Exhibit 1.1
7,000,000
KOSAN BIOSCIENCES
INCORPORATED
Common Stock
PLACEMENT AGENT
AGREEMENT
February 8, 2007
C OWEN AND C OMPANY ,
LLC
Leerink Swan & Company
Rodman & Renshaw, LLC
c/o Cowen and Company,
LLC
1221 Avenue of the Americas
New York, New York 10020
Dear Sirs:
1. I NTRODUCTION . Kosan Biosciences Incorporated, a Delaware
corporation (the “ Company ”), proposes to issue
and sell to the purchasers, pursuant to the terms of this Placement
Agent Agreement (this “ Agreement ”) and the
Subscription Agreements in the form of Exhibit A attached
hereto (the “ Subscription Agreements ”) entered
into with the purchasers identified therein (each a “
Purchaser ” and collectively, the “
Purchasers ”), up to an aggregate of 7,000,000 shares
of common stock, $0.001 par value per share (the “ Common
Stock ”) of the Company. The aggregate of 7,000,000
shares so proposed to be sold is hereinafter referred to as the
“ Stock .” The Company hereby confirms its
agreement with Cowen and Company, LLC (“ Cowen
”), Leerink Swann & Company (“ Leerink
”) and Rodman & Renshaw, LLC (“ Rodman
” and together with Cowen and Leerink, the “
Placement Agents ”) to act as placement agents in
accordance with the terms and conditions of this Placement Agent
Agreement (this “ Agreement ”). Cowen is acting
as the representative of the Placement Agents and in such capacity
is hereinafter referred to as the “ Representative
.”
2. A GREEMENT TO A CT AS P LACEMENT A GENT ; P LACEMENT OF S ECURITIES . 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:
(I) The Company hereby authorizes
the Placement Agents to act as its sole 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 Representative, solicit or accept
offers to purchase Stock otherwise than through the Placement
Agents.
(II) The Placement Agents agree, as
agents of the Company, to use its 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 best 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 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 its own account
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(III) , 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.
(III) Subject to the provisions of
this Section 2 , offers for the purchase of Stock may
be solicited by the Placement Agent as agents for the Company at
such times and in such amounts as the Placement Agents deems
advisable. The Placement Agents shall communicate to the Company,
orally or in writing, each reasonable offer to purchase Stock
received by them 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 Representative
shall have the right, in its discretion reasonably exercised, with
notice to the Company, to reject any offer to purchase Stock
received by the Placement Agents, in whole or in part, and any such
rejection shall not be deemed a breach of its agreement contained
herein.
(IV) The Stock is being sold to the
Purchasers at a price of $6.50 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.
(V) 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 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 (such aggregate
amount to be divided among the Placement Agents pursuant to a prior
existing agreement between the Placement Agents).
(VI) No Stock which the Company has
agreed to sell pursuant to the Subscription Agreements 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(III)
herein.
3. R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY . The
Company represents and warrants to, and agrees with, the Placement
Agents and Purchasers that the statements contained in this
Section 3 are true and correct as of the Applicable Time, and
will be true and correct as of the Closing as though made as of the
Closing, except to the extent such representations and warranties
are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such
date):
(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. 333-108909), which became effective as
of
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October 3, 2003 (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 or
434(d) under the Securities Act), as amended and/or supplemented to
the date of this Agreement, including the Base Prospectus. The
Registration Statement is effective under the Securities Act and no
stop order preventing or suspending the effectiveness of the
Registration Statement or suspending or preventing the use of the
Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the
Company, are threatened by the Commission. The Company, if required
by the Rules and Regulations of the Commission, will file the
Prospectus (as defined below), with the Commission pursuant to Rule
424(b) of the Rules and Regulations. The term
“Prospectus” as used in this Agreement means the
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 the Representative 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, the Pricing Prospectus (as defined
below) and the information included on Schedule B hereto,
all considered together (collectively, the “General
Disclosure Package” ), nor (ii) any individual
Limited Use Free Writing Prospectus (as defined
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below), when considered together
with the General Disclosure Package, included or, as of the Closing
Date 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 by the Representative specifically for inclusion therein,
which information the parties hereto agree is limited to the
Placement Agents’ Information (as defined in Section
17) . As used in this paragraph (b) and elsewhere in this
Agreement:
“Applicable Time” means
5:30 P.M., New York time, on the date of this Agreement.
“Pricing Prospectus”
means the Base Prospectus, as amended and supplemented immediately
prior to the Applicable Time, including any document incorporated
by reference therein.
“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 proposed
offering of the Stock 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 Company’s
knowledge, 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 by
the Representative specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement
Agents’ Information (as defined in Section 17
).
(d) At the time the Registration
Statement became or becomes 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, in light of
the circumstances under which they were made, not
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misleading; the Prospectus, at the
time the Prospectus was issued and at the Closing Date, conformed
and will conform in all material respects to the requirements of
the Securities Act and the Rules and Regulations and did not and
will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading; provided , however , that the
foregoing representations and warranties in this paragraph
(d) shall not apply to information contained in or omitted
from the Registration Statement or the Prospectus in reliance upon,
and in conformity with, written information furnished to the
Company by the Representative specifically for inclusion therein,
which information the parties hereto agree is limited to the
Placement Agents’ Information (as defined in
Section 17 ).
(e) Each Issuer Free Writing
Prospectus, if any, as of its issue date and at all subsequent
times through the completion of the public offer and sale of the
Stock or until any earlier date that the Company notified or
notifies the Represenative 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
prevailing 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
Representative specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement
Agents’ 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 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 written
offering material in connection with the offering and sale of the
Stock 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 Rules 163(b)(2) and
433(d) under the Securities Act.
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(h) The Company has been duly
incorporated and is an existing corporation in good standing under
the laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus; and the Company is duly
qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification
except for such jurisdictions where the failure to so qualify, be
in good standing or have such power or authority would not,
individually or in the aggregate, (i) have a material adverse
effect on the condition (financial or otherwise), assets, business,
properties or results of operations of the Company 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 does not own or control, directly
or indirectly, any interest in any corporation, partnership,
limited liability partnership, limited liability company,
association or other entity. The Company has no subsidiaries (as
defined in Section 14).
(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 Representative and the escrow agent
named therein, and to perform and to discharge its obligations
hereunder and thereunder; and each of this Agreement, each of the
Subscription Agreements and the Escrow Agreement 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) 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 December 31, 2006, there were
35,389,717 shares of Common Stock issued and outstanding and no
shares of Preferred Stock, par value $0.001 of the Company issued
and outstanding and 4,652,852 shares of Common Stock were issuable
upon the exercise of all options, warrants and convertible
securities outstanding as of such date. Since such date, the
Company has not issued any securities, other than stock options
issued under the Company’s stock option plans, 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 Common Stock pursuant to employee stock purchase
plans. None of the outstanding
6
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 other than those described above or accurately
described in the General Disclosure Package. The description of the
Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder,
as described in the General Disclosure Package and the Prospectus,
accurately and fairly present the information required to be shown
with respect to such plans, arrangements, options and
rights.
(l) 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 pursuant to, 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, nor will
such actions result in any violation of the provisions of the
charter or by-laws (or analogous governing instruments, as
applicable) of the Company or 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 their properties or assets.
(m) 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 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.
(n) 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 ”). Except as pre-approved in accordance with
the requirements set forth in Section 10A of the Exchange Act,
Ernst & Young LLP has not been engaged by the Company to
perform any “prohibited activities” (as defined in
Section 10A of the Exchange Act).
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(o) 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 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. 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 and 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.
(p) The Company has not sustained,
since the date of the latest unaudited financial statements
included or incorporated by reference in the General Disclosure
Package, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the General Disclosure Package; and, since such
date, there has not been any change in the capital stock or
long-term debt of the Company (other than issuances of shares of
capital stock upon exercise of stock options and equity draws under
the Company’s committed equity financing facility), or any
material adverse changes, or any development involving a
prospective material adverse change, in or affecting the business,
assets, general affairs, management, financial position, prospects,
stockholders’ equity or results of operations of the Company,
otherwise than as set forth or contemplated in the General
Disclosure Package.
(q) 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 is a
party or of which any property or assets of the Company 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 and is not described
therein, or which, singularly or in the aggregate, if determined
adversely to the Company, could have a Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby;
and to the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others.
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(r) The Company is not in
(i) violation of its certificate of incorporation or by-laws,
(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 (r), for any violations or defaults which,
singularly or in the aggregate, would not have a Material Adverse
Effect.
(s) The Company possesses adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business
now operated by it except where the lack thereof would not
individually or in the aggregate have a Material Adverse Effect,
including without limitation all such certificates, authorities or
permits required by the United States Food and Drug Administration
(“ FDA ”) or any other federal, state or foreign
agencies or bodies engaged in the regulation of pharmaceuticals and
biohazardous materials, and has not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to
the Company, would individually or in the aggregate have a Material
Adverse Effect.
(t) The Company is not 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 not 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.
(u) To the Company’s
knowledge, none 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.
(v) Except as disclosed in the
General Disclosure Package, the Company owns, possesses or can
acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property
(collectively, “ intellectual property rights ”)
necessary to conduct the business now operated by it or as proposed
to be conducted as described in the General Disclosure Package by
it, or presently employed by it, and, except as disclosed in the
General Disclosure Package, has not received any notice of
infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined
adversely to the Company, would individually or in the aggregate
have a Material Adverse Effect. Except as disclosed in the General
Disclosure Package, there is no claim being made against the
Company regarding intellectual property rights that would
individually or in the aggregate have a Material Adverse Effect.
Except as disclosed in the General Disclosure Package, the Company
does not in the conduct of its business, as now conducted or
proposed to be conducted as described in the General Disclosure
Package,
9
infringe or conflict with any
enforceable intellectual property rights of a third party or, to
its knowledge, any intellectual property rights which are the
subject of any patent application filed by any third party, in each
case which infringement or conflict could reasonably be expected to
result in a Material Adverse Effect. The Company is not aware of
any prior art that may render any patent application owned by the
Company unpatentable which has not been or will not be disclosed to
the United States Patent and Trademark Office and which could have
Material Adverse Effect.
(w) Except as disclosed in the
General Disclosure Package, the Company has good and marketable
title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects
that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by it; and except
as disclosed in the General Disclosure Package, the Company holds
any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the
use made or to be made thereof by it.
(x) No labor disturbance by the
employees of the Company exists or, to the Company’s
knowledge, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers, customers or contractors,
that could 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
plans to terminate employment with the Company.
(y) 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 could reasonably be expected to occur with respect to
any employee benefit plan of the Company which could, singularly or
in the aggregate, have a Material Adverse Effect. Each employee
benefit plan of the Company is in compliance in all material
respects with applicable law, including ERISA and the Code. The
Company has not incurred and could 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 would have any
liability that is intended to be qualified under
Section 401(a) of the Code is so qualified, and nothing has
occurred, whether by action or by failure to act, which could,
singularly or in the aggregate, cause the loss of such
qualification.
(z) Except as disclosed in the
General Disclosure Package, the Company is not in violation in any
material respect of any statute, any rule, regulation, decision or
order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, “ environmental laws ”), does not
own or operate any real property contaminated with any substance
that is subject to any environmental laws, is not liable
10
for any off-site disposal or
contamination pursuant to any environmental laws, or is not subject
to any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not
aware of any pending investigation which might lead to such a
claim.
(aa) The Company (i) has timely
filed all necessary federal, state, local and foreign tax returns,
and all such returns were true, complete and correct,
(ii) have paid all federal, state, local and foreign taxes,
assessments, governmental or other charges due and payable for
which they are liable, including, without limitation, all sales and
use taxes and all taxes which the Company is obligated to withhold
from amounts owing to employees, creditors and third parties, and
(iii) do not have any tax deficiency or claims outstanding or
assessed or, to its knowledge, proposed against any of them, except
those, in each of the cases described in clauses (i), (ii) and
(iii) of this paragraph (aa), that would not, singularly or in
the aggregate, have a Material Adverse Effect. The Company has not
engaged in any transaction which is a corporate tax shelter or
which 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 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 has not incurred any
liability for taxes other than in the ordinary course.
(bb) The Company carries, or is
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of its business and the value of its
properties and as is customary for companies of a similar size
engaged in similar businesses in similar industries. The Company
has no reason to believe that it 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 result in a Material Adverse
Effect.
(cc) The Company maintains a system
of internal accounting and other controls sufficient to provide
reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s
general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences. Except as described in the General Disclosure
Package, since the end of the Company’s most recent audited
fiscal year, there has 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.
(dd) The minute books of the Company
have been made available to the Placement Agents and counsel for
the Placement Agents, and such books (i) contain a complete
summary of all meetings and actions of the board of directors
(including each board committee) and
11
stockholders of the Company (or
analogous governing bodies and interest holders, as applicable)
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.
(ee) There is no franchise, lease,
contract, agreement or document required by the Securities Act or
by the Rules and Regulations to be described in the General
Disclosure Package and in the Prospectus or a document incorporated
by reference therein or to be filed as an exhibit to the
Registration Statement or a document incorporated by reference
therein 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
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 the other parties
thereto, and Company has received no 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.
(ff) No relationship, direct or
indirect, exists between or among the Company on the one hand, and
the directors, officers, stockholders (or analogous interest
holders), customers or suppliers of the Company 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.
(gg) No person or entity has the
right to require registration of shares of Common Stock or other
securities of the Company in connection with the Offering, 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 under the Securities Act.
(hh) The Company does not 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.
(ii) Other than that certain
Engagement Letter dated February 2, 2007 between the Company
and the Representative, the Company is not 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 Agents for a
brokerage commission, finder’s fee or like payment in
connection with the offering and sale of the Stock or any
transaction contemplated by this Agreement, the Registration
Statement, the General Disclosure Package or the
Prospectus.
12
(jj) 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.
(kk) 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 (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
Stock Market, 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 Stock Market is required for the listing and trading of the
Stock on the Nasdaq GM.
(ll) The Company is in compliance in
all material respects 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 then in effect
and is actively taking steps to ensure that it will be in
compliance with other applicable provisions of the Sarbanes-Oxley
Act not currently in effect upon and at all times after the
effectiveness of such provisions.
(mm) The Company is in compliance in
all material respects with all applicable corporate governance
requirements set forth in the Nasdaq Marketplace Rules that are
then in effect and is actively taking steps to ensure that it will
be in compliance with other applicable corporate governance
requirements set forth in the Nasdaq Marketplace Rules not
currently in effect upon and all times after the effectiveness of
such requirements.
(nn) The Company and to the
Company’s knowledge, any employee or agent of the Company,
while acting on behalf of the Company, has not made any
contribution or other payment to any official of, or candidate for,
any federal, state, local or foreign office in violation of any
applicable 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.
(oo) 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 structured finance, special purpose or
limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability
of or requirements for their capital resources required to be
described in the General Disclosure Package and the Prospectus or a
document incorporated by reference therein which have not been
described as required.
13
(pp) 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 to or for the benefit of any of the officers or directors
of the Company or any of their respective family members, except as
disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus.
(qq) 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.
(rr) The operations of the Company
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 with respect to the Money
Laundering Laws is pending, or to the knowledge of the Company,
threatened.
(ss) The Company and to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company, is not 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 person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions
administered by OFAC.
(tt) The Company nor any of its
affiliates (within the meaning of NASD Conduct Rule 2720(b)(1)(a))
directly or indirectly controls, are con
