Exhibit 1.1
3,500,000 Shares
COLLAGENEX PHARMACEUTICALS,
INC.
Common Stock
PLACEMENT AGENT
AGREEMENT
November 15, 2006
LAZARD CAPITAL MARKETS LLC
30 Rockefeller Plaza
New York, New York 10020
Dear Sirs:
1.
INTRODUCTION . CollaGenex Pharmaceuticals, 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 3,500,000 shares
of common stock, $0.01 par value per share (the “ Common
Stock ”) of the Company. The aggregate of 3,500,000
shares so proposed to be sold is hereinafter referred to as the
“ Stock .” 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 Stock from the Company in connection with the proposed
offering of the Stock (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 Stock
otherwise than through the Placement Agent. LCM may utilize
the expertise of Lazard Frères & Co. LLC in connection
with LCM’s placement agent activities.
2.2
The Placement Agent agrees, as agent of the Company, to use its
reasonable best efforts to solicit offers to purchase the Stock
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
Stock 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 Stock for its own account and, in soliciting
purchases of Stock, 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 Stock as principal.
2.3
Subject to the provisions of this Section 2 , offers for the
purchase of Stock 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 Stock received by it as agent of the Company. The Company
shall have the sole right to accept offers to purchase the Stock
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
Stock 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 Stock is being sold to the Purchasers at a price of $13.00 per
share. The purchases of the Stock 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 six percent (6%) of the gross proceeds
received by the Company from the sale of the Stock on such Closing
Date; provided that one and one half percent (1.5%) of such
compensation may be paid by the Company to an advisor to the
Company, as agreed in writing between the Company and the Placement
Agent.
2.6
No Stock 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 Stock shall have been delivered to
the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver Stock 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 (No. 333-131655),
which became effective as of March 1, 2006 (the “
Effective Date ”), including a base prospectus
relating to the Stock (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
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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 Prospectus, in the form in
which it is filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations, or, if the Prospectus is not to be filed
with the Commission pursuant to Rule 424(b), the Prospectus in the
form included as part of the Registration Statement as of the
Effective Date, except that if any revised prospectus or prospectus
supplement shall be provided to the Placement Agent by the Company
for use in connection with the offering and sale of the Stock which
differs from the Prospectus (whether or not such revised prospectus
or prospectus supplement is required to be filed by the Company
pursuant to Rule 424(b) of the Rules and Regulations), the term
“ Prospectus ” shall refer to such revised
prospectus or prospectus supplement, as the case may be, from and
after the time it is first provided to the Placement Agent for such
use. 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
which 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, which is incorporated by reference and (ii) any such
document so filed. If the Company has filed an abbreviated
registration statement to register additional Stock 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.
(b)
As of the Applicable Time (as defined below) and as of the Closing
Date, neither (i) the General Use Free Writing Prospectuses (as
defined below) issued at or prior to the Applicable Time and the
Prospectus, 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 Prospectus and any
Issuer Free Writing Prospectus, in reliance upon, and in conformity
with, written information furnished to the Company by the
Placement
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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 7:30 P.M., New York City time, on the date of this
Agreement.
“ Issuer Free Writing
Prospectus ” means any “issuer free writing
prospectus,” as defined in Rule 433 under the Securities Act
relating to the Stock 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.
“ General Use Free Writing
Prospectus ” means any Issuer Free Writing Prospectus
that is identified on Schedule A to this
Agreement.
“ 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 required to be stated therein 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
).
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(e)
Each Issuer Free Writing Prospectus, if any, as of its issue date
and at all subsequent times through the completion of the public
offer and sale of the Stock 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 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 includes 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 each of its subsidiaries (as defined in Section
15 ) 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 each of its subsidiaries 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
5
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 its subsidiaries,
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: CollaGenex
International, Ltd., SansRosa Pharmaceutical Development, Inc. and
MMP Technologies, Inc.
(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 Stock to be issued and sold by the Company to the Purchasers
hereunder and under the Subscription Agreements has been duly and
validly authorized and, when issued and delivered against payment
therefor as provided herein and the Subscription Agreements, 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
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 November 13, 2006, there were 17,689,224
shares of Common Stock issued and outstanding and 200,000 shares of
Preferred Stock, par value $0.01 of the Company issued and
outstanding and 3,530,840 shares of Common Stock were issuable upon
the exercise of all options, warrants and convertible securities
outstanding as of such date excluding the Preferred Stock. 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. 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 any of its
subsidiaries 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
6
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 each subsidiary of
the Company 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 or indirectly through one or more wholly-owned
subsidiaries, 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, delivery and performance of this Agreement, the
Subscription Agreements and the Escrow Agreement by the Company,
the issue and sale of the Stock 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) 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 any subsidiary
pursuant to (i) any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries 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 any of its subsidiaries or (iii) result in any violation of 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 any of its subsidiaries 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 be reasonably expected to have a Material Adverse
Effect.
(n)
Except for the registration of the Stock 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 Stock 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 Stock or the consummation of the transactions
contemplated hereby or thereby.
(o)
To the best of the Company’s knowledge, KPMG 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
7
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, KPMG 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 subsidiaries and other consolidated entities 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 which 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 any of its subsidiaries has sustained,
since the date of the latest audited 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 any of its
subsidiaries, 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 any of its subsidiaries is a party or of which
any property or assets of the Company or any of its subsidiaries is
the subject which is required to be described in the Registration
Statement, the General Disclosure Package or the Prospectus or a
document incorporated by reference therein that is not described
therein, or which, singularly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, 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
8
proceedings are threatened or
contemplated by governmental authorities or threatened in writing
by others.
(s)
Neither the Company nor any of its subsidiaries 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 each of its subsidiaries 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 its subsidiaries
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 any subsidiary
has received written notification of any revocation or modification
(or proceedings related thereto) of any such Governmental Permit
and the Company has no reason to believe that any such Governmental
Permit will not be renewed.
(u)
Neither the Company nor any of its subsidiaries is or, after giving
effect to the offering of the Stock 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, its subsidiaries nor, to the Company’s
knowledge, any of the Company’s or its subsidiaries’
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 which
caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.
(w)
Except as disclosed in the General Disclosure Package and the
Prospectus, the Company and its subsidiaries own or possess the
right to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names,
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copyrights, licenses, inventions,
software, know-how, trade secrets and other unpatented and/or
unpatentable proprietary or confidential information 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 its subsidiaries with respect to the foregoing except
for those that would not 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.
To the Company’s knowledge, the Company and each of its
subsidiaries have complied in all material respects with, and are
not in breach nor have received any asserted or threatened claim of
breach of, any material Intellectual Property license, and the
Company has no knowledge of any breach or anticipated breach by any
other person to any Intellectual Property license. To
the Company’s knowledge, the Company’s and each of its
subsidiaries’ businesses as now conducted and as proposed to
be conducted do not infringe or misappropriate any patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses or other Intellectual Property or franchise right of any
person. No claim has been made against the Company or any of
its subsidiaries alleging the infringement by the Company or any of
its subsidiaries of any patent, trademark, service mark, trade
name, copyright, trade secret, license in or other intellectual
property right of any person. The Company and each of its
subsidiaries have taken reasonable steps to protect, maintain and
safeguard their rights in all Intellectual Property, including the
execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated
by this Agreement will not result in the loss or impairment of or
payment of any additional amounts with respect to, nor require the
consent of any other person in respect of, the Company’s or
any of its subsidiaries’ right to own, use, or hold for use
any of the Intellectual Property as owned, used or held for use in
the conduct of the businesses as currently conducted.
(x)
The Company and each of its subsidiaries 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 which are material to
the business of the Company and its subsidiaries 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 any of its subsidiaries; and all of
the leases and subleases material to the business of the Company
and its subsidiaries, and under which the Company or any of its
subsidiaries holds properties described in the General Disclosure
Package and the Prospectus, are in full force and effect, and
neither the Company nor any subsidiary has received any notice of
any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any subsidiary under any of
the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or such 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 any of its
subsidiaries 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
10
by the employees of any of its or
its subsidiaries’ principal suppliers, manufacturers,
customers or contractors, that would reasonably be expected,
singularly or in the aggregate, to have a Material Adverse
Effect. The Company is not aware that any key employee or
significant group of employees of the Company or any subsidiary
plans to terminate employment with the Company or any such
subsidiary.
(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 any of its subsidiaries which would,
singularly or in the aggregate, be reasonably expected to have a
Material Adverse Effect. Each employee benefit plan of the
Company or any of its subsidiaries is in compliance in all material
respects with applicable law, including ERISA and the Code. The
Company and its subsidiaries 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 any of its subsidiaries 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 would, singularly or in the aggregate, be
reasonably expected to cause the loss of such
qualification.
(aa)
The Company and its subsidiaries 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, 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 any of
its subsidiaries (or, to the Company’s knowledge, any other
entity for whose acts or omissions the Company or any of its
subsidiaries is or may otherwise be liable) upon any of the
property now or previously leased by the Company or any of its
subsidiaries 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 its subsidiaries, 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 any of its subsidiaries is obligated to withhold from
amounts owing to employees, creditors and third parties, and (iii)
does
11
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 its subsidiaries, 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 its
subsidiaries 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 September 30,
2006 the Company and its subsidiaries each has not incurred any
liability for taxes other than in the ordinary course.
(cc)
The Company and each of its subsidiaries 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
any 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.
(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 their
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 each of its subsidiaries that
would be a “significant subsidiary” within the meaning
of Rule 1-02(w) of Regulation S-X under the Exchange Act (such a
significant subsidiary of the Company, a “ Significant
Subsidiary ”) have been made available to the Placement
Agent and counsel for the Placement Agent, and such books (i)
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 each of its
Significant Subsidiaries since the time of its respective
incorporation or organization through the date of the latest
meeting and action, and (ii) accurately in all material respects
reflect all transactions referred to in such minutes.
(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
12
therein or to be filed as an exhibit
to the Registration Statement or a document incorporated by
reference therein which 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 and complete 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 any of its subsidiaries or any of the other parties
thereto, and neither the Company nor any of its subsidiaries 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 any of its subsidiaries on the one hand, and the
directors, officers, stockholders (or analogous interest holders),
customers or suppliers of the Company or any of its subsidiaries or
any of their affiliates on the other hand, which is required to be
described in the General Disclosure Package and the Prospectus or a
document incorporated by reference therein and which 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 any of its
subsidiaries because of the filing or effectiveness of the
Registration Statement or the sale of the Stock, 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 any of its subsidiaries under the
Securities Act.
(ii)
Neither the Company nor any of its subsidiaries 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 Stock 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
Stock 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 any of its subsidiaries 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.
13
(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(b) 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 Stock 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 compliance in all material respects with all
applicable corporate governance requirements set forth in the
Nasdaq Marketplace Rules that are currently in effect.
(oo)
Neither the Company nor any of its subsidiaries nor, to the best of
the Company’s knowledge, any employee or agent of the Company
or any subsidiary, has made any contribution or other payment to
any official of, or candidate for, any federal, state, 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
any of its subsidiaries’ 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 any of its
subsidiaries to or for the benefit of any of the officers or
directors of the Company, any of its subsidiaries 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.
14
(ss)
The operations of the Company and its subsidiaries are and have
been 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 any of its subsidiaries with respect to
the Money Laundering Laws is pending, or to the best knowledge of
the Company, threatened.
(tt)
Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its subsidiaries 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 any 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)
Neither the Company nor any 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)
Assuming the accuracy of the representations of the Purchasers in
the Subscription Agreements, no approval of the shareholders of the
Company under the rules and regulations of Nasdaq (including Rule
4350 of the Nasdaq Global Marketplace Rules) is required for the
Company to issue and deliver to the Purchasers the
Stock.
Any certificate signed by or on
behalf of the Company and delivered to the Placement Agent or to
counsel for the Placement Agent in connection with the Offering
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 City time, on November 21, 2006 (the “ Closing
Date ”) at the offices of Wilmer Cutler Pickering Hale
and Dorr LLP. Prior to the Closing, the Company, the
Placement Agent and the escrow agent shall have entered into the
Escrow Agreement. In addition, prior to the Closing, payment
of the purchase price for the Stock to be purchased by certain of
the Purchasers (e.g., DWAC shares) shall be made directly to the
escrow agent and the escrow agent agrees to hold such purchase
price in escrow in accordance therewith. The escrow agent
shall, on the Closing Date, deliver to the Company, by federal
funds wire transfer, the purchase price so held by the escrow agent
in escrow against delivery of such Stock (through the facilities of
The Depository Trust Company), and such Stock shall be registered
in such name or names and shall be in such denominations, as the
Placement Agent may request at least one business day before the
Closing Date. Thereafter, the escrow agent’s
obligations with respect to the escrow of the purchase price so
held by it shall cease. At the Closing, payment of the
purchase price for the remaining Stock to be sold in the Offering
(e.g., DVP shares), such Stock to be purchased by certain other
Purchasers not referred to in the Escrow Agreement, shall
be
15
made directly to the Company by such
Purchasers by federal funds wire transfer against delivery of such
Stock in accordance with Section 3.3(b) of the Subscription
Agreements.
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 approved by 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 approved by the Placement Agent
containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on rules
430A, 430B and 430C and to file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the second business
day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A of
the Rules and Regulations; to notify the Placement Agent
immediately of the Company’s intention to file or prepare any
supplement or amendment to any Registration Statement or to the
Prospectus and to make no amendment or supplement to the
Registration Statement, the General Disclosure Package or to the
Prospectus to which the Placement Agent shall reasonably object by
notice to the Company after a reasonable period to review; to
advise the Placement Agent, promptly after it receives notice
thereof, of the time when any amendment to any Registration
Statement has been filed or becomes effective or any supplement to
the General Disclosure Package or the Prospectus or any amended
Prospectus has been filed and to furnish the Placement Agent copies
thereof; to file promptly all material required to be filed by the
Company with the Commission pursuant to Rule 433(d) or 163(b)(2),
as the case may be; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and
for so long as the delivery of a prospectus (or in lieu thereof,
the notice referred to in Rule 173(a) under the Securities Act) is
required in connection with the offering or sale of the Stock; to
advise the Placement Agent, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary
Prospectus, any Issuer Free Writing Prospectus, if any, or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the
Registration Statement, the General Disclosure Package or the
Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus, any Issuer Free Writing
Prospectus or the Prospectus or suspending any such qualification,
and promptly to use its best efforts to obtain the withdrawal of
such order.
(b)
The Company represents and agrees that, unless it obtains the prior
consent of the Placement Agent, it has not made and will not,
make any offer relating to the Stock that would constitute a
“free writing prospectus” as defined in Rule 405 under
the Securities Act unless the prior written consent of the
Placement Agent has been received (each, a “ Permitted
Free Writing Prospectus ”); provided that
the prior written consent of the Placement Agent hereto shall be
deemed to have been given in respect of the Issuer Free Writing
Prospectuses, if any, included in Schedule A hereto.
The Company represents that it has treated and agrees that it will
treat each Permitted
16
Free Writing Prospectus as an Issuer
Free Writing Prospectus, comply with the requirements of Rules 164
and 433 under the Securities Act applicable to any Issuer Free
Writing Prospectus, including the requirements relating to timely
filing with the Commission, legending and record keeping and will
not take any action that would result in the Placement Agent or the
Company being required to file with the Commission pursuant to Rule
433(d) under the Securities Act a free writing prospectus prepared
by or on behalf of such Placement Agent that such Placement Agent
otherwise would not have been required to file
thereunder.
(c)
If at any time when a Prospectus relating to the Stock is required
to be delivered under the Securities Act, any event occurs or
condition exists as a result of which the Prospectus, as then
amended or supplemented, would include any untrue statement of a
material fact or omit to state a material fact required to be
stated therein necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading, or the Registration Statement, as then amended or
supplemented, would include any untrue statement of a material fact
req
