EXHIBIT 1.1
_________
Shares
TARGACEPT,
INC.
COMMON STOCK,
PAR VALUE $0.001 PER SHARE
UNDERWRITING
AGREEMENT
_______________,
2006
_______________,
2006
Deutsche Bank
Securities Inc.
Pacific Growth
Equities, LLC
CIBC World
Markets Corp.
Lazard Capital
Markets LLC
|
c/o
|
|
Deutsche Bank Securities
Inc.
|
60 Wall
Street
New York, NY
10005
Ladies and
Gentlemen:
Targacept, Inc., a
Delaware corporation (the “ Company ”), proposes
to issue and sell to the several Underwriters named in Schedule I
hereto (the “ Underwriters ”) _________ shares
of its common stock, par value $0.001 per share (the “
Firm Shares ”). The Company also proposes to issue and
sell to the several Underwriters not more than an additional
_______ shares of its common stock, par value $0.001 per share (the
“ Additional Shares ”), if and to the extent
that you, as Managers of the offering, shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such
shares of common stock granted to the Underwriters in
Section 2 hereof. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the “
Shares. ” The shares of common stock, par value $0.001
per share, of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the
“ Common Stock. ”
The Company has
filed with the Securities and Exchange Commission (the “
Commission ”) a registration statement on Form S-1
(File No. 333-131050), including a prospectus, relating to the
Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Securities Act of 1933, as amended
(the “ Securities Act ”), is hereinafter
referred to as the “ Registration Statement ”;
the prospectus in the form first used to confirm sales of Shares
(or in the form first made available to the Underwriters by the
Company to meet requests of purchasers pursuant to Rule 173 under
the Securities Act) is hereinafter referred to as the “
Prospectus. ” If the Company has filed an abbreviated
registration statement to register additional shares of Common
Stock pursuant to Rule 462(b) under the Securities Act (the “
Rule 462 Registration Statement ”), then any reference
herein to the term “ Registration Statement ”
shall be deemed to include such Rule 462 Registration
Statement.
For purposes of
this Agreement, the terms set forth below have the respective
meanings ascribed to them as follows:
“ Free
writing prospectus ” has the meaning set forth in Rule
405 under the Securities Act.
“
Applicable Time ” means ______, New York City time, on
the date of this Agreement or such other time as agreed to in
writing by the Company and you.
“
Statutory Prospectus ” as of any time means the
preliminary prospectus relating to the Shares that is included in
the Registration Statement immediately prior to the earlier of that
time and the time the Registration Statement becomes
effective.
“ Issuer
Free Writing Prospectus ” means any “issuer free
writing prospectus,” as defined in Rule 433 under the
Securities Act, relating to the Shares 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 II to this
Agreement, including any pricing information orally communicated by
the Underwriters to prospective purchasers prior to confirming
sales and identified on Schedule II.
“ Limited
Use Free Writing Prospectus ” means any Issuer Free
Writing Prospectus that is not a General Use Free Writing
Prospectus.
“ General
Disclosure Package ” means each General Use Free Writing
Prospectus issued at or prior to the Applicable Time and the
Statutory Prospectus, all considered together.
As used herein,
the terms “Registration Statement,” “preliminary
prospectus,” “General Disclosure Package” and
“Prospectus” shall include the documents, if any,
incorporated by reference therein.
Deutsche Bank
Securities Inc. (“ DBSI ”) has agreed to reserve
a portion of the Shares to be purchased by it under this Agreement
for sale to the Company’s directors, officers, employees and
business associates and other parties related to the Company
(collectively, “ Participants ”), as set forth
in the Prospectus under the heading “Underwriters” (the
“ Directed Share Program ”). The Shares to be
sold by DBSI and its affiliates pursuant to the Directed Share
Program are referred to hereinafter as the “ Directed
Shares .” Any Directed Shares not confirmed for purchase
by any Participant by the end of the business day on which this
Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
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1.
Representations and Warranties . The Company represents and
warrants to and agrees with each of the Underwriters
that:
(a) The
Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or,
to the knowledge of the Company, threatened by the Commission; no
order preventing or suspending the use of any preliminary
prospectus, any Issuer Free Writing Prospectus or the Prospectus
relating to the offering of the Shares is in effect, and no
proceedings for such purpose or pursuant to Section 8A of the
Securities Act are pending before, or to the knowledge of the
Company, threatened by the Commission.
(b) (i) The
Registration Statement, when it became effective, did not contain
and, as amended or supplemented, if applicable, will not contain
any 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 not misleading, (ii) the Registration
Statement when it became effective complied, and the Prospectus
complies, and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder,
(iii) the General Disclosure Package, as of the Applicable
Time, did not contain and, as of the Closing Date, as then amended
or supplemented by the Company, if applicable, will not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
(iv) each individual Limited Use Free Writing Prospectus, when
considered together with the General Disclosure Package, as of the
Applicable Time, did not contain and, as of the Closing Date, as
then amended or supplemented by the Company, if applicable, will
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading and (v) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in the Registration
Statement, the General Disclosure Package, any Issuer Free Writing
Prospectus or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing, including by
email, by such Underwriter (or on behalf of such Underwriter by
counsel) through you expressly for use therein, it being understood
and agreed that the only such information is that described in
Section 12 hereof.
(c) Each Issuer
Free Writing Prospectus, as of its issue date and at all subsequent
times through the completion of the public offer and sale of the
Shares or until any earlier date that the Company notified or
notifies you that it has
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determined that it is
necessary to amend or supplement the General Disclosure Package in
accordance with Section 6(e) hereof, did not, does not and
will not include any information that conflicted, conflicts or will
conflict with the information contained in the Registration
Statement or the Prospectus.
(d) The Company
has not, directly or indirectly, distributed and will not
distribute any offering material in connection with the offering
and sale of the Shares other than the preliminary prospectus
included in the Registration Statement prior to the time it becomes
effective, the Prospectus and other materials, if any, permitted
under the Securities Act and consistent with Section 6(c)
hereof. The Company will comply with the filing requirements under
Rule 433(d) under the Securities Act with respect to each Issuer
Free Writing Prospectus. The Company has satisfied or will satisfy
the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road
show.
(e) At the time of
filing the Registration Statement and as of the date hereof (with
such date being used as the determination date), the Company was
not and is not an “ineligible issuer” (as defined in
Rule 405 under the Securities Act, without taking into account any
determination by the Commission pursuant to Rule 405 under the
Securities Act that it is not necessary that the Company be
considered an ineligible issuer), including, without limitation,
for purposes of Rules 164 and 433 under the Securities Act with
respect to the offering of the Shares as contemplated by the
Registration Statement.
(f) The Company
has been duly incorporated, is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the General
Disclosure Package and the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company.
(g) The Company
has no subsidiaries.
(h) This Agreement
has been duly authorized, executed and delivered by the
Company.
(i) The authorized
capital stock of the Company conforms as to legal matters to the
description thereof contained in the Registration Statement, the
General Disclosure Package and the Prospectus.
(j) The shares of
Common Stock outstanding prior to the issuance of the Shares have
been duly authorized and are validly issued, fully paid
and
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non-assessable. No person is
entitled to preemptive or similar rights to acquire any securities
of the Company, except rights that are not triggered by the
issuance of the Shares and that terminate upon the Closing Date (as
defined herein). There are no outstanding securities convertible
into or exchangeable for, or warrants, rights or options to
purchase from the Company, or obligations of the Company to issue,
any shares of its Common Stock or any other class of shares of
capital stock of the Company, except as set forth in the General
Disclosure Package and the Prospectus.
(k) The Shares
have been duly authorized and, when issued, delivered and paid for
in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar
rights.
(l) The execution
and delivery by the Company of, and the performance by the Company
of its obligations under, this Agreement will not contravene
(i) any provision of applicable law, (ii) the certificate
of incorporation or bylaws of the Company, in each case as amended
and in effect as of the date hereof, (iii) any agreement or
other instrument binding upon the Company that is material to the
Company, or (iv) any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the
Company, except, with respect to clauses (i), (iii) and (iv),
for such contraventions which would not, singly or in the
aggregate, result in a material adverse effect on the Company. No
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement,
except (i) such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and
sale of the Shares, (ii) where the failure to obtain such
would not have a material adverse effect on the power or ability of
the Company to perform its obligations under this Agreement, or
(iii) as may be required by the rules and regulations of the
National Association of Securities Dealers, Inc. (the “
NASD ”).
(m) There has not
occurred any material adverse change, or any development involving
a prospective material adverse change, in the condition, financial
or otherwise, or in the earnings, business or operations of the
Company from that set forth in the General Disclosure
Package.
(n) There are no
legal or governmental proceedings pending or, to the knowledge of
the Company, threatened to which the Company is a party or to which
any of the properties of the Company is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described, and there are no statutes, regulations,
contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or
filed as required.
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(o) Each
preliminary prospectus filed as part of the registration statement
as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission
thereunder.
(p) The Company is
not, and after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in the
Prospectus will not be, required to register as an
“investment company” as such term is defined in the
Investment Company Act of 1940, as amended.
(q) The Company
(i) is in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants (“
Environmental Laws ”), (ii) has received all
permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business and
(iii) is in compliance with all terms and conditions of any
such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly
or in the aggregate, have a material adverse effect on the
Company.
(r) There are no
costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities
to third parties) which would, singly or in the aggregate, have a
material adverse effect on the Company.
(s) Except as
described in the General Disclosure Package and the Prospectus,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require
the Company to file a registration statement under the Securities
Act with respect to any securities of the Company. No person has
the right to require the Company to include any securities of the
Company with the Shares registered pursuant to the Registration
Statement, except for such rights as have been waived.
(t) Subsequent to
the respective dates as of which information is given in each of
the Registration Statement, the General Disclosure Package and the
Prospectus, (i) the Company has not incurred any material
liability or obligation, direct or contingent, nor entered into any
material transaction not in the ordinary course of business;
(ii) the Company has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock, other than ordinary
and customary dividends; and
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(iii) there has not been any
material change in the capital stock, short-term debt or long-term
debt of the Company, except in each case as described in each of
the Registration Statement, the General Disclosure Package and the
Prospectus, respectively.
(u) The Company
does not own any real property. The Company has good and marketable
title to all tangible personal property owned by it that is
material to the business of the Company, in each case free and
clear of all liens, encumbrances and defects, except such as are
described in the General Disclosure Package and the Prospectus or
such as do not materially affect the value of such property and do
not interfere in any material respect with the use made and
proposed to be 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 are not material and do not interfere in any material
respect with the use made and proposed to be made of such property
and buildings by the Company, in each case except as described in
the General Disclosure Package and the Prospectus.
(v) The Company
owns or has valid, binding and enforceable licenses or other rights
to the patents and patent applications, copyrights, trademarks,
service marks, trade names, service names and trade secrets
reasonably necessary or used in any material respect to conduct the
business of the Company in the manner described in the General
Disclosure Package and the Prospectus (collectively, the “
Company Intellectual Property ”), except as
enforceability may be limited by bankruptcy and other similar laws
affecting the rights of creditors generally and general principles
of equity; the Company is not obligated to pay a royalty, grant a
license, or provide other consideration to any third party in
connection with the Company Intellectual Property other than as
disclosed in the Registration Statement (including the exhibits
thereto); except as disclosed in the General Disclosure Package and
the Prospectus, (i) the Company has not received any written
notice of infringement or conflict with asserted rights of others
with respect to any Company Intellectual Property, (ii) the
discoveries, inventions, products or processes of the Company
referred to in the General Disclosure Package and the Prospectus do
not, to the knowledge of the Company, infringe, interfere or
conflict with any right or patent claim of any third party, and
(iii) no third party has any ownership right in or to any
Company Intellectual Property that is owned by the Company, other
than any co-owner of any patent constituting Company Intellectual
Property who is listed on the records of the United States Patent
and Trademark Office (the “ PTO ”) and any
co-owner of any patent application constituting Company
Intellectual Property who is named in such patent application, and,
to the knowledge of the Company, no third party has any ownership
right in or to any Company Intellectual Property that is licensed
to the Company, other than any licensor of the Company of such
Company Intellectual Property.
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(w) All patent
applications owned by the Company and filed with the PTO or any
foreign or international patent authority (the “ Company
Patent Applications ”) have been duly and properly filed;
the Company has complied with its duty of candor and disclosure to
the PTO for the Company Patent Applications; the Company is not
aware of any facts required to be disclosed to the PTO that were
not disclosed to the PTO and which would preclude the grant of a
patent for the Company Patent Applications; and the Company has no
knowledge of any facts which would preclude it from having clear
title to the Company Patent Applications that have been identified
by the Company as being exclusively owned by the
Company.
(x) No material
labor dispute with the employees of the Company exists, except as
described in the General Disclosure Package and the Prospectus, or,
to the knowledge of the Company, is imminent; and the Company is
not aware of any existing, threatened or imminent labor disturbance
by the employees of any of its principal suppliers, manufacturers
or contractors that could have a material adverse effect on the
Company.
(y) The Company is
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as the Company believes
are adequate for the conduct of its business at its current stage
of development as described in the General Disclosure Package and
the Prospectus and the value of its properties and as are customary
in the business in which it is currently engaged; the Company has
not been refused any insurance coverage sought or applied for; and
the Company believes that it will be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a material
adverse effect on the Company, except as described in the General
Disclosure Package and the Prospectus.
(z) The Company
possesses all certificates, authorizations and permits issued by
the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business as currently conducted, except
where the lack of any such certificate, authorization or permit
would not have a material adverse effect on the Company, including
without limitation all such certificates, authorizations and
permits required by the United States Food and Drug Administration
(the “ FDA ”) or any other federal, state or
foreign agencies or bodies engaged in the regulation of
pharmaceuticals or biohazardous materials, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect
on the Company, except as described in the General Disclosure
Package and the Prospectus.
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(aa) The studies,
tests and preclinical and clinical trials conducted by or on behalf
of the Company that are described in the Registration Statement,
the General Disclosure Package and the Prospectus were and, if
still pending, are, to the Company’s knowledge, being
conducted in all material respects in accordance with experimental
protocols, procedures and controls pursuant to, where applicable,
accepted professional and scientific standards for products or
product candidates comparable to those being developed by the
Company; the descriptions of the results of such studies, tests and
trials contained in the Registration Statement, the General
Disclosure Package and the Prospectus do not contain any
misstatement of a material fact or omit to state a material fact
necessary to make such statements not misleading; there have been
no studies, tests or trials conducted by or on behalf of the
Company not described in the Registration Statement, the General
Disclosure Package and the Prospectus the results of which
reasonably call into question the results of the studies, tests and
trials described in the Registration Statement, the General
Disclosure Package or the Prospectus; and the Company has not
received any notices 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 or material modification of any
studies, tests or preclinical or clinical trials conducted by or on
behalf of the Company which termination, suspension or material
modification would reasonably be expected to have a material
adverse effect on the Company.
(bb) The Company
maintains a system of internal accounting controls sufficient to
provide reasonable assurance 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
generally accepted accounting principles and to maintain asset
accountability; (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 the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences; and
the Company is otherwise in compliance in all material respects
with all effective provisions of the Sarbanes-Oxley Act of 2002 and
any related rules and regulations promulgated by the Commission
which are applicable to the Company and with which the Company is
currently required to comply.
(cc) The financial
statements of the Company (together with the related notes thereto)
included in the Registration Statement, the General Disclosure
Package and the Prospectus present fairly the financial position
and results of the operations of the Company as of the respective
dates indicated and for the respective periods specified; and such
financial statements (together with the related notes thereto) have
been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved
except as otherwise stated therein. The summary and selected
financial
9
data included in the
Registration Statement, the General Disclosure Package and the
Prospectus present fairly the information shown therein and have
been compiled on a basis consistent with that of the audited
financial information included in the Registration Statement, the
General Disclosure Package and the Prospectus. There are no
financial statements (historical or pro forma) that are required to
be included in the Registration Statement, the General Disclosure
Package or the Prospectus that are not included as
required.
(dd) Each material
contract, agreement and license to which the Company is bound is
valid, binding, enforceable, and in full force and effect against
the Company, and to the knowledge of the Company, each other party
thereto, except as enforceability may be limited by bankruptcy and
other similar laws affecting the rights of creditors generally and
general principles of equity. Neither the Company nor, to the
Company’s knowledge, any other party is in breach or default
in any material respect with respect to any such contract,
agreement and license, and, to the Company’s knowledge, no
event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination,
modification, or acceleration, under any such contract, agreement
or license. No party has repudiated any material provision of any
such contract, agreement or license.
(ee) The
statistical, industry-related 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
reasonably and in good faith believes are reliable and
accurate.
(ff) The
Registration Statement, the General Disclosure Package and the
Prospectus and any preliminary prospectus comply, and any
amendments or supplements thereto will comply, with any applicable
laws or regulations of foreign jurisdictions in which the
Prospectus, the General Disclosure Package or any preliminary
prospectus, as amended or supplemented, if applicable, were or will
be distributed in connection with the Directed Share
Program.
(gg) No consent,
approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required
in connection with the offering of the Directed Shares in any
jurisdiction where the Directed Shares are being
offered.
(hh) The Company
has not offered, or caused DBSI or its affiliates to offer, Shares
to any person pursuant to the Directed Share Program with the
intent to unlawfully influence (i) a customer or supplier of
the Company to alter the customer’s or supplier’s level
or type of business with the Company, or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
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2. Agreements
to Sell and Purchase. The Company hereby agrees to sell to the
several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly,
to purchase from the Company the respective numbers of Firm Shares
set forth in Schedule I hereto opposite its name at $______ a
share (the “ Purchase Price ”).
On the basis of
the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to sell to
the Underwriters the Additional Shares, and the Underwriters shall
have the right to purchase, severally and not jointly, up to
_______ Additional Shares at the Purchase Price. You may exercise
this right on behalf of the Underwriters in whole or from time to
time in part by giving written notice of each election to exercise
the option not later than 30 days after the date of this Agreement.
Any exercise notice shall specify the number of Additional Shares
to be purchased by the Underwriters and the date on which such
shares are to be purchased. Each purchase date must be at least two
business days after the written notice is given and may not be
earlier than the closing date for the Firm Shares nor later than
ten business days after the date of such notice. Additional Shares
may be purchased as provided in Section 4 hereof solely for
the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. On each day, if any, that Additional
Shares are to be purchased (an “ Option Closing Date
”), each Underwriter agrees, severally and not jointly, to
purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine)
that bears the same proportion to the total number of Additional
Shares to be purchased on such Option Closing Date as the number of
Firm Shares set forth in Schedule I hereto opposite the name of
such Underwriter bears to the total number of Firm
Shares.
The Company hereby
agrees that, without the prior written consent of DBSI on behalf of
the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, (ii) file with the Commission
any registration statement under the Securities Act relating to any
additional shares of its Common Stock or securities convertible
into or exchangeable or exercisable for any shares of its Common
Stock, other than a Registration Statement on Form S-8 (or any
successor form) relating to the Company’s 2000 Equity
Incentive Plan or 2006 Stock Incentive Plan or (iii) enter
into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause
(i), (ii) or (iii) above is to be settled by delivery of
Common Stock or such other securities, in cash or
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otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the issuance by the Company of shares of Common
Stock upon the exercise of an option or warrant or the conversion
of a security outstanding on the date hereof as described in or as
contemplated by the Prospectus, or (C) the grant of options to
purchase shares of Common Stock, or of restricted shares of Common
Stock, pursuant to the Company’s 2005 Stock Incentive Plan,
provided that, prior to the grant of any such stock option
or restricted shares of Common Stock, the Company shall cause the
recipients of such grants to execute and deliver to DBSI
“lock-up” agreements, each substantially in the form of
Exhibit A hereto. Notwithstanding the foregoing, if
(i) during the last 17 days of the 180-day restricted period,
the Company issues an earnings release or material news or a
material event relating to the Company occurs or (ii) prior to
the expiration of the 180-day restricted period, the Company
announces that it will release earnings results during the 16-day
period beginning on the last day of the 180-day period, then the
restrictions imposed by this paragraph shall continue to apply
until the expiration of the 18-day period beginning on the issuance
of the earnings release or the occurrence of the material news or
material event, in each case unless DBSI on behalf of the
Underwriters waives, in writing, such extension.
3. Terms of
Public Offering . The Company is advised by you that the
Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as in your judgment is
advisable. The Company is further advised by you that the Shares
are to be offered to the public initially at $______ a share (the
“ Public Offering Price ”) and to certain
dealers selected by you at a price that represents a concession not
in excess of $______ a share under the Public Offering
Price.
4. Payment and
Delivery. Payment for the Firm Shares shall be made to the
Company in Federal or other funds immediately available in New York
City against delivery of such Firm Shares for the respective
accounts of the several Underwriters at 10:00 a.m., New York City
time, on _________, 2006, or at such other time on the same or such
other date, not later than _________, 2006, as shall be designated
in writing by you. The time and date of such payment are
hereinafter referred to as the “ Closing Date
.”
Payment for any
Additional Shares shall be made to the Company in Federal or other
funds immediately available in New York City against delivery of
such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date
specified in the corresponding notice described in Section 2
or at such other time on the same or on such other date, in any
event not later than _________, 2006, as shall be designated in
writing by you. The time and date of such payment are hereinafter
referred to as the “ Option Closing Date
.”
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The Firm Shares
and Additional Shares shall be registered in such names and in such
denominations as you shall request in writing not later than one
full business day prior to the Closing Date or the applicable
Option Closing Date, as the case may be. The Firm Shares and
Additional Shares shall be delivered to you on the Closing Date or
an Option Closing Date, as the case may be, for the respective
accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the
Underwriters duly paid, against payment of the Purchase Price
therefor.
5. Conditions
to the Underwriters’ Obligations . The obligations of the
Company to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares
on the Closing Date are subject to the condition that the
Registration Statement shall have become effective not later than
_____ (New York City time) on the date hereof.
The several
obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to
the execution and delivery of this Agreement and prior to the
Closing Date:
(i) there shall
not have occurred any downgrading, nor shall any notice have been
given of any intended or potential downgrading or of any review for
a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company’s
securities by any “nationally recognized statistical rating
organization,” as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall
not have occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company from that set
forth in the General Disclosure Package that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the General Disclosure Package.
(b) The
Underwriters shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the
Company on behalf of the Company, to the effect set forth in
Section 5(a)(i) above and to the effect that the
representations and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date and that the
Company has complied in all material respects with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing
Date.
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The officer
signing and delivering such certificate may rely upon the best of
his or her knowledge as to proceedings threatened.
(c) The
Underwriters shall have received on the Closing Date an opinion of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., outside
corporate counsel for the Company, dated the Closing Date, to the
effect that:
(i) the Company
is validly existing as a corporation in good standing under the
laws of the State of Delaware, and has the corporate power and
authority to own its property and to conduct its business as
described in the General Disclosure Package and the
Prospectus;
(ii) the Shares
have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable;
(iii) this
Agreement has been duly authorized, executed and delivered by the
Company;
(iv) the
execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Agreement will not
(A) conflict with or constitute a breach of the certificate of
incorporation or bylaws of the Company or any agreement that has
been filed as an exhibit to the Registration Statement, or
(B) violate any United States federal or Massachusetts or New
York state law, rule or regulation that in such counsel’s
experience is normally applicable in transactions of the type
contemplated by this Agreement, the Delaware General Corporation
Law, or any judgment, order or decree of any governmental
authority, agency or court specifically naming the Company of which
such counsel is aware;
(v) except as may
be required under the Securities Act and the rules and regulations
of the Commission thereunder and the Securities Exchange Act of
1934, as amended (the “ Exchange Act ”), and the
rules and regulations of the Commission thereunder, no consent,
approval, authorization or order of, or qualification with, any
United States federal or Massachusetts or New York state
governmental authority or agency is required for the issuance, sale
and delivery of the Shares by the Company to the Underwriters
pursuant to this Agreement or the performance by the Company of its
other obligations under this Agreement;
(vi) the
information in the General Disclosure Package and the Prospectus
under the captions “Prospectus Summary – Targacept,
Inc.” (only with respect to the seventh paragraph thereof);
“Prospectus Summary – Targacept, Inc. – Strategic
Collaboration with AstraZeneca
14
AB”;
“Risk Factors – Risks Related to Our Dependence on
Third Parties – The successful development and
commercialization of our lead product candidate, TC-1734, depends
substantially on our recently established collaboration with
AstraZeneca. If AstraZeneca is unable to further develop or
commercialize TC-1734, or experiences significant delays in doing
so, our business will be materially harmed.”; “Risk
Factors – Risks Related to Our Dependence on Third Parties
– If AstraZeneca were to terminate our collaboration
agreement, or if we otherwise lose AstraZeneca as a collaborator in
the development or commercialization of TC-1734, it would
materially harm our business.”; “Risk Factors –
Risks Related to Our Dependence on Third Parties – We will
depend on collaborations with third parties for the development and
commercialization of some of our product candidates. If these
collaborations are not successful, we may not be able to capitalize
on the market potential of these product candidates.”;
“Risk Factors – Risks Related to Our Common Stock and
this Offering – Provisions of our charter, bylaws and
Delaware law may make an acquisition of us or a change in our
management more difficult.”; “Business – Overview
(only with respect to the seventh and eighth paragraphs thereof);
“Business – Our Product Development Pipeline –
Depression/Anxiety – Mecamylamine Hydrochloride” (only
with respect to the fifth, sixth, seventh and eight sentences of
the first paragraph thereof); “Business – Strategic
Collaborations”; “Business – License
Agreements”; and “Underwriters” (only with
respect to the description of this Agreement), insofar as it
constitutes statements of matters of law or legal conclusions or
summarizes the terms of agreements, is correct in all material
respects; and
(vii) the Company
is not, and after giving effect to the offering and sale of the
Shares and the application of the proceeds thereof as described in
the Prospectus will not be, required to register as an
“investment company” as such term is defined in the
Investment Company Act of 1940, as amended.
In rendering such
opinion, such counsel may rely (1) as to matters involving the
application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the state laws of
Massachusetts or New York or the federal law of the United States,
to the extent they deem proper and specified in such opinion, upon
the opinion (which shall be dated the First Closing Date or the
Second Closing Date, as the case may be, shall be satisfactory in
form and substance to the Underwriters, shall expressly state that
the Underwriters may rely on such opinion as if it were addressed
to them and shall be furnished to the Representatives) of other
counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters; provided ,
however , that such counsel shall further state that they
believe that they and the
15
Underwriters are justified in
relying upon such opinion of other counsel, and (2) as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public
officials.
In addition to the
opinions provided above, such counsel shall confirm to you as
follows:
In the course of
acting as counsel for the Company in connection with the
preparation of the Registration Statement, the General Disclosure
Package and the Prospectus, such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of and counsel for the Underwriters and
representatives of the independent public accountants for the
Company, during which the contents of the Registration Statement,
the General Disclosure Package
