3.75% Senior Convertible Notes Due
2013
MERRILL LYNCH
& CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
c/o Merrill
Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
4 World Financial Center
New York, New York 10080
c/o J.P. Morgan
Securities Inc.
277 Park Avenue
New York, New York 10172
MannKind
Corporation, a Delaware corporation (the “Company”),
proposes to issue and sell to Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (“Merrill
Lynch”) and J.P. Morgan Securities Inc.
(“JPMorgan”, together with Merrill Lynch, the
“Underwriters”), $100,000,000 aggregate principal
amount of its 3.75% Senior Convertible Notes due 2013 (the
“Notes”), and with respect to the grant by the Company
to the Underwriters, acting severally and jointly, of the option
described in Section 2(a) hereof to purchase all or any part of an
additional $15,00,000 aggregate principal amount of Notes to cover
over-allotments, if any. The aforesaid $100,000,000 principal
amount of the Notes to be purchased by the Underwriters (the
“Initial Securities”) and all or any part of the
$15,000,000 aggregate principal amount of Notes subject to the
option described in Section 2(a) hereof (the “Option
Securities”) are hereinafter called, collectively, the
“Securities.” The Securities will be issued pursuant to
an Indenture dated November 1, 2006, as amended by that first
supplement to the indenture, dated as of the Closing Date (the
“Indenture”), between the Company and Wells Fargo Bank,
N.A., as trustee (the “Trustee”). Securities issued in
book-entry form will be issued to Cede & Co. as nominee of The
Depository Trust Company (“DTC”) pursuant to a letter
agreement, to be dated as of the Closing Time (as herein) (the
“DTC Agreement”), among the Company, the Trustee and
DTC.
The Securities are
convertible into shares of common stock, par value $0.01 per share,
of the Company (the “Underlying Common Stock”) in
accordance with the terms of the Securities and the Indenture, at
the initial conversion price set forth on Annex E.
Concurrent with
the offering and sale of the Securities by the Company pursuant to
the terms of this Agreement, the Company is offering to sell up to
23,000,000 shares of its common stock (including the
underwriters’ over-allotment) (the “Shares”),
pursuant to the terms of a Purchase Agreement, dated of even date
herewith, among the Company, JPMorgan, Merrill Lynch, CIBC World
Markets Corp., Leerink Swan & Co., Inc. and Wachovia Securities
(the “Concurrent Equity Offering”). The offering,
issuance and sale of the Securities by the Company pursuant to the
terms of this Agreement are not contingent on the successful
completion of the Concurrent Equity Offering.
The Company hereby
confirms its agreement with the Underwriters concerning the
purchase and sale of the Securities, as follows:
1.
Registration Statement . The Company has prepared and filed
with the Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the “Securities Act”), a registration
statement (File No. 333-138373), including a prospectus,
relating to the Securities and other securities of the Company.
Such registration statement was declared effective on
November 7, 2006. Such registration statement, as amended at
the time it became effective, including the information, if any,
deemed pursuant to Rule 430A, 430B or 430C under the
Securities Act to be part of the registration statement at the time
of its effectiveness (“Rule 430 Information”), is
referred to herein as the “Registration Statement”; and
as used herein, the term “Preliminary Prospectus” means
each prospectus included in such registration statement (and any
amendments thereto) before it became effective, any prospectus
filed with the Commission pursuant to Rule 424(a) under the
Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness, together with any
prospectus supplement filed with the Commission pursuant to Rule
424(b) under the Securities Act, that omits Rule 430
Information, and the term “Prospectus” means the
prospectus, together with any prospectus supplement filed pursuant
to Rule 424(b) under the Securities Act, in the form first used (or
made available upon request of purchasers pursuant to Rule 173
under the Securities Act) in connection with confirmation of sales
of the Securities. If the Company has filed an abbreviated
registration statement 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. Any reference in this Agreement 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 under the Securities Act, as of the effective date of the
Registration Statement or the date of such Preliminary Prospectus
or the Prospectus, as the case may be and any reference to
“amend”, “amendment” or
“supplement” with respect to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date
under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder (collectively,
the “Exchange Act”) that are deemed to be incorporated
by reference therein.
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Capitalized
terms used but not defined herein shall have the meanings given to
such terms in the Registration Statement and the
Prospectus.
At or prior to the
time when sales of the Securities were first made (the “Time
of Sale”), the Company had prepared the following information
(collectively, the “Time of Sale Information”): a
Preliminary Prospectus dated November 27, 2006, and each
“free-writing prospectus” (as defined pursuant to
Rule 405 under the Securities Act) listed on Annex D hereto
and the pricing information set forth on Annex E.
2.
Purchase of the Securities by the Underwriters .
(a) The Company agrees to issue and sell the Securities to the
Underwriters as provided in this Agreement, and each Underwriter,
on the basis of the representations, warranties and agreements set
forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the
respective aggregate principal amount of Securities set forth
opposite such Underwriter’s name in Schedule 1 hereto at
a price equal to 97% of the principal amount thereof (the
“Purchase Price”) plus accrued interest, if any, from
December 6, 2006, to the Closing Date.
In addition, the
Company agrees to issue and sell up to $15,000,000 principal amount
of Option Securities to the Underwriters at the Purchase Price plus
accrued interest, if any, from the Closing Date to the date of
payment and delivery, and the Underwriters, on the basis of the
representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option
to purchase, severally and not jointly, from the Company the Option
Securities at the Purchase Price.
If any Option
Securities are to be purchased, the number of Option Securities to
be purchased by each Underwriter shall be the number of Option
Securities which bears the same ratio to the aggregate principal
amount of Securities being purchased as the aggregate principle
amount of Initial Securities set forth opposite the name of such
Underwriter in Schedule 1 hereto (or such number increased as
set forth in Section 10 hereof) bears to the aggregate
principal amount of Initial Securities being purchased from the
Company by the Underwriters, subject, however, to such adjustments
to eliminate any fractional Securities as the Underwriters in their
sole discretion shall make.
The Underwriters
may exercise the option to purchase the Option Securities at any
time in whole, or from time to time in part, on or before the
thirtieth day following the date of this Agreement, by written
notice from the Underwriters to the Company. Such notice shall set
forth the aggregate number of Option Securities as to which the
option is being exercised and the date and time when the Option
Securities are to be delivered and paid for which may be the same
date and time as the Closing Date (as hereafter defined) but shall
not be earlier than the Closing Date nor later than the tenth full
business day (as hereinafter defined) after the date of such notice
(unless such time and date are postponed in accordance with the
provisions of Section 10 hereof). Any such notice shall be
given at least two business days prior to the date and time of
delivery specified therein.
(b) The
Company understands that the Underwriters intend to make a public
offering of the Securities as soon after the effectiveness of this
Agreement as in the judgment of the
4
Underwriters is
advisable, and initially to offer the Securities on the terms set
forth in the Prospectus. The Company acknowledges and agrees that
the Underwriters may offer and sell Securities to or through any
affiliate of an Underwriter and that any such affiliate may offer
and sell Securities purchased by it to or through any
Underwriter.
(c) Payment
for the Securities shall be made by wire transfer in immediately
available funds to the account specified by the Company to the
Underwriters for the Initial Securities, at the offices of Latham
& Watkins LLP, 650 Town Center Drive, 20
th Floor, Costa Mesa, California 92626 at
10:00 A.M. New York City time on December 12, 2006, or at
such other time or place on the same or such other date, not later
than the fifth business day thereafter, as the Underwriters and the
Company may agree upon in writing or, in the case of the Option
Securities, on the date and at the time and place specified by the
Underwriters in the written notice of the Underwriters’
election to purchase such Option Securities. The time and date of
such payment for the Initial Securities is referred to herein as
the “Closing Date” and the time and date for such
payment for the Option Securities, if other than the Closing Date,
is herein referred to as the “Additional Closing
Date.”
Payment for the
Securities to be purchased on the Closing Date or the Additional
Closing Date, as the case may be, shall be made against delivery to
the Underwriters for their respective accounts of the Securities to
be purchased on such date in definitive form registered in such
names and in such denominations as the Underwriters shall request
in writing not later than two full business days prior to the
Closing Date or the Additional Closing Date, as the case may be,
with any transfer taxes payable in connection with the sale of the
Securities duly paid by the Company. The certificates for the
Securities will be made available for inspection and packaging by
the Underwriters at the office of Merrill Lynch set forth above not
later than 1:00 P.M., New York City time, on the business day prior
to the Closing Date or the Additional Closing Date, as the case may
be.
(d) The
Company acknowledges and agrees that the Underwriters are acting
solely in the capacity of an arm’s length contractual
counterparty to the Company with respect to the offering of
Securities contemplated hereby (including in connection with
determining the terms of the offering) and not as a financial
advisor or a fiduciary to, or an agent of, the Company or any other
person. Additionally, neither Underwriter is advising the Company
or any other person as to any legal, tax, investment, accounting or
regulatory matters in any jurisdiction. The Company shall consult
with its own advisors concerning such matters and shall be
responsible for making its own independent investigation and
appraisal of the transactions contemplated hereby, and the
Underwriters shall have no responsibility or liability to the
Company with respect thereto. Any review by the Underwriters of the
Company, the transactions contemplated hereby or other matters
relating to such transactions will be performed solely for the
benefit of the Underwriters and shall not be on behalf of the
Company.
3.
Representations and Warranties of the Company . The Company
represents and warrants to each Underwriter that:
(a)
Preliminary Prospectus. No order preventing or suspending
the use of any Preliminary Prospectus has been issued by the
Commission, and each Preliminary Prospectus, at
5
the time of
filing thereof, complied in all material respects with the
Securities Act, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter expressly for use in any Preliminary Prospectus.
Each Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T or Rule 424(b) of the Securities
Act.
(b) Time
of Sale Information . The Time of Sale Information, at the Time
of Sale did not, and at the Closing Date and as of the Additional
Closing Date, as the case may be, will not, contain any untrue
statement of a material fact or 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 that the Company makes no representation and
warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
expressly for use in such Time of Sale Information. No statement of
material fact included in the Prospectus has been omitted from the
Time of Sale Information and no statement of material fact included
in the Time of Sale Information that is required to be included in
the Prospectus has been omitted therefrom.
(c)
Issuer Free Writing Prospectus. Other than the Preliminary
Prospectus and the Prospectus, the Company (including its agents
and representatives, other than the Underwriters in their capacity
as such) has not made, used, prepared, authorized, approved or
referred to and will not prepare, make, use, authorize, approve or
refer to any “written communication” (as defined in
Rule 405 under the Securities Act) that constitutes an offer to
sell or solicitation of an offer to buy the Securities (each such
communication by the Company or its agents and representatives
(other than a communication referred to in clause (i) below)
an “Issuer Free Writing Prospectus”) other than
(i) any communication not constituting a prospectus pursuant
to Section 2(a)(10)(a) of the Securities Act or Rule 134
under the Securities Act or (ii) the documents listed on Annex
D hereto and other written communications approved in writing in
advance by the Underwriter. Each such Issuer Free Writing
Prospectus complied in all material respects with the Securities
Act, has been filed in accordance with the Securities Act (to the
extent required thereby) and, when taken together with the
Preliminary Prospectus filed prior to the first use of such Issuer
Free Writing Prospectus, did not, and at the Closing Date and as of
the Additional Closing Date, as the case may be, will not, contain
any untrue statement of a material fact or 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 that the Company makes no
representation and warranty with respect to any statements or
omissions made in each such Issuer Free Writing Prospectus in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
expressly for use in any Issuer Free Writing Prospectus. Each such
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
6
Securities or
until any earlier date that the issuer notified or notifies the
Underwriters as described in Section 4(e), did not, does not
and will not include any information that conflicted, conflicts or
will conflict with the information contained in the Registration
Statement or the Prospectus, including any document incorporated by
reference therein and any Preliminary Prospectus deemed to be a
part thereof that has not been superseded or modified.
(d)
Registration Statement and Prospectus. The Registration
Statement has been declared effective by the Commission. No order
suspending the effectiveness of the Registration Statement has been
issued by the Commission and no proceeding for that purpose or
pursuant to Section 8A of the Securities Act against the
Company or related to the offering has been initiated or threatened
by the Commission or, to the knowledge of the Company, are
contemplated by the Commission, and any request received by the
Company on the part of the Commission for additional information
has been complied with; the Registration Statement is not the
subject of a pending proceeding or examination under Section 8(d)
or 8(e) of the Securities Act; as of the applicable effective date
of the Registration Statement and any amendment thereto, the
Registration Statement (as amended or supplemented as of such date)
complied and will comply in all material respects with the
Securities Act, and did not and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and as of the date of the
Prospectus (as amended or supplemented as of such date) and any
amendment or supplement thereto and as of the Closing Date and as
of the Additional Closing Date, as the case may be, the Prospectus
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided that the Company makes no representation and
warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
expressly for use in the Registration Statement and the Prospectus
and any amendment or supplement thereto.
(e)
Incorporated Documents. The documents incorporated by
reference in the Registration Statement, the Prospectus or the Time
of Sale Information, 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 none of such documents contained any untrue
statement of a material fact or omitted 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; and any further documents so filed and
incorporated by reference in the Registration Statement, the
Prospectus or the Time of Sale Information, 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 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, in the light of the circumstances under
which they were made, not misleading.
(f)
Financial Statements. The financial statements and the
related notes thereto of the Company and its consolidated
subsidiaries included or incorporated by reference in the
Registration Statement, the Time of Sale Information and the
Prospectus comply in all material
7
respects with
the applicable requirements of the Securities Act and the Exchange
Act, as applicable, and present fairly the financial position of
the Company and its subsidiaries as of the dates indicated and the
results of their operations and the changes in their cash flows for
the periods specified; such financial statements have been prepared
in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods covered thereby, and
the supporting schedules included or incorporated by reference in
the Registration Statement present fairly the information required
to be stated therein; and the pro forma financial
information and the related notes thereto included or incorporated
by reference in the Registration Statement, the Time of Sale
Information and the Prospectus have been prepared in accordance
with the applicable requirements of the Securities Act and the
Exchange Act, as applicable, and the assumptions underlying such
pro forma financial information are reasonable and
are set forth in the Registration Statement, the Time of Sale
Information and the Prospectus. The selected financial data
included or incorporated by reference in the Time of Sale
Information and the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of
the audited financial statements included or incorporated by
reference in the Registration Statement. No other financial
statements or schedules are required to be included in the
Registration Statement, the Time of Sale Information or the
Prospectus. All disclosures contained in the Registration
Statement, the Time of Sale Information or the Prospectus, or
incorporated by reference therein, 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. Except as described in
the Registration Statement, the Time of Sale Information or the
Prospectus, 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 current or future 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.
(g) No
Material Adverse Change. Since the date of the most recent
financial statements of the Company included or incorporated by
reference in the Registration Statement, the Time of Sale
Information and the Prospectus, (i) there has not been any
material change in the capital stock or long-term debt of the
Company or any of its subsidiaries, or any dividend or distribution
of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock, or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the business, properties, management,
financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries taken as a whole;
(ii) neither the Company nor any of its subsidiaries has
entered into any transaction or agreement that is material to the
Company and its subsidiaries taken as a whole or incurred any
liability or obligation, direct or contingent, that is material to
the Company and its subsidiaries taken as a whole; and
(iii) neither the Company nor any of its subsidiaries has
sustained 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 disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in
the Registration Statement, the Time of Sale Information and the
Prospectus.
8
(h)
Organization and Good Standing. The Company and each of its
subsidiaries have been duly organized and are validly existing and
in good standing under the laws of their respective jurisdictions
of organization, are duly qualified to do business and are in good
standing in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure
to be so qualified, in good standing or have such power or
authority would not, individually or in the aggregate, have a
material adverse effect on the business, properties, management,
financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries taken as a whole (a
“Material Adverse Effect”). The Company has no
significant subsidiaries.
(i)
Capitalization. The Company has an authorized capitalization
as set forth in the Registration Statement, the Time of Sale
Information and the Prospectus under the heading
“Capitalization”; all the outstanding shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable and are not subject to
any pre-emptive or similar rights; except as described in or
expressly contemplated by the Time of Sale Information and the
Prospectus and the Concurrent Equity Offering, there are no
outstanding rights (including, without limitation, pre-emptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other
equity interest in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of
any kind relating to the issuance of any capital stock of the
Company or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options;
the capital stock of the Company conforms in all material respects
to the description thereof contained in the Registration Statement,
the Time of Sale Information and the Prospectus; and all the
outstanding shares of capital stock or other equity interests of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of any
lien, charge, encumbrance, security interest, restriction on voting
or transfer or any other claim of any third party.
(j) Due
Authorization. The Company has full right, power and authority
to execute and deliver this Agreement, the Indenture and the DTC
Agreement (together the “Transaction Documents”), and
to perform its obligations thereunder; and all action required to
be taken for the due and proper authorization, execution and
delivery by it of the Transactions Documents and the consummation
by it of the transactions contemplated thereunder have been duly
and validly taken.
(k)
Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes
the legal and binding obligation of the Company, enforceable in
accordance with its 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.
(l) The
Indenture. The Indenture has been duly authorized by the
Company and duly qualified under the Trust Indenture Act of 1939
(the “1939 Act”) and, when duly executed and delivered
by the Company and the Trustee, will constitute a valid and binding
agreement of the
9
Company,
enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and
except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(m) The
Securities. The Securities have been duly authorized and, at
the Closing Date, will have been duly executed by the Company and,
when authenticated, issued and delivered in the manner provided for
in the Indenture and delivered against payment of the purchase
price therefor as provided in this Agreement, will constitute valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors’ rights generally and except as enforcement thereof
is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and
will be in the form contemplated by, and entitled to the benefits
of, the Indenture.
(n) The
Underlying Common Stock. The Underlying Common Stock conforms
to all statements relating thereto contained or incorporated by
reference in the Time of Sale Information and the Prospectus. Upon
issuance and delivery of the Securities in accordance with this
Agreement and the Indenture, the Securities will be convertible at
the option of the holder thereof for shares of Underlying Common
Stock in accordance with the terms of the Securities and the
Indenture; the shares of the Underlying Common Stock issuable upon
conversion of the Securities have been duly authorized and reserved
for issuance upon such conversion by all necessary corporate action
and such shares, when issued upon conversion, will be validly
issued and will be fully paid and non-assessable; no holder of such
shares will be subject to debts or liabilities of the Company by
reason of being such a holder; and the issuance of such shares upon
such conversion will not be subject to the preemptive or other
similar rights of any security holder of the Company.
(o) No
Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter or by-laws or
similar organizational documents; (ii) in default, and no
event has occurred that, 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 or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject; or (iii) in
violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory
authority, except, in the case of clauses (ii) and (iii)
above, for any such default or violation that would not,
individually or in the aggregate, have a Material Adverse
Effect.
(p) No
Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents and the consummation of the
transactions contemplated therein (including the offering, issuance
and sale of the Securities pursuant to this Agreement and the use
of the proceeds from the sale of the Securities to repay the
outstanding amounts to Alfred E. Mann as
10
described in
the Preliminary Prospectus and the Prospectus under the caption
“Use of Proceeds”) and in the Concurrent Equity
Offering do not and will not, whether with or without the giving of
notice or passage of time or both, (i) conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of
its subsidiaries is subject, (ii) result in any violation of
the provisions of the charter or by-laws or similar organizational
documents of the Company or any of its subsidiaries or (iii) result
in the violation of any law or statute or any judgment, order, rule
or regulation of any court or arbitrator or governmental or
regulatory authority, except in the case of clause (i) above, for
any such conflict, breach, violation, default, lien, charge or
encumbrance that would not, individually or in the aggregate, have
a Material Adverse Effect.
(q) No
Consents Required. No filing with, or consent, approval,
authorization, order, registration, license, decree or
qualification of, any court or arbitrator or governmental or
regulatory authority is required for the execution, delivery and
performance by the Company of the Transaction Documents, the
issuance and sale of the Securities and the consummation of the
transactions contemplated herein and in the Concurrent Equity
Offering, except for (i) the registration of the Securities
and the Underlying Common Stock under the Securities Act,
(ii) such filings, consents, approvals, authorizations,
orders, registrations, licenses, decrees or qualifications as may
be required under applicable state securities laws in connection
with the purchase and distribution of the Securities by the
Underwriters, and (iii) listing of the Securities on the
National Association of Securities Dealers Automated Quotations
Global Market (the “Nasdaq Global Market”), which will
be made prior to the Closing Date.
(r) Legal
Proceedings. Except as described in the Registration Statement,
the Time of Sale Information and the Prospectus, there are no
legal, governmental or regulatory investigations, actions, suits or
proceedings pending to which the Company or any of its subsidiaries
is or may be a party or to which any property of the Company or any
of its subsidiaries is or may be the subject that, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect or materially and adversely affect the ability of
the Company to perform its obligations under this Agreement; to the
knowledge of the Company, no such investigations, actions, suits or
proceedings are threatened or contemplated by any governmental or
regulatory authority or threatened by others; and (i) there
are no current or pending legal, governmental or regulatory
actions, suits or proceedings that are required under the
Securities Act to be described in the Registration Statement that
are not so described in the Registration Statement, the Time of
Sale Information and the Prospectus and (ii) there are no
statutes, regulations or contracts or other documents that are
required under the Securities Act to be filed as exhibits to the
Registration Statement or described in the Registration Statement
or the Prospectus that are not so filed as exhibits to the
Registration Statement or described in the Registration Statement,
the Time of Sale Information and the Prospectus.
(s)
Independent Accountants. Deloitte & Touche LLP, who have
certified the annual financial statements included in the
Registration Statement or incorporated by reference in
the
11
Registration
Statement, the Time of Sale Information or the Prospectus, is an
independent registered public accounting firm with the respect to
the Company and its subsidiaries within the applicable rules and
regulations adopted by the Commission and the Public Accounting
Oversight Board (United States) and as required by the Securities
Act.
(t) Title
to Real and Personal Property. The Company and its subsidiaries
have good and marketable title in fee simple to, or have valid
rights to lease or otherwise use, all items of real and personal
property that are material to the respective businesses of the
Company and its subsidiaries, in each case free and clear of all
mortgages, pledges, security interest, liens, encumbrances, claims,
restrictions and defects and imperfections of title except those
that (i) do not materially interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries or (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect. All of the leases and subleases material to the business of
the Company and its subsidiaries, taken as a whole, and under which
the Company or any of its subsidiaries holds properties described
in the Time of Sale Information or the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has
any written notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any
subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(u) Title
to Intellectual Property. The Company owns, possesses or can
acquire on reasonable terms all Intellectual Property (as defined
below) used in the conduct of the business of the Company as
described in the Registration Statement, the Time of Sale
Information and the Prospectus as now conducted or to be conducted,
except where the failure to own, possess or be able to acquire such
Intellectual Property could not, individually or in the aggregate,
have a Material Adverse Effect, and (A) to the knowledge of
the Company, there is no infringement, misappropriation or
violation by third parties of any such Intellectual Property;
(B) there is no pending or, to the knowledge of the Company,
threatened action, suit, proceeding or claim by others challenging
the rights of the Company in or to any such Intellectual Property,
and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (C) 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 such Intellectual Property, and the
Company is unaware of any facts which would form a reasonable basis
for any such claim; and (D) except as disclosed in the
Registration Statement, the Time of Sale Information and the
Prospectus, 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,
the Company has not received any written notice of such claim and
the Company is unaware of any other facts which would form a
reasonable basis for any such claim. The term “Intellectual
Property” as used herein means all patents, patent
applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual
property.
12
(v) No
Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company or any of its subsidiaries, on
the one hand, and the directors, officers, stockholders, customers
or suppliers of the Company or any of its subsidiaries, on the
other, that is required by the Securities Act to be described in
the Registration Statement and the Prospectus and that is not so
described in such documents and in the Time of Sale
Information.
(w)
Investment Company Act. The Company is not and, after giving
effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the
Registration Statement, the Time of Sale Information and the
Prospectus and the offering and sale of the Shares as contemplated
in the Concurrent Equity Offering, will not be required to register
as an “investment company” or an entity
“controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder
(collectively, “Investment Company Act”).
(x)
Public Utility Holding Company Act. Neither the Company nor
any of its subsidiaries is a “holding company” or a
“subsidiary company” of a holding company or an
“affiliate” thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(y)
Taxes. The Company and its subsidiaries have paid all
federal, state, local and foreign taxes and filed all tax returns
required to be paid or filed through the date hereof and is not in
default in the payment of any taxes which were payable pursuant to
said returns or any assessments with respect thereto, other than
any which the Company or any of its subsidiaries is contesting in
good faith. There is no pending dispute with any taxing authority
relating to any of such returns and the Company has no knowledge of
any proposed liability for any tax to be imposed upon the
properties or assets of the Company or any of its subsidiaries for
which there is not an adequate reserve reflected in the
Company’s financial statements included in the Registration
Statement.
(z)
Licenses and Permits. The Company and its subsidiaries
possess all licenses, certificates, permits and other
authorizations issued by, and have made all declarations and
filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of
their respective businesses as described in the Registration
Statement, the Time of Sale Information and the Prospectus, except
where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect;
and except as described in the Registration Statement, the Time of
Sale Information and the Prospectus, neither the Company nor any of
its subsidiaries has received notice of any revocation or
modification of any such license, certificate, permit or
authorization, or has knowledge of any proceedings relating to the
revocation or modification of any such license, certificate, permit
or authorization, or has any reason to believe that any such
license, certificate, permit or authorization will not be renewed
in the ordinary course, except where the failure to renew such
license, certificate, permit or authorization would not,
individually or in the aggregate, have a Material Adverse
Effect.
(aa) FDA
Compliance. Except as described in the Registration Statement,
the Time of Sale Information and the Prospectus, the Company:
(A) is and at all times has been in full
13
compliance with
all statutes, rules, regulations, or guidances 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 under development, manufactured or distributed by the
Company (“Applicable Laws”); (B) has not received
any FDA Form 483, notice of adverse finding, warning letter,
untitled letter or other correspondence or notice from the U.S.
Food and Drug Administration (the “FDA”) or any other
federal, state, local or foreign governmental or regulatory
authority alleging or asserting 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) possesses all Authorizations
and such Authorizations are valid and in full force and effect and
are not in violation of any term of any such Authorizations;
(D) has not received notice of any claim, action, suit,
proceeding, hearing, enforcement, investigation, arbitration or
other action from the FDA or any other federal, state, local or
foreign governmental or regulatory 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 the
FDA or any other federal, state, local or foreign governmental or
regulatory authority or third party is considering any such claim,
litigation, arbitration, action, suit, investigation or proceeding;
(E) has not received notice that the FDA or any other federal,
state, local or foreign governmental or regulatory authority has
taken, is taking or intends to take action to limit, suspend,
modify or revoke any Authorizations and has no knowledge that the
FDA or any other federal, state, local or foreign governmental or
regulatory authority is considering such action; (F) has
filed, obtained, maintained or submitted all 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 complete and correct on the date filed (or were
corrected or supplemented by a subsequent submission); and
(G) has not, either voluntarily or involuntarily, initiated,
conducted, or issued or caused to be initiated, conducted or
issued, any recall, market withdrawal or replacement, safety alert,
post sale warning, “dear doctor” letter, or other
notice or action relating to the alleged lack of safety or efficacy
of any product or any alleged product defect or violation and, to
the Company’s knowledge, no third party has initiated,
conducted or intends to initiate any such notice or
action.
(bb)
Clinical Studies. The studies, tests and preclinical and
clinical trials conducted by or on behalf of the Company were and,
if still pending, are being conducted 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 the rules and regulations
promulgated thereunder (collectively, “FFDCA”); the
descriptions of the results of such studies, tests and trials
contained in the Registration Statement, the Time of Sale
Information and the Prospectus are accurate and complete in all
material respects and fairly present the data derived from such
studies, tests and trials; except to the extent disclosed in the
Registration Statement, the Time of Sale Information and the
Prospectus, 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 Registration Statement, the Time of Sale
Information and the Prospectus when viewed in the context in which
such results are described and the clinical state of development;
and, since March 24, 2001, the Company has not received any
notices or correspondence from
14
the FDA or any
other federal, state, local or foreign governmental or regulatory
authority requiring the termination, suspension or material
modification of any studies, tests or preclinical or clinical
trials of Technosphere, Technosphere Insulin or cancer vaccines
conducted by or on behalf of the Company.
(cc) No
Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its subsidiaries exists or, to
the knowledge of the Company, is contemplated or threatened and the
Company is not aware of any existing or imminent labor disturbance
by, or dispute with, the employees of any of its or its
subsidiaries’ principal suppliers, contractors or customers,
except as would not have a Material Adverse Effect.
(dd)
Compliance With Environmental Laws. (i) The Company and
its subsidiaries (x) are, and at all prior times were, in
compliance with any and all applicable federal, state, local or
foreign statute, law, rule, regulation, ordinance, code 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”), (y) have received
and are in compliance with all permits, licenses, certificates or
other authorizations or approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and
(z) have not received notice of any actual or potential
liability under or relating to any Environmental Laws, including
for the investigation or remediation of any disposal or release of
Hazardous Materials, and have no knowledge of any event or
condition that would reasonably be expected to result in any such
notice, and (ii) there are no costs or liabilities associated
with Environmental Laws of or relating to the Company or its
subsidiaries, except in the case of each of (i) and
(ii) above, for any such failure to comply, or failure to
receive required permits, licenses or approvals, or cost or
liability, as would not, individually or in the aggregate, have a
Material Adverse Effect; and (iii) except as described in the
Registration Statement, the Time of Sale Information and the
Prospectus, (x) there are no proceedings that are pending, or
that are known to be contemplated, against the Company or any of
its subsidiaries under any Environmental Laws in which a
governmental entity is also a party, other than such proceedings
regarding which it is reasonably believed no monetary sanctions of
$100,000 or more will be imposed, (y) the Company and its
subsidiaries are not aware of any issues regarding compliance with
Environmental Laws, or liabilities or other obligations under
Environmental Laws or concerning hazardous or toxic substances or
wastes, pollutants or contaminants, that could reasonably be
expected to have a material effect on the capital expenditures,
earnings or competitive position of the Company and its
subsidiaries, and (z) none of the Company and its subsidiaries
anticipates material capital expenditures relating to any
Environmental Laws.
(ee)
Compliance With ERISA. (i) Each employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended
(“ERISA”),
15
for which the
Company or any member of its “Controlled Group”
(defined as any organization which is a member of a controlled
group of corporations within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the “Code”))
would have any liability (each, a “Plan”) has been
maintained in material compliance with its terms and the
requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code;
(ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any Plan excluding transactions effected
pursuant to a statutory or administrative exemption; (iii) for
each Plan that is subject to the funding rules of Section 412
of the Code or Section 302 of ERISA, no “accumulated
funding deficiency” as defined in Section 412 of the
Code, whether or not waived, has occurred or is reasonably expected
to occur; (iv) the fair market value of the assets of each
Plan exceeds the present value of all benefits accrued under such
Plan (determined based on those assumptions used to fund such
Plan); (v) no “reportable event” (within the
meaning of Section 4043(c) of ERISA) has occurred or is reasonably
expected to occur; and (vi) neither the Company nor any member
of the Controlled Group has incurred, nor reasonably expects to
incur, any liability under Title IV of ERISA (other than
contributions to the Plan or premiums to the PBGC, in the ordinary
course and without default) in respect of a Plan (including a
“multiemployer plan”, within the meaning of
Section 4001(a)(3) of ERISA).
(ff)
Disclosure Controls . The Company and its subsidiaries
maintain an effective system of “disclosure controls and
procedures” (as defined in Rule 13a-15(e) of the
Exchange Act) that is designed to ensure that information required
to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the
Commission’s rules and forms, including controls and
procedures designed to ensure that such information is accumulated
and communicated to the Company’s management as appropriate
to allow timely decisions regarding required disclosure. The
Company and its subsidiaries have carried out evaluations of the
effectiveness of their disclosure controls and procedures as
required by Rule 13a-15 of the Exchange Act.
(gg)
Accounting Controls. The Company and its subsidiaries
maintain systems of “internal control over financial
reporting” (as defined in Rule 13a-15(f) of the Exchange
Act) that comply with the requirements of the Exchange Act and have
been designed by, or under the supervision of, their respective
principal executive and principal financial officers, or persons
performing similar functions, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles,
including, but not limited to 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. Except
as disclosed in the Registration Statement, the Time of Sale
Information and the Prospectus, the Company is not aware of any
material weaknesses in the Company’s internal
controls.
16
(hh)
Insurance. The Company and its subsidiaries have insurance
covering their respective properties, operations, personnel and
businesses, including business interruption insurance, which
insurance is in amounts and insures against such losses and risks
as are, to the knowledge of the Company, adequate to protect the
Company and its subsidiaries and their respective businesses; and
neither the Company nor any of its subsidiaries has
(i) received notice from any insurer or agent of such insurer
that capital improvements or other expenditures are required or
necessary to be made in order to continue such insurance or
(ii) any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires
or to obtain similar coverage at reasonable cost from similar
insurers as may be necessary to continue its business. All such
insurance is outstanding and duly in force on the date
hereof.
(ii) No
Unlawful Payments. Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or other person associated with or acting
on behalf of the Company or any of its subsidiaries has
(i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or
(iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(jj)
Compliance with Money Laundering Laws . The operations of
the Company and its subsidiaries are and have been conducted at all
times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively,
the “Money Laundering Laws”) and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its
subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened.
(kk)
Compliance with OFAC. None of the Company, any of its
subsidiaries or, to the knowledge of the Company, any director,
officer, agent, employee or Affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”); and the Company
will not directly or indirectly use the proceeds of the offering of
the Securities hereunder, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or
other person or entity, for the purpose of financing the activities
of any person currently subject to any U.S. sanctions administered
by OFAC.
(ll) No
Restrictions on Subsidiaries . No subsidiary of the Company is
currently prohibited, directly or indirectly, under any agreement
or other instrument to which it is a party or is subject, from
paying any dividends to the Company, from making any other
distribution on such
17
subsidiary’s capital stock, from repaying
to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary’s
properties or assets to the Company or any other subsidiary of the
Company.
(mm) No
Broker’s Fees. Neither the Company nor any of its
subsidiaries is a party to any contract, agreement or understanding
with any person (other than this Agreement) that would give rise to
a valid claim against the Company or any of its subsidiaries or any
Underwriter for a brokerage commission, finder’s fee or like
payment in connection with the offering and sale of the
Securities.
(nn) No
Registration Rights . No person has the right to require the
Company or any of its subsidiaries to register any securities for
sale under the Securities Act by reason of the filing of the
Registration Statement with the Commission or the issuance and sale
of the Securities, other than such rights as have been satisfied or
duly and validly waived.
(oo) No
Stabilization. The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be
expected to cause or result in any stabilization or manipulation of
the price of the Securities.
(pp)
Business With Cuba. The Company has complied with all
provisions of Section 517.075, Florida Statutes
(Chapter 92-198, Laws of Florida) relating to doing business
with the Government of Cuba or with any person or affiliate located
in Cuba.
(qq)
Margin Rules . Neither the issuance, sale and delivery of
the Securities nor the application of the proceeds thereof by the
Company as described in the Registration Statement, the Time of
Sale Information and the Prospectus will violate Regulation T,
U or X of the Board of Governors of the Federal Reserve System or
any other regulation of such Board of Governors.
(rr)
Forward-Looking Statements. No forward-looking statement
(within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act) contained in the Registration
Statement, the Time of Sale Information and the Prospectus has been
made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith.
(ss)
Statistical and Market Data. Nothing has come to the
attention of the Company that has caused the Company to believe
that the statistical and market-related data included in the
Registration Statement, the Time of Sale Information and the
Prospectus is not based on or derived from sources that are
reliable and accurate in all material respects.
(tt)
Sarbanes-Oxley Act . There is and has been no failure on the
part of the Company or any of the Company’s directors or
officers, in their capacities as such, to comply with any provision
of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder (collectively, the “Sarbanes-Oxley
Act”), including Section 402 thereof related to loans
and Sections 302 and 906 thereof related to
certifications.
(uu)
Status under the Securities Act . The Company is not an
ineligible issuer as defined under the Securities Act, in each case
at the times specified in the Securities Act in connection with the
offering of the Securities.
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