PLACEMENT AGENT
AGREEMENT
Lazard Capital
Markets LLC
Cowen and Company, LLC
c/o Lazard Capital Markets LLC
30 Rockefeller Plaza
New York, New York 10020
1.
Introduction .
GTx, 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 3,799,600 shares of common stock, $0.001 par
value per share (the “ Common Stock ”) of the
Company. The aggregate of 3,799,600 shares so proposed to be sold
is hereinafter referred to as the “ Stock .” The
Company hereby confirms its agreement with Lazard Capital Markets
LLC (“ LCM ”), and Cowen and Company, LLC
(“ Co-Agent ”), and together with LCM, the
“ Placement Agents ”) to act as Placement Agents
in accordance with the terms and conditions hereof. LCM is acting
as the representative of the Placement Agents and in such capacity
is hereinafter referred to as the “ Representative
.”
2.
Agreement to Act as
Placement Agents; 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 Agents to act as its
exclusive agents 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
Representative, solicit or accept offers to purchase Stock
otherwise than through the Placement Agents. LCM may utilize the
expertise of Lazard Frères & Co. LLC in connection with
LCM’s placement agent activities.
2.2
The Placement Agents agree, as agents of the Company, to use their
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 Agents 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 Agents and accepted by the Company,
but the
Placement
Agents 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 Agents be obligated to underwrite or purchase any Stock
for their own accounts and, in soliciting purchases of Stock, the
Placement Agents shall act solely as the Company’s agents and
not as principals. Notwithstanding the foregoing and except as
otherwise provided in Section 2.3 , it is understood
and agreed that the Placement Agents (or their affiliates) may,
solely at their discretion and without any obligation to do so,
purchase Stock as principals.
2.3
Subject to the provisions of this Section 2 , offers
for the purchase of Stock may be solicited by the Placement Agents
as agents for the Company at such times and in such amounts as the
Placement Agents deem advisable. Each 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. Each
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 $16.00 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 Agents by wire transfer of immediately available funds to
an account or accounts designated by the Representative, an amount
equal to five percent (5%) of the gross proceeds received by the
Company from the sale of the Stock on such Closing Date.
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 Agents 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 Agents 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. 333-127175), which
became effective as of August 17, 2005 (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 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, to the best knowledge of the Company, instituted or are
threatened by the Commission. The Company, if
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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 to be 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
Representative 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
any 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) any General Use Free Writing Prospectus (as
defined below) issued at or prior to the Applicable Time, and the
Pricing Prospectus (as defined below) and the information included
on Schedule A hereto, all considered together
(collectively, the “ General Disclosure Package
”), nor (ii) any individual Limited Use Free Writing
Prospectus (as defined below), if any, issued prior to the
Effective 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 any Issuer Free Writing Prospectus, in reliance
upon, and in conformity with, written information furnished to the
Company through the Representative by or on behalf of any Placement
Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agents’
Information (as defined in Section 18 ). As used in
this paragraph (b) and elsewhere in this
Agreement:
“
Applicable Time ” means 3:50 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 Stock in the
form filed or required to be filed with the
3
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, to the best knowledge of the Company, instituted or
threatened by the Commission, and each Preliminary Prospectus, 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
through the Representative by or on behalf of any Placement Agent
specifically for inclusion therein, which information the parties
hereto agree is limited to the Placement Agents’ Information
(as defined in Section 18 ).
(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 through the Representative by
or on behalf of any Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to
the Placement Agents’ Information (as defined in
Section 18 ).
(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 any earlier date that the Company
notified or notifies the Representative 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 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, 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
through the Representative by
4
or on behalf of
any Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement
Agents’ Information (as defined in Section 18
).
(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 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 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 Rule 433(d) under the
Securities Act.
(h) 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
Agents and the escrow agent named therein, and to perform and to
discharge its obligations hereunder and thereunder; and each of
this Agreement, the Escrow 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.
(i) Neither the
Company nor, to the Company’s knowledge, any of the
Company’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 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.
(j) 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 Global Market
(“ 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.
(k) No approval of
the shareholders of the Company under the rules and regulations of
Nasdaq (including Rule 4350 of the Nasdaq Marketplace Rules)
is required for the Company to issue and deliver to the Purchasers
the Stock.
(l) The Company
has not sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not
5
covered by
insurance, or from any labor dispute or court or governmental
action, order or decree; and, since the respective dates as of
which information is given in the Prospectus and General Disclosure
Package, there has not been any change in the capital stock (other
than as a result of the grant of stock options to purchase an
aggregate of not more than 100,000 shares of common stock pursuant
to the Company’s current stock option plans, the annual grant
of stock options to key employees in accordance with the
Company’s past practice and the cancellation or exercise of
stock options described in the Prospectus and General Disclosure
Package), short-term debt or long-term debt of the Company or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders’ equity or
results of operations of the Company (“ Material Adverse
Effect ”), otherwise than as set forth or contemplated in
the Prospectus and General Disclosure Package.
(m) The Company
does not own any real property; the Company has good and marketable
title to all tangible personal property owned by it, in each case
free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus and General Disclosure Package
or such as do not materially affect the value of such property and
do not interfere with the use made of such property by the Company;
and any real property and buildings held under lease by the Company
are held by it under valid, subsisting and enforceable leases with
such exceptions as would not result in a Material Adverse
Effect.
(n) The Company
has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the State of Delaware, with
power and corporate authority to own its properties and conduct its
business as described in the Prospectus and General Disclosure
Package, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except
where the failure to be so qualified would not result in a Material
Adverse Effect.
(o) The Company
does not control directly or indirectly or have any direct or
indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture,
trust or other business association or entity.
(p) The Company
has an authorized capitalization as set forth in the Prospectus and
General Disclosure Package, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable.
(q) 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 Prospectus and General Disclosure
Package.
(r) The issue and
sale of the Stock by the Company and the compliance by the Company
with all of the provisions of this Agreement, the Subscription
Agreements and the Escrow Agreement, and the consummation of the
transactions contemplated herein and therein will not conflict with
or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company
is subject, other than any conflict, breach or violation that would
not have a Material Adverse Effect, nor will such action result in
any violation of the provisions of the Certificate of Incorporation
or By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no
consent, approval, authorization,
6
order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of
the Stock or the consummation by the Company of the transactions
contemplated by this Agreement, the Subscription Agreements and the
Escrow Agreement, except such as have been, or will have been prior
to the Closing Date, obtained under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the offering and sale of the
Stock.
(s) The Company is
not (i) in violation of its Certificate of Incorporation or
By-laws or (ii) in default in the performance or observance of
any material obligation, agreement, 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
or any of its properties may be bound, except in the case of clause
(ii), any default that would not have a Material Adverse
Effect.
(t) The statements
set forth in the Prospectus under the caption “Description of
Capital Stock”, insofar as they purport to constitute a
summary of the terms of the Stock, and the statements set forth in
the Prospectus under the caption “Plan of
Distribution”, the statements incorporated by reference into
the Prospectus from the Company’s Annual Report on Form 10-K
for the year ended December 31, 2005 filed with the
Commission, as amended, under the captions “Business —
Licenses and Collaborative Relationships, — Manufacturing,
— Intellectual Property, and — Government
Regulation,” and the statements set forth in the Prospectus
under the captions “Prospectus Supplement Summary —
Acapodene, — Andarine for the Treatment of Cancer Weight
Loss, — Fareston and — Orion Agreement,”
“Risk Factors — Risks Related to Our Dependence on
Third Parties — If third parties do not manufacture our
product candidates in sufficient quantities and at an acceptable
cost, clinical development and commercialization of our product
candidates would be delayed, and — We are dependent on our
collaborative arrangement with Ipsen to develop and commercialize
ACAPODENE ® in the European Territory. We may also be
dependent upon additional collaborative arrangements to complete
the development and commercialization of some of our other product
candidates. These collaborative arrangements may place the
development and commercialization of our product candidates outside
our control, may require us to relinquish important rights or may
otherwise be on terms unfavorable to us, Risks Related to Our
Intellectual Property — Our license agreement with Orion
excludes the use of toremifene in humans to treat breast cancer
outside the United States and may limit our ability to market
Acapodene for human uses of toremifene outside the United States,
— If some or all of our, or our licensors’, patents
expire or are invalidated or are found to be unenforceable, or if
some or all of our patent applications do not yield issued patents
or yield patents with narrow claims, or if we are estopped from
asserting that the claims of an issued patent cover a product of a
third party, we may be subject to competition from third parties
with products with the same active pharmaceutical ingredients as
our product candidates, and — Off-label sale or use of
toremifene products could decrease our sales of Acapodene and could
lead to pricing pressure if such products become available at
competitive prices and in dosages that are appropriate for the
indications for which we are developing Acapodene, — Risks
Related to Commercialization — If we are unable to obtain
adequate coverage and reimbursement from third-party payors for
products we sell at acceptable prices, our revenues and prospects
for profitability will suffer, — Risks Related to Our Common
Stock — Anti-takeover provisions in our charter documents and
under Delaware law could make an acquisition of us, which may be
beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove our current
management, and — A significant portion of our total
outstanding shares are restricted from immediate resale but may be
sold into the market in the near future. This could cause the
market price of our common stock to drop significantly, even if our
business is doing well”, insofar as they purport to describe
the provisions of the laws and documents referred to therein, are
accurate, complete and fair.
7
(u) There are no
legal or governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject,
which, if determined adversely to the Company, would individually
or in the aggregate have a Material Adverse Effect; and, to the
Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others.
(v) The Company is
not and, after giving effect to the offering and sale of the Stock,
will not be an “investment company”, as such term is
defined in the Investment Company Act of 1940, as amended and the
rules and regulations of the Commission promulgated
thereunder.
(w) The Company
does not do business with the government of Cuba nor, to the
Company’s knowledge, with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida
Statutes.
(x) Ernst &
Young 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 ”). Ernst & Young LLP have not been engaged
by the Company to perform any “ prohibited activities”
(as defined in Section 10A of the Exchange Act).
(y) The financial
statements of the Company (together with the related notes thereto)
included or incorporated by reference in the Registration
Statement, Prospectus and the General Disclosure Package as amended
or supplemented (i) fairly present the financial condition and
results of the operations and cash flows of the Company as of the
respective dates indicated and for the respective periods
specified, (ii) complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto (including,
without limitation, Regulation S-X) and (iii) have been
prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis
during the periods and at the dates involved (except as may be
indicated in the notes thereto); the summary and selected financial
data included or incorporated by reference in the Registration
Statement, Prospectus and the General Disclosure Package as amended
or supplemented fairly present the information shown therein and
have been compiled on a consistent basis with that of the audited
financial information incorporated by reference in the Registration
Statement, Prospectus and the General Disclosure Package; There is
no pro forma or as adjusted financial information which is required
to be included in the Registration Statement, Prospectus or the
General Disclosure Package, 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. The pro forma and pro forma as adjusted financial
information and the related notes included or incorporated by
reference in the Registration Statement, Prospectus and the General
Disclosure Package have been properly compiled and prepared in
accordance with the applicable requirements of the Securities Act
and the Rules and Regulations and present fairly the information
shown therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to
therein.
(z) The Company
maintains a system of internal control over financial reporting (as
such term is defined in Rule 13a-15(f) of 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; the Company’s internal
8
control over
financial reporting is effective and the Company is not aware of
any material weaknesses in its internal control over financial
reporting; there has been no fraud, whether or not material, that
involves management or other employees who have a significant role
in the Company’s internal control over financial reporting;
since the date of the latest audited financial statements included
or incorporated by reference in the Registration Statement,
Prospectus and the General Disclosure Package, there has been 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.
(aa) The Company
maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) of the Exchange Act) that comply
with the requirements of the Exchange Act; such disclosure controls
and procedures have been designed to ensure that material
information relating to the Company and its subsidiaries is made
known to the Company’s principal executive officer and
principal financial officer by others within those entities; such
disclosure controls and procedures are effective.
(bb) The Company
is in compliance in all material respects with all applicable
provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated by the Commission thereunder.
(cc) The Company
owns or has valid, binding and enforceable licenses or other rights
to use the patents and patent applications, copyrights, trademarks,
trade names, service marks, service names, and know-how (including
trade secrets and other unpatented proprietary intellectual
property rights) that is necessary or used in any material respect
to conduct its business in the manner in which it is described as
being conducted and in the manner in which it is contemplated to be
conducted as set forth in the Registration Statement, Prospectus
and the General Disclosure Package as amended or supplemented with
respect to Company’s product candidates identified in the
table set forth under the caption “Overview” from the
Company’s Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2006 (the “ Product
Candidates ”) (such rights are referred to herein
collectively as the “ Company Intellectual Property
”); the Company owns or possesses licenses or other rights to
the patents and patent applications set forth on the schedule
provided to the Placement Agents on the date hereof (the “
Patent Schedule ”) (the patents and patent
applications set forth on the Patent Schedule that disclose or
claim the Product Candidates are referred to herein collectively as
the “ Company Patents ”) that is necessary or
used in the conduct of its business in the manner in which it is
described as being conducted and in the manner in which it is
contemplated to be conducted as set forth in the Registration
Statement, the General Disclosure Package and the Prospectus as
amended or supplemented; with respect to Product Candidates, the
Company has exclusive rights to develop, market and commercialize
as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus as amended or supplemented; none of the
issued patents within the Company Patents is unenforceable or
invalid and to the Company’s knowledge, none of the patent
applications within Company Patents if issued would be
unenforceable or invalid; nor is any material fact known by the
Company with respect to such Company Patents that would preclude
the issuance of patents with respect to such applications or would
render such patents invalid or unenforceable; the Company is not
obligated to pay a royalty, grant a license, or provide other
consideration to any third party in connection with the Product
Candidates other than as disclosed in the Registration Statement,
the General Disclosure Package and the Prospectus as amended or
supplemented; the Company has not received any notice of
infringement or conflict with (and the Company is not aware of any
infringement or conflict with) the rights of others with respect to
the Product Candidates disclosed and claimed in the Company Patents
or in connection with its business as currently conducted or as
currently contemplated to be conducted as described in the
Registration Statement, the General Disclosure Package and the
Prospectus as amended or supplemented; there are no pending, nor
has there been any notice of
9
any,
threatened, actions, suits, proceedings, claims or allegations by
others that the Company is or will be infringing any patent, trade
secret, trademark, service mark, copyright or other proprietary
intellectual property rights through the manufacture, use or sale
of any Product Candidates; the manufacture, use or sale of the
products, including Product Candidates, described in the
Registration Statement, the General Disclosure Package and the
Prospectus as amended or supplemented as being under development
and other activities of the Company referred to in the Registration
Statement, the General Disclosure Package and the Prospectus as
amended or supplemented does not, and to the Company’s
knowledge, will not, infringe or conflict with any patent of any
third party in a manner which could reasonably be expected to have
a Material Adverse Effect; to the Company’s knowledge, the
patents and patent applications within Company Patents cover the
Product Candidates and are patentable; the Company has not been
notified of any inventorship challenges or any interference
proceeding having been declared or provoked with respect to the
Company Patents, nor is any material fact known by the Company
which fact is reasonably likely to result in any inventorship
challenge or interference proceeding with respect to such patents
and patent applications; to the Company’s knowledge no third
party has infringed or misappropriated, and no third party is
currently infringing or misappropriating the Company Intellectual
Property; except as described in the Registration Statement, the
General Disclosure Package and the Prospectus as amended or
supplemented and for any rights of the United States government
pursuant to 35 U.S.C. § 200 et seq. relating to a Product
Candidate other than Acapodene, no third party, including any
academic institution or any other government entity, possesses
rights to the Company Patents which, if exercised, could enable
such party to develop products competitive to a Product Candidate
or could reasonably be expected to have a Material Adverse Effect;
except as described in the Registration Statement, the General
Disclosure Package and the Prospectus as amended or supplemented,
the Company is not in material breach of, and has complied in all
material respects with all terms of, any license agreement to which
it is a party that covers technology necessary to conduct or used
in the conduct of the Company’s business in the manner in
which it is described as being conducted and in the manner in which
it is contemplated to be conducted as set forth in the Registration
Statement, the General Disclosure Package and the Prospectus as
amended or supplemented; there are no contracts or other documents
material to the Company’s patents, trade secrets, trademarks,
service marks, copyrights or other proprietary information or
materials included in the Company Intellectual Property other than
those described in the Registration Statement, the General
Disclosure Package and the Prospectus as amended or supplemented;
no Company employee is obligated under any contract (including
licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would interfere with the use of such
employee’s best efforts to promote the interest of the
Company or that would conflict with the Company’s business;
none of the execution and delivery of this Agreement, the Escrow
Agreement or any Subscription Agreement, the carrying on of the
Company’s business by the employees of the Company, and the
conduct of the Company’s business as proposed, will conflict
with or result in a breach of terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument
under which any such employee is now obligated; and it is not and
will not be necessary to use any inventions, trade secrets or
proprietary information of any of its consultants, or its employees
(or persons it currently intends to hire) made prior to their
employment by the Company, except for technology that is licensed
to or owned by the Company.
(dd) The Company
has complied with the required duty of candor and good faith in
dealing with the United States Patent and Trademark Office (the
“ PTO ”) with respect to the Company Patents,
and to the Company’s knowledge, all individuals to whom the
duty of candor and good faith applies with respect to the Company
Patents have complied with such duty, including the duty to
disclose to the PTO all information believed to be material to the
patentability of the Company Patents and pending U.S. patent
applications within Company
10
Patents; the
Company, the University of Tennessee Research Foundation (“
UTRF ”) and Orion are identified in the records of the
PTO as the holder of record of the U.S. patents and patent
applications of the Company Patents as set forth in the Patent
Schedule; the Company, UTRF and Orion are similarly listed in the
records of corresponding foreign agencies with respect to the
foreign counterparts of the Company Patents; except for the rights
of UTRF, Orion and The Ohio State University (“ OSU
”) that are described in the Registration Statement, the
General Disclosure Package and the Prospectus as amended or
supplemented, the rights of the OSU solely to receive payments from
UTRF with respect to certain patent applications and related
patents and to utilize certain of the Company Patents for academic,
non-commercial purposes, the rights of the United States government
pursuant to 35 U.S.C. § 200 et seq. relating to a Product
Candidate other than Acapodene and the nonexclusive rights that the
Company granted to third party contractors to perform activities on
the Company’s behalf to develop Product Candidates, no other
entity or individual has any right, title or interest in the
Company Patents; there are no legal or governmental proceedings
pending relating to Company Patents other than PTO or World
Intellectual Property Organization (“ WIPO ”)
(or patent offices in other jurisdictions) review of pending
applications for patents, and, other than PTO or WIPO (or patent
offices in other jurisdictions) review of pending applications for
patents, to the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or others,
and the Company is not aware of any fact that is likely to result
in any such proceeding; and the Company is diligently prosecuting,
and shall continue to diligently prosecute, claims in the patent
applications within the Company Patents which claim products are
described in the Registration Statement, the General Disclosure
Package and the Prospectus as being under development.
(ee) The Company
possesses all registrations, approvals, certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
its business as described in the Registration Statement, the
General Disclosure Package and the Prospectus as amended or
supplemented, including without limitation, all such registrations,
approvals, certificates, authorizations and permits required by the
United States Food and Drug Administration (the “ FDA
”) or any other federal, state, local or foreign agencies or
bodies engaged in the regulation of pharmaceuticals or biohazardous
substances or materials, except where the failure to possess such
registrations, approvals, certificates, authorizations and permits,
singly or in the aggregate, would not have a Material Adverse
Effect; and the Company has not received any notice of proceedings
relating to, and there are no facts or circumstances, including
without limitation facts or circumstances relating to the
withdrawal, revocation, suspension, modification or termination of
any registration, approval, certificate, authorization or permit
held by others, known to the Company that could lead to, the
withdrawal, revocation, suspension, modification or termination of
any such registration, approval, certificate, authorization or
permit, which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in a Material
Adverse Effect.
(ff) The Company
and, to the Company’s knowledge, others who perform services
on the Company’s behalf have been and are in compliance with
all applicable federal, state, local and foreign laws, rules,
regulations, standards, orders and decrees governing their
respective businesses, including without limitation, all
regulations promulgated by the FDA or any other federal, state,
local 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; and the Company has not received any
notice citing action or inaction by the Company or others who
perform services on the Company’s behalf that would
constitute non-compliance with any applicable federal, state, local
or foreign laws, rules, regulations or standards.
(gg) The tests and
preclinical and clinical studies conducted by or on behalf of the
Company that are described in the Registration Statement, the
General Disclosure Package and
11
the Prospectus
as amended or supplemented were and, if still pending, are being,
conducted in all material respects in accordance with experimental
protocols, procedures and controls generally used by qualified
experts in the preclinical and clinical study of new drugs, and
laws and regulations; the descriptions of the tests and preclinical
and clinical studies, and results thereof, conducted by or on
behalf of the Company contained in the Registration Statement, the
General Disclosure Package and the Prospectus as amended or
supplemented are accurate in all material respects; the Company has
not received any written notice or correspondence from the FDA or
any foreign, state or local governmental body exercising comparable
authority or any Institutional Review Board or comparable authority
requiring the termination, suspension, material modification or
clinical hold of any tests or preclinical or clinical studies
conducted by or on behalf of the Company, which termination,
suspension, material modification or clinical hold would reasonably
be expected to have a Material Adverse Effect; and the Company has
not received any written notices or correspondence from others
concerning the termination, suspension, material modification or
clinical hold of any tests or preclinical or clinical studies
conducted by others on any active ingredient contained in the
existing products of the Company or the products described in the
Registration Statement, the General Disclosure Package and the
Prospectus as amended or supplemented as being under development,
which termination, suspension, material modification or clinical
hold would reasonably be expected to have a Material Adverse
Effect.
(hh) The Company
has all consents, authorizations, approvals, orders, certificates
and permits of and from, and has made all declarations and filings
with, all foreign, federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and
other tribunals necessary to own, lease, license and use its
properties and assets and to conduct its business in the manner in
which it is described in the Registration Statement, the General
Disclosure Package and the Prospectus as amended or supplemented,
except for such consents, authorizations, approvals, orders,
certificates, permits, declarations and filings the failure of
which to have, maintain or make would not have a Material Adverse
Effect; the Company has not received any notice of proceedings
relating to the revocation or modification of any such consent,
authorization, approval, order, certificate or permit; and the
Company is in compl
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