of the Commission thereunder. The
Registration Statement did not, as of the Effective Date, contain
any
untrue statement of a material fact or omit to state any material
fact
required to be stated therein or necessary in order to make the
statements
therein not misleading; and on the Effective Date and the Closing
Date
neither the Registration Statement nor the Prospectus, nor any
amendment
thereof or supplement thereto, will contain any untrue statement of
a
material fact or will omit to state any material fact required to
be stated
therein or necessary in order to make the statements therein not
misleading. If applicable, when any related preliminary prospectus
was
first filed with the Commission (whether filed as part of the
Registration
Statement or any amendment thereto or pursuant to Rule 424(a) of
the Rules)
and when any amendment thereof or supplement thereto was first
filed with
the Commission, such preliminary prospectus as amended or
supplemented
complied in all material respects with the applicable provisions of
the
Securities Act and the Rules and did not contain any untrue
statement of a
material fact or omit to state any material fact required to be
stated
therein or necessary in order to make the statements therein not
misleading. The Prospectus delivered to the Placement Agents for
use in
connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to
EDGAR,
except to the extent permitted by Regulation S-T. If Rule 434 is
used, the
Company will comply with the requirements of Rule 434 and the
Prospectus
shall not be "materially different," as such term is used in Rule
434, from
the Prospectus included in the Registration Statement at the time
it became
effective. Notwithstanding the foregoing, none of the
representations and
warranties in this paragraph 2(a) shall
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apply to statements in, or omissions from, the Registration
Statement or
the Prospectus made in reliance upon, and in conformity with,
information
herein or otherwise furnished in writing by the Placement Agents
for use in
the Registration Statement or the Prospectus.
(b) The Registration Statement is effective under the Securities
Act,
and no stop order preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the
Prospectus has been issued by the Commission and no proceedings for
that
purpose have been instituted or, to the Company's knowledge, are
threatened
against the Company under the Securities Act. Any required filing
of the
Prospectus and any supplement thereto pursuant to Rule 424(b) of
the Rules
has been or will be made in the manner and within the time period
required
by such Rule 424(b).
(c) The documents incorporated by reference in the Registration
Statement and the Prospectus, at the time they became effective or
were
filed with the Commission, as the case may be, complied in all
material
respects with the requirements of the Securities Act or the
Exchange Act,
as applicable, and the rules and regulations of the Commission
thereunder,
and at the time they became effective or were filed with the
Commission, as
the case may be, none of such documents contained an untrue
statement of a
material fact or omitted to state a material fact required to be
stated
therein or necessary in order to make the statements therein, in
the light
of the circumstances under which they were made, not misleading,
and any
further documents so filed and incorporated by reference in the
Registration Statement and the Prospectus, when such documents
become
effective or are filed with the Commission, as the case may be,
will
conform in all material respects to the requirements of the
Securities Act
or the Exchange Act, as applicable, and the rules and regulations
of the
Commission thereunder 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 light of
the
circumstances under which they are made, not misleading.
(d) The financial statements of the Company (including all notes
and
schedules thereto) included or incorporated by reference in the
Registration Statement and Prospectus present fairly the financial
position
of the Company and its consolidated subsidiaries at the dates
indicated and
the statement of operations, stockholders' equity and cash flows of
the
Company and its consolidated subsidiaries for the periods
specified; and
such financial statements and related schedules and notes thereto,
and the
unaudited financial information filed with the Commission as part
of the
Registration Statement, have been prepared in conformity with
generally
accepted accounting principles, consistently applied throughout the
periods
involved. The selected financial data included in the Prospectus
present
fairly the information shown therein as at the respective dates and
for the
respective periods specified and have been presented on a basis
consistent
with the consolidated financial statements set forth in the
Prospectus and
other financial information.
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(e) Ernst & Young LLP, whose reports are filed with the
Commission as
a part of the Registration Statement, are and, during the periods
covered
by their reports, were independent public accountants as required
by the
Securities Act and the Rules.
(f) The Company, each of its subsidiaries, and each entity
(corporation, partnership, joint venture, association or other
business
organization) controlled directly or indirectly by the Company, is
duly
organized, validly existing and in good standing under the laws of
their
respective jurisdictions of incorporation or organization. The
Company and
its subsidiaries each is duly qualified to do business and is in
good
standing as a foreign entity in each jurisdiction in which the
nature of
the business conducted by it or location of the assets or
properties owned,
leased or licensed by it requires such qualification, except for
such
jurisdictions where the failure to so qualify individually or in
the
aggregate would not have a material adverse effect on the assets,
properties, condition, financial or otherwise, or in the results of
operations, business affairs or business prospects of the Company
and its
subsidiaries considered as a whole (a "Material Adverse Effect");
and to
the Company's knowledge, no proceeding has been instituted in any
such
jurisdiction revoking, limiting or curtailing, or seeking to
revoke, limit
or curtail, such power and authority or qualification. Except as
set forth
in the Prospectus or the Registration Statement, the Company does
not own,
lease or license any asset or property or conduct any business
outside the
United States of America.
(g) Except as set forth in the Prospectus, the Company and its
subsidiaries each has all requisite corporate power and authority,
and all
necessary authorizations, approvals, consents, orders, licenses,
certificates and permits of and from all governmental or regulatory
bodies
or any other person or entity (collectively, the "Permits"), to
own, lease
and license its assets and properties and conduct its business as
currently
conducted, all of which are valid and in full force and effect,
except
where the lack of such Permits, individually or in the aggregate,
would not
have a Material Adverse Effect. The Company and its subsidiaries
each has
fulfilled and performed in all material respects all of its
material
obligations with respect to such Permits and no event has occurred
that
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of
the
rights of the Company thereunder; and all of the descriptions in
the
Prospectus of the Company's and its subsidiaries' legal and
governmental
proceedings and procedures before the United States Food and Drug
Administration (the "FDA"), or any other national, departmental,
state or
local governmental body exercising comparable authority do not
contain an
untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements
therein
not misleading. Except required notices of the issuances of the
Shares to
Nasdaq and as may be required under the Securities Act, state and
foreign
securities or Blue Sky laws, no other Permits are required to enter
into,
deliver and perform this Agreement and each Purchase Agreement and
to issue
and sell the Shares.
(h) Since the respective dates as of which information is given in
the
Prospectus, the studies, tests and preclinical and clinical trials
conducted by or on behalf of the Company and its subsidiaries that
are
described in the Prospectus were and, if still pending, are being
conducted
in accordance with experimental protocols, procedures and
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controls pursuant to, where applicable, accepted professional
scientific
standards; the descriptions of the results of such studies, tests
and
trials contained in the Prospectus are true and correct in all
material
respects; and, except as disclosed in the Prospectus, the Company
and its
subsidiaries each have not received any notices or correspondence
from the
FDA, or any national, state or local governmental body exercising
comparable authority requiring the termination or suspension of any
studies, tests or preclinical or clinical trials conducted by or on
behalf
of the Company.
(i) Except as set forth in the Prospectus and except as could not
reasonably be expected to have a Material Effect, the Company and
its
subsidiaries each own or possesses adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets
and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks,
trade names
or other intellectual property (collectively, "Intellectual
Property")
necessary to carry on the business now operated by them as
described in the
Prospectus. Except as disclosed in the Prospectus, there is no
litigation
or other proceeding pending or, to the Company's knowledge,
threatened and
no claims are presently being asserted by any third party
challenging or
questioning the ownership, validity, enforceability of the
Company's or its
subsidiaries right to use or own any Intellectual Property or
asserting
that the use of any Intellectual Property by the Company or its
subsidiaries or the operation of the business of the Company or its
subsidiaries infringes upon or misappropriates the Intellectual
Property of
any third party, other than infringements which would not be
reasonably
likely to have a Material Adverse Effect, and the Company is not
otherwise
aware of any infringement of or conflict with asserted rights of
others
with respect to any of the Company's Intellectual Property or of
any facts
or circumstances which would render any of the Company's
Intellectual
Property invalid or inadequate to protect the interest of the
Company or
its subsidiaries therein, and which infringement or conflict (if
the
subject of any unfavorable decision, ruling or finding) or
invalidity or
inadequacy, singly or in the aggregate, would result in a Material
Adverse
Effect.
(j) The Company and its subsidiaries each have good and marketable
title in fee simple to all real property, and good and marketable
title to
all other property owned by it, in each case free and clear of all
liens,
encumbrances, claims, security interests and defects, except such
as do not
materially 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 and its subsidiaries. All property held under lease by the
Company
and its subsidiaries is held by them under valid, existing and
enforceable
leases, free and clear of all liens, encumbrances, claims, security
interests and defects, except such as are not material and do not
materially interfere with the use made or proposed to be made of
such
property by the Company and its subsidiaries. Subsequent to the
respective
dates as of which information is given in the Registration
Statement and
the Prospectus, (i) there has not been any change in the Company's
business
that has resulted in any Material Adverse Effect on the assets,
properties,
condition, financial or otherwise, or in the results of operations,
business affairs or business prospects of the Company and its
subsidiaries
considered as a whole; (ii) neither the Company nor any of its
subsidiaries
has sustained any loss or interference with its assets, businesses
or
properties (whether owned or leased) from fire, explosion,
earthquake,
flood or other calamity, whether or not covered
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by insurance, or from any labor dispute or any court or legislative
or
other governmental action, order or decree which would have a
Material
Adverse Effect; and (iii) since the date of the latest balance
sheet
included or incorporated by reference in the Registration Statement
and the
Prospectus, neither the Company nor its subsidiaries has (A) issued
any
securities or incurred any liability or obligation, direct or
contingent,
for borrowed money, except such liabilities or except issuance of
options
and stock upon the exercise of options and warrants obligations
incurred in
the ordinary course of business and purchases under the Company's
stock
purchase plan, (B) entered into any transaction not in the ordinary
course
of business or (C) declared or paid any dividend or made any
distribution
on any shares of its stock or redeemed, purchased or otherwise
acquired or
agreed to redeem, purchase or otherwise acquire any shares of its
capital
stock.
(k) There is no document, contract or other agreement required to
be
described in the Registration Statement or Prospectus or to be
filed as an
exhibit to the Registration Statement which is not described or
filed as
required by the Securities Act or Rules. Each description of a
contract,
document or other agreement in the Registration Statement and the
Prospectus accurately reflects in all material respects the terms
of the
underlying contract, document or other agreement. Neither the
Company nor
any of its subsidiaries nor, to the Company's knowledge, any other
party is
in default in the observance or performance of any material term or
obligation to be performed by it under any such agreement, and no
event has
occurred which with notice or lapse of time or both would
constitute such a
default, in any such case which default or event, individually or
in the
aggregate, would have a Material Adverse Effect.
(l) The statistical and market related data included in the
Prospectus
are based on or derived from sources that the Company believes to
be
reliable and accurate.
(m) Neither the Company nor any of its subsidiaries is in violation
of
any term or provision of its charter, by-laws or of any franchise,
license,
permit, judgment, decree, order, statute, rule or regulation, where
the
consequences of such violation, individually or in the aggregate,
would
have a Material Adverse Effect.
(n) Neither the execution, delivery and performance of this
Agreement
by the Company nor the consummation of any of the transactions
contemplated
hereby (including, without limitation, the issuance and sale by the
Company
of the Shares) will give rise to a right to terminate or accelerate
the due
date of any payment due under, or conflict with or result in the
breach of
any term or provision of, or constitute a default (or an event
which with
notice or lapse of time or both would constitute a default) under,
or
require any consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties
or assets
of the Company or its subsidiaries pursuant to the terms of, any
material
indenture, mortgage, deed of trust or other agreement or instrument
to
which the Company or any of its subsidiaries is a party or by which
either
the Company, its subsidiaries or any of their properties or
businesses is
bound, or any franchise, license, permit, judgment, decree, order,
statute,
rule or regulation applicable to the Company or any of its
subsidiaries, or
violate any provision of the charter or by-laws of the Company or
any of
its subsidiaries except for such consents or waivers which have
already
been obtained and are in full force and effect and
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except such as may be required by the securities or Blue Sky laws
of the
various states in connection with the offer and sale of the Shares
and
required notices of the issuances or the Shares to the Nasdaq
SmallCap
Market.
(o) The Company is authorized to issue a total of 155,000,000
shares
of capital stock consisting of 150,000,000 shares of Common Stock
and
5,000,000 shares of Preferred Stock. After giving effect to the
transactions contemplated by the Purchase Agreement, on the date
hereof,
(i) no shares of Preferred Stock will be issued and outstanding,
(ii)
65,863,725 shares of Common Stock will be issued and outstanding,
and (iii)
5,955,785 shares of common stock will be reserved for issuance
under the
Company's stock option plans, of which 5,173,878 shares were
subject to
outstanding options as of January 25, 2005. The certificates
evidencing the
Shares are in due and proper legal form and have been duly
authorized for
issuance by the Company. All of the issued and outstanding shares
of Common
Stock have been duly and validly issued and are fully paid and
nonassessable. There are no statutory preemptive or other similar
rights to
subscribe for or to purchase or acquire any shares of Common Stock
of the
Company or any of its subsidiaries or any such rights pursuant to
its
Certificate of Incorporation or by-laws or any agreement or
instrument to
or by which the Company or any of its subsidiaries is a party or
bound. The
Shares, when delivered by the Company pursuant to this Agreement
and the
Purchase Agreements, will be duly and validly issued, fully paid
and
nonassessable and none of them will be issued in violation of any
preemptive or other similar right. Except as disclosed in the
Registration
Statement and the Prospectus, there is no outstanding option,
warrant or
other right calling for the issuance of, and there is no
commitment, plan
or arrangement to issue, any share of stock of the Company or any
of its
subsidiaries or any security convertible into, or exercisable or
exchangeable for, such stock. The Common Stock and the Shares
conform in
all material respects to all statements in relation thereto
contained in
the Registration Statement and the Prospectus. All outstanding
shares of
capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued, and are fully paid and nonassessable
and are
owned directly by the Company free and clear of any security
interests,
liens, encumbrances, equities or claims, other than those described
in the
Prospectus.
(p) No holder of any security of the Company has any right, which
has
not been waived, to have any security owned by such holder included
in the
Registration Statement or to demand registration of any security
owned by
such holder for a period of 90 days after the date of this
Agreement. Each
director and officer of the Company listed on Schedule I hereto has
delivered to the Placement Agents his enforceable written lock-up
agreement
in the form attached to this Agreement as Exhibit B hereto
("Lock-Up
Agreement").
(q) All necessary corporate action has been duly and validly taken
by
the Company and to authorize the execution, delivery and
performance of
this Agreement and each Purchase Agreement and the issuance and
sale of the
Shares by the Company. This Agreement and each Purchase Agreement
has been
duly and validly authorized, executed and delivered by the Company
and
constitute and will constitute legal, valid and binding obligations
of the
Company enforceable against the Company in accordance with
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their respective terms, except as the enforceability thereof may be
limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws
affecting the enforcement of creditors' rights generally and by
general
equitable principles.
(r) Neither the Company nor any of its subsidiaries is involved in
any
labor dispute nor, to the knowledge of the Company, is any such
dispute
threatened, which dispute would have a Material Adverse Effect. The
Company
is not aware of any existing or imminent labor disturbance by the
employees
of any of its principal suppliers or contractors which would have a
Material Adverse Effect. The Company is not aware of any threatened
or
pending litigation between the Company or any of its subsidiaries
and any
of its executive officers which, if adversely determined, could
have a
Material Adverse Effect and has no reason to believe that such
officers
will not remain in the employment of the Company.
(s) No transaction has occurred between or among the Company and
any
of its officers or directors, shareholders or any affiliate or
affiliates
of any such officer or director or shareholder that is required to
be
described in and is not described in the Registration Statement and
the
Prospectus.
(t) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected to
cause or result in, or which has constituted or which might
reasonably be
expected to constitute, the stabilization or manipulation of the
price of
the Common Stock or any security of the Company to facilitate the
sale or
resale of any of the Shares.
(u) The Company and its subsidiaries each have filed all Federal,
state, local and foreign tax returns which are required to be filed
through
the date hereof, which returns are true and correct in all material
respects or has received timely extensions thereof, and has paid
all taxes
shown on such returns and all assessments received by it to the
extent that
the same are material and have become due. There are no tax audits
or
investigations pending, which if adversely determined would have a
Material
Adverse Effect; nor are there any material proposed additional tax
assessments against the Company or any of its subsidiaries.
(v) The Shares have been duly authorized for quotation on the
National
Association of Securities Dealers Automated Quotation ("Nasdaq")
SmallCap
Market System, subject to official notice of issuance.
(w) The Company has taken no action designed to, or likely to have
the
effect of, terminating the registration of the Common Stock under
the
Exchange Act or the quotation of the Common Stock on the Nasdaq
SmallCap
Market, nor has the Company received any notification that the
Commission
or the Nasdaq SmallCap Market is contemplating terminating such
registration or quotation.
(x) The books, records and accounts of the Company and its
subsidiaries accurately and fairly reflect, in reasonable detail,
the
transactions in, and dispositions of, the assets of, and the
results of
operations of, the Company and its subsidiaries. The
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Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that (i)
transactions are executed in accordance with management's general
or
specific authorizations, (ii) transactions are recorded as
necessary to
permit preparation of financial statements in accordance with
generally
accepted accounting principles and to maintain asset
accountability, (iii)
access to assets is permitted only in accordance with management's
general
or specific authorization and (iv) the recorded accountability for
assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences; the
chief
executive officer and the chief financial officer of the Company
have made
all certifications required by the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act") and any related rules and regulations
promulgated by
the Commission, and the statements contained in any such
certification are
complete and correct; the Company is otherwise in compliance in all
material respects with all applicable effective provisions of the
Sarbanes-Oxley Act and is actively taking steps to ensure that it
will be
in compliance with other applicable provisions of the
Sarbanes-Oxley Act
upon the effectiveness of such provisions.
(y) The Company has established and maintains disclosure controls
and
procedures (as such term is defined in Rule 13a-14 under the
Exchange Act).
Based on the evaluation of its disclosure controls and procedures,
the
Company is not aware of (i) any significant deficiency in the
design or
operation of internal controls which could adversely affect the
Company's
ability to record, process, summarize and report financial data or
any
material weaknesses in internal controls; or (ii) any fraud,
whether or not
material, that involves management or other employees who have a
significant role in the Company's internal controls. Since the date
of the
most recent evaluation of such disclosure controls and procedures,
there
have been no changes that have materially affected, or are
reasonably
likely to materially affect, the Company's internal control over
financial
reporting, including any corrective actions with regard to
significant
deficiencies and material weaknesses.
(z) There are no material off-balance sheet arrangements (as
defined
in Item 303 of Regulation S-K) that have or are reasonably likely
to have a
material current or future effect on the Company's financial
condition,
revenues or expenses, changes in financial condition, results of
operations, liquidity, capital expenditures or capital resources.
(aa) Prior to the death of Walter B. Wriston on January 19, 2005,
the
Company's Board of Directors had a validly appointed audit
committee whose
composition satisfied the requirements of Rule 4350(d)(2) of the
Rules of
the NASD. The Board of Directors and/or the audit committee has
adopted a
charter that satisfies the requirements of Rule 4350(d)(1) of the
NASD
Rules and the audit committee has reviewed the adequacy of its
charter
within the past twelve months.
(bb) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in
such amounts as are customary in the businesses in which they are
engaged
or proposes to engage after giving effect to the transactions
described in
the Prospectus; all policies of insurance and fidelity or surety
bonds
insuring the Company or any of its subsidiaries or the Company's or
its
10
subsidiaries' respective businesses, assets, employees, officers
and
directors are in full force and effect; the Company and its
subsidiaries
are each in compliance with the terms of such policies and
instruments in
all material respects; and neither the Company nor any subsidiary
of the
Company has any reason to believe that it will not be able to renew
its
existing insurance coverage as and when such coverage expires or to
obtain
similar coverage from similar insurers as may be necessary to
continue its
business at a cost that is not materially greater than the current
cost.
Neither the Company nor any of its subsidiaries has been denied any
insurance coverage which it has sought or for which it has applied.
(cc) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative
or
other governmental body necessary in connection with the execution
and
delivery by the Company of this Agreement and the consummation of
the
transactions herein contemplated required to be obtained or
performed by
the Company (except such additional steps as may be necessary to
qualify
the Shares under the state securities or Blue Sky laws and except
for
required notices of issuances of the Shares to the Nasdaq SmallCap
Market)
has been obtained or made and is in full force and effect.
(dd) There are no affiliations with the National Association of
Securities Dealers, Inc. (the "NASD") among the Company's officers,
directors or, to the knowledge of the Company, any five percent or
greater
stockholder of the Company, except as set forth in the Registration
Statement or otherwise disclosed in writing to the Placement
Agents.
(ee) (i) Each of the Company and its subsidiaries is in compliance
in
all material respects with all rules, laws and regulation relating
to the
use, treatment, storage and disposal of toxic substances and
protection of
health or the environment ("Environmental Law") which are
applicable to its
business; (ii) neither the Company nor its subsidiaries has
received any
notice from any governmental authority or third party of an
asserted claim
under Environmental Laws; (iii) the Company and each of its
subsidiaries
have received all permits, licenses or other approvals required of
it under
applicable Environmental Laws to conduct its business and is in
compliance
with all terms and conditions of any such permit, license or
approval
except where such failure to receive required permits, licenses or
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; (iv) to the Company's knowledge, no
facts
currently exist that will require the Company or any of its
subsidiaries to
make future material capital expenditures to comply with
Environmental
Laws; and (v) to the Company's knowledge no property which is or
has been
owned, leased or occupied by the Company or its subsidiaries has
been
designated as a Superfund site pursuant to the Comprehensive
Environmental
Response, Compensation and Liability Act of 1980, as amended (42
U.S.C.
Section 9601, et. seq.) ("CER, CLA 1980") or otherwise designated
as a
contaminated site under applicable state or local law. Neither the
Company
nor any of its subsidiaries has been named as a "potentially
responsible
party" under the CER, CLA 1980.
11
(ff) In the ordinary course of its business, the Company
periodically
reviews the effect of Environmental Laws on the business,
operations and
properties of the Company and its subsidiaries, in the course of
which the
Company identifies and evaluates associated costs and liabilities
(including, without limitation, any capital or operating
expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws, or any permit, license or approval, any related
constraints on operating activities and any potential liabilities
to third
parties). On the basis of such review, the Company has reasonably
concluded
that such associated costs and liabilities would not, singly or in
the
aggregate, have a Material Adverse Effect.
(gg) The Company is not and, after giving effect to the offering
and
sale of the Shares and the application of proceeds thereof as
described in
the Prospectus, will not be an "investment company" within the
meaning of
the Investment Company Act of 1940, as amended (the "Investment
Company
Act").
(hh) Neither the Company nor any person associated with or acting
on
behalf of the Company including, without limitation, any director,
officer,
agent or employee of the Company or its subsidiaries, has, directly
or
indirectly, while acting on behalf of the Company or its
subsidiaries (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.
(ii) The operations of the Company and its subsidiaries are and
have
been conducted at all times in compliance with applicable financial
record
keeping and reporting requirements of the Currency and Foreign
Transactions
Reporting Act of 1970, as amended, the money laundering statutes of
all
jurisdictions, the rules and regulations thereunder and any related
or
similar rules, regulations or guidelines, issued, administered or
enforced
by any governmental agency (collectively, the "Money Laundering
Laws") and
no action, suit or proceeding by or before any court or
governmental
agency, authority or body or any arbitrator involving the Company
or any of
its subsidiaries with respect to the Money Laundering
