CRITICAL THERAPEUTICS,
INC.
PLACEMENT AGENT
AGREEMENT
LAZARD CAPITAL
MARKETS LLC
30 Rockefeller Plaza
New York, New York 10020
1.
Introduction .
Critical Therapeutics, Inc., a Delaware corporation (the “
Company ”), proposes to issue and sell to the
purchasers, pursuant to the terms of this Placement Agent Agreement
(this “ Agreement ”) and the Subscription
Agreements in the form of Exhibit A attached hereto
(the “ Subscription Agreements ”) entered into
with the purchasers identified therein (each a “
Purchaser ” and collectively, the “
Purchasers ”), up to an aggregate of 7,455,731 units
(the “ Units ”) with each Unit consisting of
(i) one share of common stock, $0.001 par value per share (the
“ Common Stock ”) of the Company and
(ii) one warrant to purchase 0.5 shares of Common Stock (the
“ Warrants ”). The terms and conditions of the
Warrants are set forth in the form of Exhibit B
attached hereto. The Company hereby confirms its agreement with
Lazard Capital Markets LLC to act as Placement Agent (“
LCM ” or the “ Placement Agent ”)
in accordance with the terms and conditions hereof.
2.
Agreement to Act as
Placement Agent; Placement of Securities. On the basis
of the representations, warranties and agreements of the Company
herein contained, and subject to all the terms and conditions of
this Agreement:
2.1
The Company hereby authorizes the Placement Agent to act as its
exclusive agent to solicit offers for the purchase of all or part
of the Units from the Company in connection with the proposed
offering of the Units (the “ Offering ”). Until
the Closing Date (as defined in Section 4 hereof), the
Company shall not, without the prior written consent of the
Placement Agent, solicit or accept offers to purchase Units
otherwise than through the Placement Agent.
2.2
The Placement Agent agrees, as agent of the Company, to use its
best efforts to solicit offers to purchase the Units from the
Company on the terms and subject to the conditions set forth in the
Prospectus (as defined below). The Placement Agent shall use
commercially reasonable efforts to assist the Company in obtaining
performance by each Purchaser whose offer to purchase Units has
been solicited by the Placement Agent and accepted by the Company,
but the Placement Agent shall not, except as otherwise
provided
in this
Agreement, be obligated to disclose the identity of any potential
purchaser or have any liability to the Company in the event any
such purchase is not consummated for any reason. Under no
circumstances will the Placement Agent be obligated to underwrite
or purchase any Units for its own account and, in soliciting
purchases of Units, the Placement Agent shall act solely as the
Company’s agent and not as principal. Notwithstanding the
foregoing and except as otherwise provided in
Section 2.3 , it is understood and agreed that the
Placement Agent (or its affiliates) may, solely at its discretion
and without any obligation to do so, purchase Units as
principal.
2.3
Subject to the provisions of this Section 2 , offers
for the purchase of Units may be solicited by the Placement Agent
as agent for the Company at such times and in such amounts as the
Placement Agent deems advisable. The Placement Agent shall
communicate to the Company, orally or in writing, each reasonable
offer to purchase Units received by it as agent of the Company. The
Company shall have the sole right to accept offers to purchase the
Units and may reject any such offer, in whole or in part. The
Placement Agent shall have the right, in its discretion reasonably
exercised, without notice to the Company, to reject any offer to
purchase Units received by it, in whole or in part, and any such
rejection shall not be deemed a breach of its agreement contained
herein.
2.4
The Units are being sold to the Purchasers at a price of
$ per Unit. The purchases of the Units by the Purchasers
shall be evidenced by the execution of Subscription Agreements by
each of the Purchasers and the Company.
2.5
As compensation for services rendered, on the Closing Date (as
defined in Section 4 hereof), the Company shall pay to
the Placement Agent by wire transfer of immediately available funds
to an account or accounts designated by the Placement Agent, an
aggregate amount equal to the sum of (i) six percent (6%) of
the gross proceeds received by the Company from the sale of the
Units (other than the 3% Purchaser Units); and (ii) three
percent (3%) of up to $15,000,000 of the gross proceeds received by
the Company from the sale of the Units (the “ 3% Purchaser
Units ”) to any Purchasers listed on
Schedule C on such Closing Date. The Placement Agent
shall not receive any compensation with respect to any proceeds
from the exercise of any Warrants.
2.6
No Units which the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or
sold by the Company, until such Units shall have been delivered to
the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Units to a
Purchaser whose offer it has accepted, the Company shall indemnify
and hold the Placement Agent harmless against any loss, claim,
damage or expense arising from or as a result of such default by
the Company in accordance with the procedures set forth in Section
8(c) herein.
3.
Representations and
Warranties of the Company. The Company represents and
warrants to, and agrees with, the Placement Agent and the
Purchasers that:
(a)
The Company has prepared and filed in conformity with the
requirements of the Securities Act of 1933, as amended (the “
Securities Act ”), and published rules and regulations
thereunder (the “ Rules and Regulations ”)
adopted by the Securities and Exchange Commission (the “
Commission ”) a “shelf” Registration
Statement (as hereinafter defined) on Form S-3 (File
No. 333-136910), which became effective as of
September 11, 2006 (the “ Effective Date
”), including a base prospectus relating to the
securities
registered pursuant to such Registration Statement (the “
Base Prospectus ”), and such amendments and
supplements thereto as may have been required to the date of this
Agreement. The term “ Registration Statement ”
as used in this Agreement means the registration statement
(including all exhibits, financial schedules and all documents and
information deemed to be a part of the Registration Statement
pursuant to Rule 430A under the Securities Act), as amended
and/or supplemented to the date of this Agreement, including, the
Base Prospectus. 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 knowledge of the Company, are threatened by the
Commission. The Company, if required by the Rules and Regulations
of the Commission, will file the Prospectus (as defined below) with
the Commission pursuant to Rule 424(b) of the Rules and
Regulations. The term “ Prospectus ” as used in
this Agreement means the final Prospectus, including the Base
Prospectus and the final prospectus supplement, in the form in
which it is to be filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations. Any preliminary prospectus or
prospectus subject to completion included in the Registration
Statement or filed with the Commission pursuant to Rule 424
under the Securities Act is hereafter called a “
Preliminary Prospectus .” Any reference herein to the
Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form
S-3 that were filed under the Securities Exchange Act of 1934, as
amended (the “ Exchange Act ”), on or before the
last to occur of the Effective Date, the date of the Preliminary
Prospectus, or the date of the Prospectus, and any reference herein
to the terms “amend,” “amendment,” or
“supplement” with respect to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include (i) the filing of any document
under the Exchange Act after the Effective Date, the date of such
Preliminary Prospectus or the date of the Prospectus, as the case
may be, that is incorporated by reference and (ii) any such
document so filed.
(b)
As of the Applicable Time (as defined below) and as of the Closing
Date, neither (i) the Pricing Prospectus (as defined below)
and the information included on Schedule A hereto, all
considered together (collectively, the “ General
Disclosure Package ”), nor (ii) the individual
Limited Use Free Writing Prospectuses (as defined below), if any,
issued at or prior to the Applicable Time when considered together
with the General Disclosure Package, included or will include, any
untrue statement of a material fact or omitted or as of the Closing
Date will omit, to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however ,
that the Company makes no representations or warranties as to
information contained in or omitted from the General Disclosure
Package or any Issuer Free Writing Prospectus, in reliance upon,
and in conformity with, written information furnished to the
Company by the Placement Agent specifically for inclusion therein,
which information the parties hereto agree is limited to the
Placement Agent’s Information (as defined in
Section 17 ). As used in this paragraph (b) and
elsewhere in this Agreement:
“
Applicable Time ” means 3:55 P.M., New York time, on
the date of this Agreement.
“
Pricing Prospectus ” means the Preliminary Prospectus,
if any, and the Base Prospectus, each as amended and supplemented
immediately prior to the Applicable Time, including any document
incorporated by reference therein and any prospectus supplement
deemed to be a part thereof.
“
Issuer Free Writing Prospectus ” means any
“issuer free writing prospectus,” as defined in
Rule 433 under the Securities Act relating to the Units in the
form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s
records pursuant to Rule 433(g) under the Securities
Act.
“
Limited Use Free Writing Prospectuses ” means any
Issuer Free Writing Prospectus that is not a General Use Free
Writing Prospectus.
(c)
No order preventing or suspending the use of any Preliminary
Prospectus, any Issuer Free Writing Prospectus or the Prospectus
relating to the Offering has been issued by the Commission, and no
proceeding for that purpose or pursuant to Section 8A of the
Securities Act has been instituted or, to the best of the
Company’s knowledge, is threatened by the Commission, and
each Preliminary Prospectus, if any, at the time of filing thereof,
conformed in all material respects to the requirements of the
Securities Act and the Rules and Regulations, and unless otherwise
corrected, modified or supplemented did 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; provided, however , that the Company
makes no representations or warranties as to information contained
in or omitted from any Preliminary Prospectus, in reliance upon,
and in conformity with, written information furnished to the
Company by the Placement Agent specifically for inclusion therein,
which information the parties hereto agree is limited to the
Placement Agent’s Information (as defined in
Section 17 ).
(d)
At the time the Registration Statement became effective, at the
date of this Agreement and at the Closing Date, the Registration
Statement conformed and will conform in all material respects to
the requirements of the Securities Act and the Rules and
Regulations and did not and will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; the Prospectus, at the time the Prospectus was issued
and at the Closing Date, conformed and will conform in all material
respects to the requirements of the Securities Act and the Rules
and Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided , however , that the foregoing
representations and warranties in this paragraph (d) shall
not apply to information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section 17
).
(e)
Each Issuer Free Writing Prospectus, if any, as of its issue date
and at all subsequent times through the completion of the Offering
or until the occurrence of an
event or
development with respect to which the Company notified or notifies
the Placement Agent as described in Section 5(e) , did
not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the
Registration Statement, Pricing Prospectus or the Prospectus,
including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof that has not been
superseded or modified, or include an untrue statement of a
material fact or omitted or would omit 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, at the subsequent time, not misleading. The
foregoing sentence does not apply to statements in or omissions
from any Issuer Free Writing Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section 17
).
(f)
The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements
of the Securities Act or the Exchange Act, as then applicable, and
the rules and regulations of the Commission thereunder and none of
such documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and any
further documents so filed and incorporated by reference in 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 any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading.
(g)
The Company has not, directly or indirectly, distributed and will
not distribute any offering material in connection with the
Offering other than any Preliminary Prospectus, the Prospectus, the
documents incorporated by reference therein and other materials, if
any, permitted under the Securities Act and consistent with
Section 5(b) below. The Company will file with the
Commission all Issuer Free Writing Prospectuses, if any, in the
time and manner required under Rules 163(b)(2) and 433(d)
under the Securities Act, as the case may be.
(h)
The Company and the Subsidiary (as defined below) have been duly
incorporated or organized, as applicable, and are validly existing
as corporations or other legal entities in good standing (or the
foreign equivalent thereof) under the laws of their respective
jurisdictions of incorporation or organization, as the case may be.
The Company and the Subsidiary are duly qualified to do business
and are in good standing as foreign corporations or other legal
entities in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
require such qualification and have all corporate power and
authority necessary to own or hold their respective properties and
to conduct the businesses in which they are engaged, except where
the failure to so qualify or have such power or authority
(i) would not have,
singularly or
in the aggregate, a material adverse effect on the condition
(financial or otherwise), results of operations, assets, business
or prospects of the Company and the Subsidiary, taken as a whole,
or (ii) impair in any material respect the ability of the
Company to perform its obligations under this Agreement or to
consummate any transactions contemplated by the Agreement, the
General Disclosure Package or the Prospectus (any such effect as
described in clauses (i) or (ii), a “ Material
Adverse Effect ”). The Company owns or controls, directly
or indirectly, only the following corporations, partnerships,
limited liability partnerships, limited liability companies,
associations or other entities: CTI Securities Corp., a
Massachusetts securities corporation and wholly-owned subsidiary of
the Company (the “ Subsidiary ”).
(i)
The Company has the full right, power and authority to enter into
this Agreement, each of the Subscription Agreements and that
certain Escrow Agreement (the “ Escrow Agreement
”) dated as of the date hereof by and among the Company, the
Placement Agent and the escrow agent named therein, and to perform
and to discharge its obligations hereunder and thereunder; and each
of this Agreement and each of the Subscription Agreements has been
duly authorized, executed and delivered by the Company, and
constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms.
(j)
The shares of Common Stock to be issued and sold by the Company to
the Purchasers under the Subscription Agreements and the shares of
Common Stock issuable upon exercise of the Warrants (the “
Warrant Shares ”) have been duly and validly
authorized and the Common Stock, when issued and delivered against
payment therefor as provided in the Subscription Agreements and the
Warrant Shares, when issued and delivered against payment therefor
as provided in the Warrants, will be duly and validly issued, fully
paid and nonassessable and free of any preemptive or similar rights
and will conform to the description thereof contained in the
General Disclosure Package and the Prospectus.
(k)
The Company has an authorized capitalization as set forth in the
Pricing Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable, have been issued in compliance
with federal and state securities laws, and conform to the
description thereof contained in the General Disclosure Package and
the Prospectus. As of October 24, 2006, there were 34,474,799
shares of Common Stock issued and outstanding and zero shares of
Preferred Stock, par value $0.001 of the Company issued and
outstanding and 10,374,276 shares of Common Stock were issuable
upon the exercise of all options, warrants and convertible
securities outstanding as of such date. Since such date, the
Company has not issued any securities, other than Common Stock of
the Company issued pursuant to the exercise of stock options
previously outstanding under the Company’s stock option plans
or the issuance of restricted Common Stock pursuant to employee
stock purchase plans. None of the outstanding shares of Common
Stock was issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding
shares of capital stock, 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
other
than those
described above or accurately described in the General Disclosure
Package. The description of the Company’s stock option, stock
bonus and other stock plans or arrangements, and the options or
other rights granted thereunder, as described in the General
Disclosure Package and the Prospectus, accurately and fairly
present the information required to be shown with respect to such
plans, arrangements, options and rights.
(l)
All the outstanding shares of capital stock of the Subsidiary have
been duly authorized and validly issued, are fully paid and
nonassessable and, except to the extent set forth in the General
Disclosure Package or the Prospectus, are owned by the Company
directly free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of
any third party.
(m)
The execution and delivery of this Agreement, the Subscription
Agreements and the Escrow Agreement by the Company, the issue and
sale of the Units by the Company and the consummation of the
transactions contemplated hereby and thereby will not (with or
without notice or lapse of time or both) (i) conflict with or
result in a breach or violation of any of the terms or provisions
of, constitute a default under, give rise to any right of
termination or other right or the cancellation or acceleration of
any right or obligation or loss of a benefit under, or give rise to
the creation or imposition of any lien, encumbrance, security
interest, claim or charge upon any property or assets of the
Company or the Subsidiary pursuant to any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company or
the Subsidiary is bound or to which any of the property or assets
of the Company or the Subsidiary is subject, (ii) result in
any violation of the provisions of the charter or by-laws (or
analogous governing instruments, as applicable) of the Company or
the Subsidiary or (iii) any law, statute, rule, regulation,
judgment, order or decree of any court or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or
the Subsidiary or any of their properties or assets, except with
respect to clauses (i) and (iii) where, any such
conflict, breach, violation, default or right would not reasonably
be expected to have a Material Adverse Effect.
(n)
Except for the registration of the securities offered in the
Offering under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state or foreign securities
laws, the National Association of Securities Dealers, Inc. and the
Nasdaq Global Market (the “ Nasdaq GM ”) in
connection with the offering and sale of the Units by the Company,
no consent, approval, authorization or order of, or filing,
qualification or registration with, any court or governmental
agency or body, foreign or domestic, which has not been made,
obtained or taken and is not in full force and effect, is required
for the execution, delivery and performance of this Agreement, the
Subscription Agreements and the Escrow Agreement by the Company,
the offer or sale of the Units or the consummation of the
transactions contemplated hereby or thereby.
(o)
To the Company’s knowledge, Deloitte & Touche LLP, who
have certified certain financial statements and related schedules
included or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectus, and
have audited the Company’s internal control over financial
reporting and
management’s assessment thereof, is an
independent registered public accounting firm as required by the
Securities Act and the Rules and Regulations and the Public Company
Accounting Oversight Board (United States) (the “
PCAOB ”). Except as disclosed in the Registration
Statement and as pre-approved in accordance with the requirements
set forth in Section 10A of the Exchange Act, Deloitte &
Touche LLP has not been engaged by the Company to perform any
“ prohibited activities” (as defined in
Section 10A of the Exchange Act).
(p)
The financial statements, together with the related notes and
schedules, included or incorporated by reference in the General
Disclosure Package, the Prospectus and in the Registration
Statement fairly present the financial position and the results of
operations and changes in financial position of the Company and its
consolidated subsidiary at the respective dates or for the
respective periods therein specified. Such statements and related
notes and schedules have been prepared in accordance with the
generally accepted accounting principles in the United States
(“ GAAP ”) applied on a consistent basis
throughout the periods involved except as may be set forth in the
related notes included or incorporated by reference in the General
Disclosure Package (provided that non-year-end financial statements
are subject to normal recurring year-end audit adjustments and do
not contain all footnotes required by GAAP). The financial
statements, together with the related notes and schedules, included
or incorporated by reference in the General Disclosure Package and
the Prospectus comply in all material respects with the Securities
Act, the Exchange Act, and the Rules and Regulations and the rules
and regulations under the Exchange Act. No other financial
statements or supporting schedules or exhibits are required by the
Securities Act or the Rules and Regulations to be described, or
included or incorporated by reference in the Registration
Statement, the General Disclosure Package or the Prospectus. There
is no pro forma or as adjusted financial information that is
required to be included in the Registration Statement, the General
Disclosure Package, or the Prospectus or a document incorporated by
reference therein in accordance with the Securities Act and the
Rules and Regulations which has not been included or incorporated
as so required.
(q)
Neither the Company nor the Subsidiary has sustained, since the
date of the latest unaudited financial statements included or
incorporated by reference in the General Disclosure Package, any
material loss or interference with its business 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, otherwise than as set forth or
contemplated in the General Disclosure Package; and, since such
date, there has not been any change in the capital stock (other
than as a result of the grant or exercise of stock options or the
offer to sell shares of Common Stock and award shares of restricted
Common Stock pursuant to the Company stock plans in the ordinary
course) or long-term debt of the Company or the Subsidiary, or any
Material Adverse Effect.
(r)
Except as set forth in the General Disclosure Package, there is no
legal or governmental action, suit, claim or proceeding pending to
which the Company or the Subsidiary is a party or of which any
property or assets of the Company or the Subsidiary is the subject,
including any proceeding before the United States Food and Drug
Administration (“ FDA ”) or comparable federal,
state, local or foreign governmental bodies (it being understood
that the interaction between the Company and the FDA and
such comparable
governmental bodies relating to the clinical development and
product approval process shall not be deemed proceedings for
purposes of this representation), which is required to be described
in the Registration Statement, the General Disclosure Package or
the Prospectus that is not described therein, and which, singularly
or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby; and to the best of the
Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
The Company is in compliance with all applicable federal, state,
local and foreign laws, regulations, orders and decrees governing
its business as prescribed by the FDA, or any other federal, state
or foreign agencies or bodies engaged in the regulation of
pharmaceuticals or biohazardous substances or materials, except
where noncompliance would not, singly or in the aggregate, have a
Material Adverse Effect. All preclinical and clinical studies
conducted by or on behalf of the Company to support approval for
commercialization of the Company’s products have been
conducted by the Company, or to the Company’s knowledge by
third parties, in compliance with all applicable federal, state or
foreign laws, rules, orders and regulations, except for such
failure or failures to be in compliance as could not reasonably be
expected to have, singly or in the aggregate, a Material Adverse
Effect.
(s)
Neither the Company nor the Subsidiary is in (i) violation of
its charter or by-laws (or analogous governing instrument, as
applicable), (ii) default in any respect, and no event has
occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its property or assets is subject or
(iii) violation in any respect of any law, ordinance,
governmental rule, regulation or court order, decree or judgment to
which it or its property or assets may be subject except, in the
case of clauses (ii) and (iii) of this paragraph (s), for
any violations or defaults which, singularly or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect.
(t)
The Company and the Subsidiary possess all licenses, certificates,
authorizations and permits issued by, and have made all
declarations and filings with, the appropriate local, state,
federal or foreign regulatory agencies or bodies which are
necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses as
described in the General Disclosure Package and the Prospectus
(collectively, the “ Governmental Permits ”)
except where any failures to possess or make the same, singularly
or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. The Company and the Subsidiary are in
material compliance with all such Governmental Permits; all such
Governmental Permits are valid and in full force and effect, except
where the validity or failure to be in full force and effect would
not, singularly or in the aggregate, reasonably be expected to have
a Material Adverse Effect. All such Governmental Permits are free
and clear of any restriction or condition that are in addition to,
or materially different from those normally applicable to similar
licenses, certificates, authorizations and permits. Neither the
Company nor the Subsidiary has received written notification of any
revocation or modification (or proceedings related thereto) of any
such Governmental Permit. The
studies, tests
and preclinical or clinical trials, if any, conducted by or on
behalf of the Company that are described in the General Disclosure
Package and the Prospectus (the “ Company Studies and
Trials ”) were and, if still pending, are being,
conducted in all material respects in accordance with experimental
protocols, procedures and controls pursuant to, where applicable,
accepted professional scientific standards; the descriptions of the
results of the Company Studies and Trials contained in the General
Disclosure Package and Prospectus are accurate in all material
respects; and the Company has not received any notices or
correspondence with the FDA or any foreign, state or local
governmental body exercising comparable authority requiring the
termination, suspension or material modification of any Company
Studies or Trials that termination, suspension or material
modification would reasonably be expected to have a Material
Adverse Effect.
(u)
Neither the Company nor the Subsidiary is or, after giving effect
to the offering of the Units and the application of the proceeds
thereof as described in the General Disclosure Package and the
Prospectus, will become an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder.
(v)
Neither the Company, the Subsidiary nor, to the Company’s
knowledge, any of the Company’s or the Subsidiary’s
officers, directors or affiliates has taken or will take, directly
or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or that caused
or resulted in, or that would in the future reasonably be expected
to cause or result in, stabilization or manipulation of the price
of any security of the Company.
(w)
The Company and the Subsidiary own or possess the right to use all
patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, software, databases, know-how, Internet domain names,
trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures, and other
intellectual property (collectively, “ Intellectual
Property ”) necessary to carry on their respective
businesses as currently conducted, and as proposed to be conducted
and described in the General Disclosure Package and the Prospectus,
and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the
Subsidiary with respect to the foregoing except for those that
would not reasonably be expected to have a Material Adverse Effect.
The Intellectual Property licenses described in the General
Disclosure Package and the Prospectus are valid, binding upon, and
enforceable by or against the parties thereto in accordance to its
terms. The Company and the Subsidiary have complied in all material
respects with, and are not in breach nor have received any asserted
or threatened claim of breach of, any such Intellectual Property
license, and the Company has no knowledge of any breach or
anticipated breach by any other person to any material Intellectual
Property license. The Company’s and the Subsidiary’s
businesses as now conducted and as proposed to be conducted do not
infringe or conflict with any patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses or other
Intellectual Property or franchise right of any person. The Company
has not received any written claim against the Company or the
Subsidiary alleging the infringement by the Company or the
Subsidiary of any patent, trademark,
service mark,
trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person which
would reasonably be expected to have a Material Adverse Effect. The
Company and the Subsidiary have taken commercially reasonable steps
to protect, maintain and safeguard their rights in all Intellectual
Property, including the execution of appropriate nondisclosure and
confidentiality agreements.
To
the knowledge of the Company, all patent applications filed by the
Company and the Subsidiary for all inventions owned by or licensed
to the Company and the Subsidiary that are material to the conduct
of the businesses of the Company and the Subsidiary, each in the
manner in which it has been and is contemplated to be conducted as
described in the Prospectus, have been duly and properly filed or
caused to be filed with the United States Patent and Trademark
Office (“ PTO” ) and, in some cases, applicable
foreign and international patent authorities. To the knowledge of
the Company, assignments for all patents and patent applications,
including, without limitation any continuations, divisionals,
continuations-in-part, renewals, reissues and applications for
registration, to the extent such assignments are required for any
such filing, of any of the foregoing owned by or licensed to the
Company and the Subsidiary (collectively, the “
Patents” ) that are material to the conduct of the
businesses of the Company and the Subsidiary each in the manner in
which it has been and is contemplated to be conducted as described
in the Prospectus, have been properly executed and recorded for
each named inventor; except where such failure would not be
reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, all printed publications and patent
references material to the patentability of the inventions claimed
in the Patents have been disclosed to those patent offices so
requiring. To the knowledge of the Company, each of the Company,
the Subsidiary, and their assignors or licensors, as applicable,
has met its duty of candor and good faith to the PTO for the
Patents. To the knowledge of the Company, no material
misrepresentation has been made to any patent office in connection
with the Patents. The Company is not aware of any facts material to
a determination of patentability regarding the Patents of which it
was aware that was not disclosed to the PTO or other applicable
patent office. The Company is not aware of any facts not disclosed
to the PTO or other applicable patent office that would preclude
the patentability, validity or enforceability of any patent or
patent application in the Patents. The Company has no knowledge of
any facts that would preclude the Company or any licensors, as
applicable, from having clear title to the patents and patent
applications in the Patents.
(x)
The Company and the Subsidiary have good and marketable title in
fee simple to, or have valid rights to lease or otherwise use, all
items of real or personal property that are material to the
business of the Company and the Subsidiary, taken as a whole, in
each case free and clear of all liens, encumbrances, security
interests, claims and defects that do not, singularly or in the
aggregate, materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of
such property by the Company or the Subsidiary; and all of the
leases and subleases material to the business of the Company and
the Subsidiary, and under which the Company or the Subsidiary holds
properties described in the General Disclosure Package and the
Prospectus, are in full force and effect, and neither the Company
nor the Subsidiary has received any written notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or the Subsidiary under any of
the leases or
subleases mentioned above, or affecting or questioning the rights
of the Company or the Subsidiary to the continued possession of the
leased or subleased premises under any such lease or
sublease.
(y)
No labor dispute with the employees of the Company or the
Subsidiary exists or, to the best of the Company’s knowledge,
is imminent, and the Company has not received written notice of any
existing or imminent labor disturbance by the employees of any of
its or the Subsidiary’s principal suppliers, manufacturers,
customers or contractors, that would reasonably be expected,
singularly or in the aggregate, to have a Material Adverse Effect,
except as described in the General Disclosure Package. The Company
is not aware that any key employee or significant group of
employees of the Company or the Subsidiary plans to terminate
employment with the Company or any such Subsidiary, except as
disclosed in the General Disclosure Package.
(z)
No “prohibited transaction” (as defined in
Section 406 of the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published
interpretations thereunder (“ ERISA ”), or
Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time (the “ Code ”)) or
“accumulated funding deficiency” (as defined in
Section 302 of ERISA) or any of the events set forth in
Section 4043(b) of ERISA (other than events with respect to which
the thirty (30)-day notice requirement under Section 4043 of
ERISA has been waived) has occurred or would reasonably be expected
to occur with respect to any employee benefit plan of the Company
or the Subsidiary that would, singularly or in the aggregate, have
a Material Adverse Effect. Each employee benefit plan of the
Company or the Subsidiary is in compliance in all material respects
with applicable law, including ERISA and the Code. The Company and
the Subsidiary have not incurred and would not reasonably be
expected to incur liability under Title IV of ERISA with respect to
the termination of, or withdrawal from, any pension plan (as
defined in ERISA). Each pension plan for which the Company or the
Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified, and
nothing has occurred, whether by action or by failure to act, which
could, singularly or in the aggregate, cause the loss of such
qualification.
(aa)
The Company and the Subsidiary are in compliance with all foreign,
federal, state and local rules, laws and regulations relating to
the use, treatment, storage and disposal of hazardous or toxic
substances or waste and protection of health and safety or the
environment which are applicable to their businesses (“
Environmental Laws ”), except where the failure to
comply would not, singularly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. There has been no
storage, generation, transportation, handling, treatment, disposal,
discharge, emission, or other release of any kind of toxic or other
wastes or other hazardous substances by, due to, or caused by the
Company or the Subsidiary (or, to the Company’s knowledge,
any other entity for whose acts or omissions the Company or the
Subsidiary is or may otherwise be liable) upon any of the property
now or previously leased by the Company or the Subsidiary in
violation of any law, statute, ordinance, rule, regulation, order,
judgment, decree or permit or which would, under any law, statute,
ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for
any
violation or
liability which would not have, singularly or in the aggregate with
all such violations and liabilities, a Material Adverse
Effect.
(bb)
The Company and the Subsidiary, each (i) has timely filed all
necessary federal, state, local and foreign tax returns, and all
such returns were true, complete and correct, (ii) has paid
all federal, state, local and foreign taxes, assessments,
governmental or other charges due and payable for which it is
liable, including, without limitation, all sales and use taxes and
all taxes which the Company or the Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third
parties, and (iii) does not have any tax deficiency or claims
outstanding or assessed or, to the best of its knowledge, proposed
against any of them, except those, in each of the cases described
in clauses (i), (ii) and (iii) of this paragraph
(bb) , that would not reasonably be expected to, singularly or
in the aggregate, have a Material Adverse Effect. The Company and
the Subsidiary, each has not engaged in any transaction which is a
corporate tax shelter or which to the Company’s knowledge
could be characterized as such by the Internal Revenue Service or
any other taxing authority. The accruals and reserves on the books
and records of the Company and the Subsidiary in respect of tax
liabilities for any taxable period not yet finally determined are
adequate to meet any assessments and related liabilities for any
such period, and since December 31, 2005 the Company and the
Subsidiary each has not incurred any liability for taxes other than
in the ordinary course.
(cc)
The Company and the Subsidiary carries, or is covered by, insurance
provided by recognized, financially sound and reputable
institutions with policies in such amounts and covering such risks
as is adequate for the conduct of their respective businesses and
the value of their respective properties and as is customary for
companies engaged in similar businesses in similar industries. The
Company has no reason to believe that it or the Subsidiary 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 reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor the Subsidiary has been
denied any insurance coverage that they have sought or for which
they have applied.
(dd)
The Company maintains a system of internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the
Exchange Act) that complies with the requirements of the Exchange
Act and has been designed by the Company’s principal
executive officer and principal financial officer, or under his
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. Except as described in the General
Disclosure Package, since the end of the Company’s most
recent audited fiscal year, there as been (A) no material
weakness in the Company’s internal control over financial
reporting (whether or not remediated) and (B) no change in the
Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial
reporting.
(ee)
The minute books of the Company and the Subsidiary have been made
available to the Placement Agent and counsel for the Placement
Agent, and such books contain in all material respects a complete
summary of all meetings and actions of the
board of
directors (including each board committee) and shareholders of the
Company (or analogous governing bodies and interest holders, as
applicable), and the Subsidiary since the time of its respective
incorporation or organization through the date of the latest
meeting and action.
(ff)
There is no franchise, lease, contract, agreement or document
required by the Securities Act or by the Rules and Regulations to
be described in the General Disclosure Package and in the
Prospectus or a document incorporated by reference therein or to be
filed as an exhibit to the Registration Statement or a document
incorporated by reference therein that is not described or filed
therein as required; and all descriptions of any such franchises,
leases, contracts, agreements or documents contained in the
Registration Statement or in a document incorporated by reference
therein are accurate descriptions of such documents in all material
respects. Other than as described in the General Disclosure
Package, no such franchise, lease, contract or agreement has been
suspended or terminated for convenience or default by the Company
or the Subsidiary or any of the other parties thereto, and neither
the Company nor the Subsidiary has received written notice nor does
the Company have any other knowledge of any such pending or
threatened suspension or termination, except for such pending or
threatened suspensions or terminations that would not reasonably be
expected to, singularly or in the aggregate, have a Material
Adverse Effect.
(gg)
No relationship, direct or indirect, exists between or among the
Company and the Subsidiary on the one hand, and the directors,
officers, stockholders (or analogous interest holders), customers
or suppliers of the Company or the Subsidiary or any of their
affiliates on the other hand, that is required to be described in
the General Disclosure Package and the Prospectus or a document
incorporated by reference therein and that is not so
described.
(hh)
No person or entity has the right to require registration of shares
of Common Stock or other securities of the Company or the
Subsidiary because of the filing or effectiveness of the
Registration Statement or otherwise, except for persons and
entities who have expressly waived such right in writing or who
have been given timely and proper written notice and have failed to
exercise such right within the time or times required under the
terms and conditions of such right. Except as described in the
General Disclosure Package, there are no persons with registration
rights or similar rights to have any securities registered by the
Company or the Subsidiary under the Securities Act.
(ii)
Neither the Company nor the Subsidiary own any “margin
securities” as that term is defined in Regulation U of
the Board of Governors of the Federal Reserve System (the “
Federal Reserve Board ”), and none of the proceeds of
the sale of the Units will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Units to be
considered a “purpose credit” within the meanings of
Regulation T, U or X of the Federal Reserve Board.
(jj)
Except for payments contemplated by this Agreement, the
Registration Statement, the General Disclosure Package or the
Prospectus, neither the Company nor the Subsidiary is a party to
any contract, agreement or understanding with any person
that
would give rise
to a valid claim against the Company or the Placement Agent for a
brokerage commission, finder’s fee or like payment in
connection with the Offering.
(kk)
No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the General Disclosure Package or
the Prospectus has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good faith.
(ll)
The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act. The Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on the
Nasdaq GM, and the Company has taken no action designed to, or
reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq GM, nor has the Company
received any notification that the Commission or the National
Association of Securities Dealers, Inc. (“ NASD
”) is contemplating terminating such registration or listing.
No consent, approval, authorization or order of, or filing,
notification or registration with, the Nasdaq GM is required for
the listing and trading of the Units on the Nasdaq GM.
(mm)
The Company is in material compliance with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and all rules and
regulations promulgated thereunder or implementing the provisions
thereof (the “ Sarbanes-Oxley Act ”) that are
currently in effect.
(nn)
The Company is in material compliance with all applicable corporate
governance requirements set forth in the Nasdaq Marketplace Rules
that are currently in effect and is actively taking steps to ensure
that it will be in compliance with other applicable corporate
governance requirements set forth in the Nasdaq Marketplace Rules
not currently in effect.
(oo)
Neither the Company nor the Subsidiary nor, to the best of the
Company’s knowledge, any employee or agent of the Company or
the Subsidiary, has made any contribution or other payment to any
official of, or candidate for, any federal, state, local or foreign
office in violation of any law (including the Foreign Corrupt
Practices Act of 1977, as amended) or of the character required to
be disclosed in the Registration Statement, the General Disclosure
Package or the Prospectus or a document incorporated by reference
therein.
(pp)
There are no transactions, arrangements or other relationships
between and/or among the Company, any of its affiliates (as such
term is defined in Rule 405 of the Securities Act) and any
unconsolidated entity, including, but not limited to, any structure
finance, special purpose or limited purpose entity that would
reasonably be expected to materially affect the Company’s or
the Subsidiary’s liquidity or the availability of or
requirements for their capital resources required to be described
in the General Disclosure Package and the Prospectus or a document
incorporated by reference therein which have not been described as
required.
(qq)
There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or
guarantees or indebtedness by
the Company or
the Subsidiary to or for the benefit of any of the officers or
directors of the Company, the Subsidiary or any of their respective
family members, that are required to be disclosed in the
Registration Statement, the General Disclosure Package and the
Prospectus.
(rr)
The statistical and market related data included in the
Registration Statement, the General Disclosure Package and the
Prospectus are based on or derived from sources that the Company
believes to be reliable and accurate, and such data agree with the
sources from which they are derived.
(ss)
The operations of the Company and the Subsidiary are conducted at
all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder
(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 the Subsidiary with respect to the Money Laundering
Laws is pending, or to the best knowledge of the Company,
threatened.
(tt)
Neither the Company nor the Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the
Company or the Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department (“ OFAC ”); and the
Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such
proceeds to the Subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by
OFAC.
(uu)
To the Company’s knowledge, neither the Company nor the
Subsidiary nor any of their affiliates (within the meaning of NASD
Conduct Rule 2720(b)(1)(a)) directly or indirectly controls,
is controlled by, or is under common control with, or is an
associated person (within the meaning of Article I,
Section 1(ee) of the By-laws of the NASD) of, any member firm
of the NASD.
(vv)
No approval of the shareholders of the Company under the rules and
regulations of Nasdaq (including Rule 4350 of the Nasdaq
National Marketplace Rules), and no approval of the shareholders of
the Company thereunder is required for the Company to issue and
deliver to the Purchasers the Units.
Any certificate
signed by or on behalf of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent pursuant to
this Agreement shall be deemed to be a representation and warranty
by the Company to the Placement Agent and the Purchasers as to the
matters covered thereby.
4.
The Closing .
The time and date of closing (the “ Closing ”)
and delivery of the documents required to be delivered to the
Placement Agent pursuant to Sections 5 and 7
hereof shall be at 10:00 A.M., New York time, on October 31,
2006 (the “ Closing Date ”) at the office of
Wilmer Cutler Pickering Hale and Dorr LLP.
5.
FURTHER AGREEMENTS
OF THE COMPANY. The Company agrees with the Placement Agent and
the Purchasers:
(a)
To prepare the Rule 462(b) Registration Statement, if necessary, in
a form reasonably acceptable to the Placement Agent and file such
Rule 462(b) Registration Statement with the Commission on the date
hereof; to prepare the Prospectus in a form reasonably
acceptable
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