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SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (this “ Agreement ”)
is dated as of April 7, 2008, by and between Neurogen
Corporation, a Delaware corporation (the
“ Company ”),
and the several purchasers identified in the attached
Exhibit A
(individually, a “ Purchaser ”
and collectively, the “ Purchasers
”).
RECITALS
A. The
Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D
(“ Regulation D
”), as promulgated by the U.S. Securities and Exchange
Commission (the “ SEC ”) under
the Securities Act of 1933, as amended (the “
Securities
Act ”).
B. The
Purchasers wish to purchase from the Company, and the Company
wishes to sell and issue to the Purchasers, upon the terms and
conditions stated in this Agreement: (i) up to an aggregate of
981,411 shares (the “ Shares ”) of
the Company’s Series A Exchangeable Preferred Stock, par
value $0.025 per share (the “ Series A
Preferred
Stock ”) and (ii) warrants in the form attached
hereto as Exhibit B
(the “ Warrants ”)
to purchase shares of the Company’s common stock, par
value $0.025 per share (the “ Common Stock
”). Solely for descriptive purposes as set forth herein,
the Shares and Warrants may be denominated in “Units
”, with each Unit consisting of one Share and one
Warrant exercisable for a number of shares of Common Stock
equal to 50% of the number of shares of Common Stock into
which one Share is exchangeable. Subject to the transfer
restrictions set forth herein, the Shares and the Warrants
will be immediately separable upon issuance. The Common Stock
issuable upon Exchange shall be referred to herein as the
“ Exchange Shares
” and the shares of Common Stock underlying the Warrants
shall be referred to herein as the “ Warrant Shares
.” The Shares, the Warrants, the Exchange Shares and the
Warrant Shares shall collectively be referred to herein as the
“ Securities.
”
C. Subject
to the terms and conditions set forth herein, 981,411 Units
will be issued and sold to the Purchasers on the Closing Date
(as defined below) for a per Unit purchase price equal to
$31.20 (the “ Per Unit Purchase
Price ”), or $30,620,023.20 in the
aggregate.
D. Contemporaneously
with the sale of the Units, the parties hereto will execute
and deliver a Registration Rights Agreement, in the form
attached hereto as Exhibit C
(the “ Registration
Rights
Agreement ”), pursuant to which the Company will
agree to provide certain registration rights under the
Securities Act, and the rules and regulations promulgated
thereunder, and applicable state securities laws.
AGREEMENT
In
consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto
agree as follows:
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1.
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Definitions . As used in this Agreement, the
following terms shall have the following respective
meanings:
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(a)
“
Business
Day ” means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction
of business.
(b)
“
Certificate of
Designations ” means the Certificate of Designations,
Number, Voting Powers, Preferences and Rights of Series A Preferred
Stock of the Company, substantially in the form attached hereto as
Exhibit
D .
(c)
“
Exchange
” means the exchange of the Series A Preferred Stock for
shares of Common Stock in accordance with the terms of the
Certificate of Designations.
(d)
“
Exchange
Act ” means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated
thereunder.
(e)
“
Majority
Purchasers ” shall mean Purchasers holding a majority
of the Shares issued hereunder; provided
however , that
with respect to any amendment to Exhibit A or the proviso of this
definition (other than immaterial changes to correct definitive
legal names of the Purchasers set forth in Exhibit A) it shall mean
a unanimous vote of all of the Purchasers.
(f)
“
Registration
Rights Agreement ” shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among
the Company and the Purchasers.
(g)
“
Registration
Statement ” shall mean any registration
statement to be filed by the Company pursuant to Registration
Rights Agreement.
(h)
“
SEC
Documents ” shall mean: (i) the Company’s Annual
Report on Form 10-K for the year ended December 31, 2007, as
amended on April 4, 2008; and (ii) any other statement, report,
registration statement (other than registration statements on Form
S-8) or definitive proxy statement filed by the Company with the
SEC following the date hereof.
(i)
“
Transaction
Agreements ” shall mean this Agreement, the Warrants
and the Registration Rights Agreement.
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2.
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Authorization of Shares; Purchase and Sale of Units
.
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2.1
Authorization of Shares . On or prior to the
Closing, the Company shall have authorized the sale and issuance of
up to an aggregate of 981,411 Units, on the terms and conditions
set forth in this Agreement. The terms, limitations and relative
rights and preferences of the Shares shall be as set forth in the
Certificate of Designations.
2.2
Purchase and Sale . Subject to and upon the terms and
conditions set forth in this Agreement, the Company agrees to issue
and sell to each Purchaser, and each Purchaser, severally and not
jointly with the other Purchasers, hereby agrees to purchase from
the Company, at the Closing (as defined below), the number of Units
set forth opposite the name of such Purchaser under the heading
“ Number of Units to be
Purchased ” on Exhibit A
hereto, for a per Unit purchase price equal to the Per Unit
Purchase Price. The total purchase price payable by each
Purchaser for the Units that such Purchaser is hereby agreeing to
purchase at the Closing is set forth opposite the name of such
Purchaser under the heading “ Aggregate Purchase
Price ” on Exhibit A
hereto (such Purchaser’s “ Closing Purchase Price
”).
2.3
Closing . Upon confirmation that all of the
conditions to closing specified in Sections 5.1 and/or 5.2 have
been satisfied or duly waived by the Purchasers and/or the Company,
as applicable, the Company shall deliver to Latham &
Watkins LLP, counsel to the Company, in trust, a certificate or
certificates, registered in such name or names as the Purchasers
may designate, representing the Units, with instructions that such
certificates are to be held for release to the Purchasers only upon
payment in full of the Closing Purchase Price to the Company by all
the Purchasers. Upon such receipt by Latham &
Watkins LLP of such certificates, each Purchaser shall promptly,
but no more than one Business Day thereafter, cause a wire transfer
in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in the amount representing
such Purchaser’s Closing Purchase Price as set forth on
Exhibit
A hereto. On the date (the “ Closing Date ”)
the Company receives the Closing Purchase
2.4
Price
from all of the Purchasers, the certificates evidencing the Units
shall be released to the Purchasers (the “ Closing
”). The Closing shall take place at the offices of
Latham & Watkins LLP, 650 Town Center Drive, 20th Floor,
Costa Mesa, CA 92626-1925, or at such other location and on such
other date as the Company and the Purchasers shall mutually
agree.
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3.
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Representations and Warranties of the Company .
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Except as otherwise
described in the SEC Documents or in the Disclosure Schedule
delivered herewith (and dated as of the date of this
Agreement), the Company hereby represents and warrants to
each of the Purchasers as follows:
3.1
Financial Statements . The financial statements of the
Company included in the SEC Documents, together with the related
schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders’ equity and
cash flows of the Company and its consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles (“
GAAP
”) applied on a consistent basis throughout the periods
involved. No other financial statements or schedules are required
to be included in the SEC Documents. Any disclosures contained in
the SEC Documents regarding “non-GAAP financial
measures” (as such term is defined by the rules and
regulations of the Commission) comply with Regulation G of the
Exchange Act and Item 10 of Regulation S-K under the Securities
Act, to the extent applicable. There are no material off-balance
sheet transactions, arrangements, obligations (including contingent
obligations), or any other relationships with unconsolidated
entities or other persons, that may have a material effect on the
Company’s financial condition, changes in financial
condition, results of operations, liquidity, capital expenditures,
capital resources or significant components of revenue or
expenses.
3.2
No Material Adverse Change in Business . Since December 31,
2007: (a) there has been no material adverse change, or any
development that would be reasonably expected to result in a
material adverse change, in the condition, financial or otherwise,
or in the earnings or business affairs of the Company and the
Subsidiary (as defined below) taken as a whole, whether or not
arising in the ordinary course of business (a “ Material Adverse Effect
”); (b) there have been no transactions entered into by the
Company or any the Subsidiary, other than those in the ordinary
course of business, which are material with respect to the Company
and the Subsidiary taken as a whole; (c) there has been no dividend
or distribution of any kind declared, paid or made by the Company
on any class of its capital stock; and (d) the Company has not
incurred any debt (excluding accrued expenses and trade payables)
or other liability (whether or not required to be reflected on a
balance sheet) for borrowed funds at any time outstanding,
exceeding $1.0 million.
3.3
Good Standing of the Company . The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has full corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the SEC Documents and to enter
into and perform its obligations under the Transaction Agreements;
and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not reasonably be expected to result in a Material
Adverse Effect.
3.4
Good Standing of Subsidiary . Neurogen Properties, LLC (the
“ Subsidiary ”) has
been duly formed and is validly existing as a limited liability
company in good standing under the laws of the jurisdiction of its
formation, has limited liability company power and authority to
own, lease and operate its properties and to conduct its business
as described in the SEC Documents, and is duly qualified as a
foreign limited liability company to transact business and is in
good standing in each jurisdiction in which
3.5
such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect; all
of the issued and outstanding membership interests of the
Subsidiary have been duly authorized and are validly issued,
fully-paid and non-assessable and are owned by the Company free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and none of the outstanding
membership interests of the Subsidiary were issued in violation of
the preemptive or similar rights of any securityholder of the
Subsidiary. The Subsidiary is the only subsidiary of the
Company.
3.6
Capitalization . Immediately prior to the Closing, the
authorized capital stock of the Company consisted of 75,000,000
shares of Common Stock and 2,000,000 shares of preferred stock, par
value $0.025 per share (the “ Preferred Stock
”), of which 981,411 shares have been designated as Series A
Preferred Stock. As of immediately following the Closing and
assuming all Purchasers purchase the Units indicated on
Exhibit
A :
(a)
The
issued and outstanding capital stock of the Company will consist
of: (x) 42,051,770 shares of Common Stock; and (y) 981,411 shares
of Series A Preferred Stock; and
(b)
The
Company will have an aggregate of: (x) 5,174,348 shares of Common
Stock reserved for issuance upon the exercise of outstanding
options granted under the Company’s outstanding option plans
and employee stock purchase programs (collectively, the “
Option
Plans
”); (y) no Exchange Shares reserved for issuance upon the
Exchange and (z) 12,758,343 Warrant Shares reserved for issuance
upon exercise of the Warrants.
Except
for the warrants and options granted under the Option Plans,
the Company does not have outstanding any options to purchase,
any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its
capital stock. All of the shares of issued and outstanding
capital stock of the Company have been duly authorized and
validly issued and are fully paid and non assessable, and none
of the outstanding shares of capital stock of the Company was
issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
3.7
Authorization of Agreement . The Company has full corporate
power and authority to (a) enter into the Transaction Agreements
and to consummate the transactions contemplated hereby and thereby
and (b) authorize, execute, issue, and deliver the Units as
contemplated by the Transaction Agreements. The Transaction
Agreements have been duly authorized, executed and delivered by the
Company, and constitute legal and binding obligations of the
Company, enforceable in accordance with their terms, except to the
extent that rights to indemnity hereunder may be limited by federal
or state securities laws and except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
3.8
Authorization of the Securities .
(a)
The
Units to be issued at the Closing have been duly authorized and
reserved for issuance and sale to the Purchasers pursuant to this
Agreement, and, when issued and delivered by the Company pursuant
to this Agreement against payment of the consideration set forth
herein, the Closing will be duly and validly issued and fully paid
and non-assessable.
(b)
After
giving effect to the stockholder approval of the
Proposal, the Exchange shares will be duly
authorized and reserved for issuance to the holders of the Shares,
and, when issued and delivered by the Company pursuant to the terms
of the Shares, will be duly and validly issued and fully paid and
non-assessable.
(c)
The
Warrant Shares underlying the Warrants to be issued at the Closing
have been duly and validly authorized and reserved for issuance
upon exercise of the Warrants, and, when issued and delivered by
the Company pursuant to the holder of such Warrant against payment
of the consideration set forth therein, the Warrant Shares will be
duly and validly issued and fully paid and
non-assessable.
(d)
No
holder of the Securities will be subject to personal liability by
reason of being such a holder, and the issuance of the Securities
is not and will not be subject to preemptive or other similar
rights of any securityholder of the Company.
3.9
Absence of Defaults and Conflicts . Neither the Company nor
the Subsidiary is (A) in violation of its charter or by-laws, or
(B) except for such defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which the Company or the Subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets
of the Company or the Subsidiary is subject (collectively, “
Agreements and
Instruments ”) and the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated herein and compliance by the Company with
its obligations hereunder, do not and will not, whether with or
without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or the Subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches, defaults or
Repayment Events or liens, charges or encumbrances that would not
be reasonably likely to result in a Material Adverse Effect), nor
will such action result in (C) any violation of the provisions of
the charter or by laws of the Company or the Subsidiary or (D)
except for such violations that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, a violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or the Subsidiary or any of their
assets, properties or operations. As used herein, a “
Repayment
Event ” means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder’s behalf) the right to
require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or the Subsidiary.
3.10
Absence of Labor Dispute . No material labor dispute with
the employees of the Company or the Subsidiary exists or, to the
knowledge of the Company, is imminent, and the Company is not aware
of any existing or imminent labor disturbance by the employees of
any of its or any of the Subsidiary’s principal suppliers,
manufacturers, customers or contractors, which, in either case,
would result in a Material Adverse Effect.
3.11
Absence of Proceedings . There is no claim, action, suit,
proceeding, inquiry, audit, review or investigation before or
brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company,
threatened against the Company or the Subsidiary, or, to the
knowledge of the Company, otherwise involving the Company or the
Subsidiary which is required to be disclosed in the SEC Documents
(other than as disclosed therein), or which would be reasonably
likely to result in a Material Adverse Effect, or which would be
reasonably likely to materially and adversely affect the
consummation of the transactions contemplated in this Agreement or
the performance by the Company of its obligations hereunder; the
aggregate of all pending legal or governmental proceedings to which
the Company or the Subsidiary is a party or of which any of their
respective property or assets is the subject which are not
described in the SEC Documents, including ordinary routine
litigation incidental
3.12
to
the Company’s conduct of its business, would not be
reasonably likely to result in a Material Adverse
Effect.
3.13
Absence of Rulemaking or Similar Proceedings . To the
Company’s knowledge, there are no rulemaking or similar
proceedings before the Food and Drug Administration, the Department
of Health and Human Services, the Centers for Medicare and Medicaid
Services or any other federal, state, local or foreign governmental
bodies that regulate the Company’s or the Subsidiary’s
activities, which would reasonably be expected to have a Material
Adverse Effect.
3.14
Accuracy of Descriptions and Exhibits . There are no
statutes, regulations, contracts or documents which are required to
be described in the SEC Documents or to be filed as exhibits
thereto which have not been so described and filed as
required.
3.15
Possession of Intellectual Property . The Company and the
Subsidiary own or license or have rights to use, make, sell, and
otherwise exploit, all Intellectual Property necessary for the
conduct of the Company’s business as now conducted except as
such failure to own or license such rights would not have a
Material Adverse Effect. To the knowledge of the Company, there is
no infringement, misappropriation or violation by other parties of
any Intellectual Property described in the preceding sentence,
except as such infringement, misappropriation or violation would
not reasonably be expected to have a Material Adverse Effect.
Except as previously disclosed in the Company’s filings with
the SEC, there is no pending, or, to the knowledge of the Company,
threatened action, suit, proceeding or claim by others to which the
Company or the Subsidiary is a party, or to the knowledge of the
Company, otherwise challenging the Company’s or the
Subsidiary’s rights in or to, or exploitation of, any such
Intellectual Property, and the Company has no knowledge of any
facts which would form a reasonable basis for any such claim. The
Intellectual Property owned by the Company and, to the knowledge of
the Company, the Intellectual Property licensed to the Company have
not been adjudged invalid or unenforceable, in whole or in part,
and there is no pending or, to the knowledge of the Company,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Intellectual Property, and the Company
has no knowledge of any facts which would form a reasonable basis
for any such claim. There is no pending or to the knowledge of the
Company, threatened action, suit, proceeding or claim by others
that the Company infringes, misappropriates or otherwise violates
any Intellectual Property or other proprietary rights of others,
and the Company has not received any written notice of such claim
and has no knowledge of any other fact which would form a
reasonable basis for any such claim. To the Company’s
knowledge, no employee or independent contractor of the Company is
in violation of any term of any employment contract, patent
disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement,
nondisclosure agreement or any restrictive covenant to or with a
former employer or independent contractor where the basis of such
violation relates to such employee’s employment or
independent contractor’s engagement with the Company or
actions undertaken while employed or engaged with the Company,
except as such violation would not reasonably be expected to have a
Material Adverse Effect. “ Intellectual Property
” shall mean all patents, patent rights, patent applications,
trade and service marks, trade and service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets,
technology, know-how and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures
owned, licensed or used by the Company.
3.16
Absence of Further Requirements . No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company
of its obligations hereunder, in connection with the offering,
issuance or sale of the Units hereunder or the consummation of the
transactions contemplated by this Agreement, except such as: (a)
have been already obtained or made; or (b) as may
3.17
be
required under the Securities Act, the rules and regulations
promulgated thereunder or state securities laws.
3.18
Absence of Manipulation . Neither the Company nor, to the
knowledge of the Company any affiliate of the Company has taken,
nor will the Company or, to the knowledge of the Company, any
affiliate take, directly or indirectly, any action which is
designed to or which has constituted or which would be expected to
cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Securities.
3.19
Possession of Licenses and Permits . The Company and the
Subsidiary possess such regulatory and quasi-regulatory permits,
licenses, approvals, consents and other authorizations
(collectively, “ Governmental Licenses
”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them, except where the failure so to possess would not,
singly or in the aggregate, reasonably be expected to result in a
Material Adverse Effect; the Company and the Subsidiary are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect; all of the Governmental Licenses are valid and in
full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses
to be in full force and effect would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect; and neither the Company nor the Subsidiary has received
notice of any proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to result in a Material
Adverse Effect.
3.20
Regulatory Authorities .
(a)
The
Company and the Subsidiary: (A) are and at all times have been in
material compliance with all statutes, rules or regulations
applicable to the ownership, testing, development, manufacture,
packaging, processing, use, distribution, marketing, labeling,
promotion, sale, offer for sale, storage, import, export or
disposal of any product manufactured or distributed by the Company
(“ Applicable Laws
”); (B) have not received any FDA Form 483, notice of adverse
finding, warning letter, untitled letter or other written
correspondence or written notice from the U.S. Food and Drug
Administration or any other federal, state or foreign governmental
authority having authority over the Company (“ Governmental Authority
”) alleging or asserting material noncompliance with any
Applicable Laws or any licenses, certificates, approvals,
clearances, authorizations, permits and supplements or amendments
thereto required by any such Applicable Laws (“ Authorizations
”); (C) possess all Authorizations (except as would not
reasonably be expected to have a Material Adverse Effect) and such
Authorizations are valid and in full force and effect and are not
in material violation of any term of any such Authorizations
(except as would not reasonably be expected to have a Material
Adverse Effect); (D) have not received written notice of any claim,
action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action from any Governmental Authority or
third party alleging that any product, operation or activity is in
violation of any Applicable Laws or Authorizations and has no
knowledge that any such Governmental Authority or third party is
considering any such claim, litigation, arbitration, action, suit,
investigation or proceeding; (E) have not received written notice
that any Governmental Authority has taken, is taking or intends to
take action to limit, suspend, modify or revoke any Authorizations
and has no knowledge that any such Governmental Authority is
considering such action; and (F) have filed, obtained, maintained
or submitted all material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and
that all such reports, documents, forms, notices, applications,
records, claims, submissions and supplements or amendments were
materially complete and correct on the date filed (or were
corrected or supplemented by a subsequent submission).
(b)
The
studies, tests and preclinical and clinical trials conducted by or
on behalf of the Company and the Subsidiary were and, if still
pending, are being conducted in all material respects in accordance
with experimental protocols, procedures and controls pursuant to
accepted professional scientific standards and all Applicable Laws
and Authorizations, including, without limitation, the Federal
Food, Drug and Cosmetic Act and implementing regulations at 21
C.F.R. Parts 50, 54, 56, 58 and 312; the descriptions of the
results of such studies, tests and trials contained in the SEC
Documents are accurate and complete in all material respects and
fairly present the data derived from such studies, tests and
trials; the Company is not aware of any studies, tests or trials
the results of which the Company believes reasonably call into
question the study, test, or trial results described or referred to
in the SEC Documents when viewed in the context in which such
results are described and the clinical state of development; and
neither the Company nor the Subsidiary has received any notices or
correspondence from any Governmental Authority requiring the
termination, suspension or material modification of any studies,
tests or preclinical or clinical trials after they were initiated
and which were conducted by or on behalf of the Company or the
Subsidiary.
3.21
Compliance with Health Care Laws . Neither the Company or
the Subsidiary, nor their respective officers, directors,
employees, agents and contractors (exercising their respective
duties on behalf of the Company or the Subsidiary), nor the
Company’s or the Subsidiary’s business operations, is,
or at any time has been, in violation of any Health Care Laws,
except where such violation would not reasonably be expected to
result in a Material Adverse Effect. “ Health Care Laws
” shall mean (A) the federal Food, Drug and Cosmetic Act (21
U.S.C. §321 et seq.), and the regulations promulgated
thereunder, (B) all federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statute
(42 U.S.C. §1320a-7b(b)), the Stark Law (42 U.S.C.
§1395nn), the Civil False Claims Act (31 U.S.C. §3729 et
seq.), the Administrative False Claims Law (42 U.S.C.
§1320a-7b(a)), the Anti-Inducement Law (42 U.S.C.
§1320a-7a(a)(5)), Sections 1320a-7 and 1320a-7a of Title 42 of
the United States Code and the regulations promulgated pursuant to
such statutes, (C) the administrative simplification provisions of
the Health Insurance Portability and Accountability Act of 1996 (42
U.S.C. §§1320d-1320d-8), the regulations promulgated
thereunder and comparable state laws, (D) the Controlled Substances
Act (21 U.S.C. §801 et seq.), (E) Titles XVIII (42 U.S.C.
§1395 et seq.) and XIX (42 U.S.C. §1396 et seq.) of the
Social Security Act and the regulations promulgated thereunder, (F)
quality, safety and accreditation standards and requirements of all
applicable foreign or state laws or regulatory bodies, and (G) any
and all other applicable health care laws, regulations, manual
provisions, policies and administrative guidance, each of (A)
through (F) as may be amended from time to time.
3.22
Title to Property . The Company and the Subsidiary have good
and marketable title to all real property owned by the Company and
the Subsidiary and good title to all other properties owned by
them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of
any kind except such as would not, singly or in the aggregate,
materially adversely affect the value of such property, and do not
interfere with the use made and proposed to be made of such
property by the Company or the Subsidiary; and all of the leases
and subleases material to the business of the Company and the
Subsidiary, taken as a whole, and under which the Company or the
Subsidiary holds properties described in the SEC Documents, are in
full force and effect, and neither the Company nor the Subsidiary
has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or the
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or the
Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
3.23
Investment Company Act . The Company is not required, and
upon the issuance and sale of the Securities as contemplated
hereunder, will not be required to register as an “investment
company” under the Investment Company Act of 1940, as
amended.
3.24
Environmental Laws . Except as would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, (A) neither the Company nor the Subsidiary is in violation
of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos-containing materials or
mold (collectively, “ Hazardous Materials ”) or
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials
(collectively, “ Environmental Laws
”), (B) the Company and the Subsidiary have all permits,
authorizations and approvals required under any applicable
Environmental Laws (except where the absence of such permits,
authorizations and approvals would not reasonably be expected to
have a Material Adverse Effect) and are each in compliance with
their requirements in all material respects, (C) there are no
pending or, to the knowledge of the Company, threatened
administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any
Environmental Law against the Company or the Subsidiary and (D) to
the knowledge of the Company, there are no events or circumstances
that would reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting
the Company or the Subsidiary relating to Hazardous Materials or
any Environmental Laws.
3.25
Registration Rights . There are no persons with registration
rights or other similar rights to have any securities registered
pursuant to the SEC Documents or otherwise registered by the
Company under the Securities Act, except under the Securities
Purchase Agreement by and between the Company and the investors
listed on the signature pages thereto dated as of March 19, 2004 as
amended on March 26, 2004, which rights have been waived in
connection with the transactions contemplated under the Transaction
Agreements.
3.26
ERISA . Each employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”), that is
or has been maintained, administered or contributed to by the
Company or any member of any group that includes or has included
the Company (as determined under Section 414(b), (c), (m), or (o)
of the Internal Revenue Code of 1986, as amended (the “
Code
”)) (a “ Company Affiliate
”) for their employees or former employees has been
maintained in compliance in all material respects with its terms
and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code to the
knowledge of the Company; no prohibited transaction, within the
meaning of Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any such plan, excluding transactions
effected pursuant to a statutory or administrative exemption; and
for each such pla
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