StemCells, Inc. 11,750,820 Shares Common Stock ($0.01 par value per Share) Placement Agency Agreement
Exhibit 1.1
StemCells, Inc.
11,750,820 Shares
Common Stock
($0.01 par value per Share)
($0.01 par value per Share)
April 3, 2006
April 3, 2006
UBS Securities LLC
as Placement Agent
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as Placement Agent
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Ladies and Gentlemen:
StemCells, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to
certain investors (collectively, the “Investors”) up to an aggregate of 11,750,820 shares
(the “Shares”) of Common Stock, $0.01 par value per share (the “Common Stock”), of
the Company. The Company desires to engage UBS Securities LLC (the “Placement Agent” or
“UBS”) as its exclusive placement agent in connection with such issuance and sale. The
Shares are described in the Prospectus which is referred to below.
The Company has prepared and filed, in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations thereunder (collectively, the “Act”), with
the Securities and Exchange Commission (the “Commission”) a registration statement on Form
S-3 (File No. 333-128797) under the Act (the “registration statement”). Amendments to such
registration statement, if necessary or appropriate, have been similarly prepared and filed with
the Commission in accordance with the Act. Such registration statement, as so amended, has become
effective under the Act.
Except where the context otherwise requires, “Registration Statement,” as used herein,
means the registration statement, as amended at the time of such registration statement’s
effectiveness for purposes of Section 11 of the Act, as such section applies to the Placement Agent
(the “Effective Time”), including (i) all documents filed as a part thereof or incorporated
or deemed to be incorporated by reference therein, (ii) any information contained or incorporated
by reference in a prospectus filed with the Commission pursuant to Rule 424(b) under the Act, to
the extent such information is deemed, pursuant to Rule 430B or Rule 430C under the Act, to be part
of the registration statement at the Effective Time, and (iii) any registration statement filed to
register the offer and sale of Shares pursuant to Rule 462(b) under the Act.
Except where the context otherwise requires, “Prospectus Supplement,” as used herein,
means the final prospectus supplement, relating to the Shares, filed by the Company with the
Commission pursuant to Rule 424(b) under the Act on or before the second business day after the
date hereof (or such earlier time as may be required under the Act), in the form furnished by the
Company to you, for use by the Placement Agent and by dealers in connection with the offering of
the Shares.
Except where the context otherwise requires, “Prospectus,” as used herein, means the
Prospectus Supplement together with the basic prospectus attached to or used with the Prospectus
Supplement.
Except where the context otherwise requires, “Basic Prospectus,” as used herein, means
the basic prospectus included in the Registration Statement at the time the Registration Statement
became effective under the Act.
“Permitted Free Writing Prospectuses,” as used herein, means the documents listed on
Schedule A attached hereto.
“Disclosure Package,” as used herein, means the Basic Prospectus, together with any
combination of one or more of the Permitted Free Writing Prospectuses, if any.
Any reference herein to the registration statement, the Registration Statement, the Basic
Prospectus, the Prospectus Supplement, the Prospectus or any Permitted Free Writing Prospectus
shall be deemed to refer to and include the documents, if any, incorporated by reference, or deemed
to be incorporated by reference, therein (the “Incorporated Documents”), including, unless
the context otherwise requires, the documents, if any, filed as exhibits to such Incorporated
Documents. Any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement, the Basic Prospectus, the
Prospectus Supplement, the Prospectus or any Permitted Free Writing Prospectus shall be deemed to
refer to and include the filing of any document under the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (collectively, the “Exchange Act”) on or
after the initial effective date of the Registration Statement, or the date of the Basic
Prospectus, the Prospectus Supplement, the Prospectus or such Permitted Free Writing Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
As used in this Agreement, “business day” shall mean a day on which the New York Stock
Exchange (the “NYSE”) is open for trading. The terms “herein,” “hereof,” “hereto,”
“hereinafter” and similar terms, as used in this Agreement, shall in each case refer to this
Agreement as a whole and not to any particular section, paragraph, sentence or other subdivision of
this Agreement. The term “or,” as used herein, is not exclusive.
The Company and the Placement Agent agree as follows:
1. Agreement to Act as Placement Agent. Upon the basis of the representations and
warranties of the Company and subject to the terms and conditions set forth in this Agreement and
in the letter agreement dated September 12, 2005 between the Company and the Placement Agent (the
“Engagement Letter”), the Company engages the Placement Agent, on a reasonable efforts
basis, to act as its exclusive placement agent in connection with the offer and sale, by the
Company, of Shares to the Investors. As compensation for services rendered, at the time of
purchase (as defined below) the Company shall pay to the Placement Agent an amount equal to 6.0% of
the gross proceeds received or to be received by the Company from the sale of the Shares (the
“Agency Fee”); provided, however, that nothing in this Agreement shall
affect the Company’s obligation to pay the Minimum Placement Fee (as defined in the Engagement
Letter) to the Placement Agent in the manner provided in the Engagement Letter in the event the
Aggregate Placement Fee (as defined in the Engagement Letter) payable to the Placement Agent during
the Term (as defined in the Engagement Letter) is less than the Minimum Placement Fee. The Shares
are being sold to Investors at a price of $3.05 per share. The Placement Agent may
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retain other brokers or dealers to act as sub-agents on its behalf in connection with the
offering and sale of the Shares.
The Company expressly acknowledges and agrees that the Placement Agent’s obligations hereunder
are on a reasonable efforts basis, and this Agreement shall not give rise to any commitment by
the Placement Agent or any of its affiliates to underwrite or purchase any of the Shares
or otherwise provide any financing. The Placement Agent shall have no authority to bind the
Company in respect of the sale of any Shares. The sale of the Shares shall be made pursuant to
purchase agreements substantially in the form included as Exhibit A hereto (the
“Purchase Agreements”).
2. Payment and Delivery. Subject to the terms and conditions hereof, payment of the
purchase price for, and delivery of certificates for, the Shares shall be made at the office of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other
place as shall be agreed upon by you and the Company), at 10:00 A.M., New York City time, on April
6, 2006 (unless another time shall be agreed to by you and the Company). Subject to the terms and
conditions hereof, payment of the purchase price for the Shares (adjusted in the manner set forth
below) shall be made to the Company in the manner set forth below by Federal Funds wire transfer,
against delivery of certificates for the Shares, through the facilities of The Depository Trust
Company (“DTC”), to such persons, and shall be registered in such name or names and shall
be in such denominations, as the Placement Agent may request at least one business day before the
time of purchase. Payment of the purchase price for the Shares to be purchased by Investors shall
be made at the time of purchase by such Investors directly to the Company. The time at which such
payment and delivery are to be made is hereinafter sometimes called the “time of purchase.”
At the time of purchase, the Company shall deliver to the Placement Agent, by Federal Funds wire
transfer, an amount in cash equal to the sum of the aggregate Agency Fee and the Placement Agent’s
bona fide estimate of the amount, if any, of expenses for which the Placement Agent is entitled to
reimbursement pursuant hereto or to the Engagement Letter, which estimate shall be evidenced by
expense reimbursement invoices provided by the Placement Agent to the Company prior to the time of
purchase. As soon as reasonably practicable after the time of purchase, the Company or the
Placement Agent, as applicable, shall make any necessary reconciling or additional payment(s) with
respect to such estimate in order to effect the reimbursement to which the Placement Agent is
entitled pursuant hereto and the Engagement Letter. Electronic transfer of the Shares shall be
made at the time of purchase in such names and in such denominations as you shall specify.
Deliveries of the documents described in Section 6 hereof with respect to the purchase of the
Shares shall be made at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 9:00 A.M., New York City time, on the date of the closing of the purchase
of the Shares.
3. Representations and Warranties of the Company. The Company represents and warrants
to and agrees with the Placement Agent that:
(a) the Registration Statement has heretofore become effective under the Act or, with
respect to any registration statement to be filed to register the offer and sale of
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Shares pursuant to Rule 462(b) under the Act, will be filed with the Commission and
become effective under the Act no later than 10:00 P.M., New York City time, on the date of
determination of the offering price for the Shares to Investors; no stop order of the
Commission preventing or suspending the use of the Basic Prospectus, the Prospectus
Supplement, the Prospectus or any Permitted Free Writing Prospectus, or the effectiveness of
the Registration Statement, has been issued, and no proceedings for such purpose have been
instituted or, to the Company’s knowledge, are contemplated by the Commission;
(b) the Registration Statement complied when it became effective, complies as of the
date hereof and, as amended or supplemented, at the time of purchase and at all times during
which a prospectus is required by the Act to be delivered (whether physically or through
compliance with Rule 172 under the Act or any similar rule) in connection with any sale of
Shares, will comply, in all material respects, with the requirements of the Act; the
conditions to the use of Form S-3 in connection with the offering and sale of the Shares as
contemplated hereby have been satisfied; the Registration Statement meets, and the offering
and sale of the Shares as contemplated hereby complies with, the requirements of Rule 415
under the Act (including, without limitation, Rule 415(a)(5)); the Registration Statement
did not, as of the Effective Time, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements
therein not misleading; the Basic Prospectus complied at the time it was filed with the
Commission, and complies as of the date hereof, in all material respects with the
requirements of the Act; at no time during the period that begins on the earlier of the date
of the Basic Prospectus and the date the Basic Prospectus was filed with the Commission and
ends at the time of purchase did or will the Basic Prospectus, as then amended or
supplemented, include an 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, and at no time during such period did or will
the Basic Prospectus, as then amended or supplemented, together with any combination of one
or more of the then issued Permitted Free Writing Prospectuses, if any, include an 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; each of the Prospectus Supplement and the Prospectus will comply, as of the date
that it is filed with the Commission, the date of the Prospectus Supplement, the time of
purchase and at all times during which a prospectus is required by the Act to be delivered
(whether physically or through compliance with Rule 172 under the Act or any similar rule)
in connection with any sale of Shares, in all material respects, with the requirements of
the Act (in the case of the Prospectus, including, without limitation, Section 10(a) of the
Act); at no time during the period that begins on the earlier of the date of the Prospectus
Supplement and the date the Prospectus Supplement is filed with the Commission and ends at
the later of the time of purchase and the end of the period during which a prospectus is
required by the Act to be delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of Shares did or will any
Prospectus Supplement or the Prospectus, as then amended or supplemented, include an untrue
statement of a material fact or omit to state a material fact necessary in order to
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make the statements therein, in the light of the circumstances under which they were
made, not misleading; at no time during the period that begins on the date of such Permitted
Free Writing Prospectus and ends at the time of purchase did or will any Permitted Free
Writing Prospectus include an 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, however,
that the Company makes no representation or warranty with respect to any statement contained
in the Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free
Writing Prospectus in reliance upon and in conformity with information concerning the
Placement Agent and furnished in writing by the Placement Agent to the Company expressly for
use in the Registration Statement, the Basic Prospectus, the Prospectus or such Permitted
Free Writing Prospectus; each Incorporated Document, at the time such document was or will
be filed with the Commission or at the time such document became or becomes effective, as
applicable, complied or will comply, as applicable, in all material respects, with the
requirements of the Exchange Act and did not or will not, as applicable, include an 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;
(c) prior to the execution of this Agreement, the Company has not, directly or
indirectly, offered or sold any Shares by means of any “prospectus” (within the meaning of
the Act) or used any “prospectus” (within the meaning of the Act) in connection with the
offer or sale of the Shares, in each case other than the Basic Prospectus and the Permitted
Free Writing Prospectuses, if any; the Company has not, directly or indirectly, prepared,
used or referred to any Permitted Free Writing Prospectus except in compliance with Rules
164 and 433 under the Act; assuming that such Permitted Free Writing Prospectus is so sent
or given after the Registration Statement was filed with the Commission (and after such
Permitted Free Writing Prospectus was, if required pursuant to Rule 433(d) under the Act,
filed with the Commission), the sending or giving, by the Placement Agent, of any Permitted
Free Writing Prospectus will satisfy the provisions of Rule 164 and Rule 433 (without
reliance on subsections (b), (c) and (d) of Rule 164); the conditions set forth in one or
more of subclauses (i) through (iv), inclusive, of Rule 433(b)(1) under the Act are
satisfied, and the registration statement relating to the offering of the Shares
contemplated hereby, as filed with the Commission on November 3, 2005, includes a prospectus
that, other than by reason of Rule 433 or Rule 431 under the Act, satisfies the requirements
of Section 10 of the Act; neither the Company nor the Placement Agent is disqualified, by
reason of subsection (f) or (g) of Rule 164 under the Act, from using, in connection with
the offer and sale of the Shares, “free writing prospectuses” (as defined in Rule 405 under
the Act) pursuant to Rules 164 and 433 under the Act; the Company is not an “ineligible
issuer” (as defined in Rule 405 under the Act) as of the eligibility determination date for
purposes of Rules 164 and 433 under the Act with respect to the offering of the Shares
contemplated by the Registration Statement; the parties hereto agree and understand that the
content of any and all “road shows” (as defined in Rule 433 under the Act) related to the
offering of the Shares contemplated hereby is solely the property of the Company;
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(d) the Shares have been registered with the Commission on Form S-3 under the Act
pursuant to the standards for such Form S-3 in effect prior to October 21, 1992;
(e) as of the date of this Agreement, the Company has an authorized and outstanding
capitalization as set forth in the section of the Prospectus entitled “Capitalization” (and
any similar sections or information, if any, contained in any Permitted Free Writing
Prospectus), and, as of the time of purchase, the Company shall have an authorized and
outstanding capitalization as set forth in the section of the Prospectus entitled
“Capitalization” (and any similar sections or information, if any, contained in any
Permitted Free Writing Prospectus) (subject, in each case, to the issuance of shares of
Common Stock upon exercise of stock options and warrants disclosed as outstanding in the
Registration Statement, the Basic Prospectus and the Prospectus and the grant of options
under existing stock option plans described in the Registration Statement, the Basic
Prospectus and the Prospectus); and all of the issued and outstanding shares of capital
stock, including the Common Stock, of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, have been issued in compliance with all
applicable securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right; the Shares are duly listed, and admitted and
authorized for trading, subject to official notice of issuance, on the Nasdaq National
Market (the “NASDAQ”);
(f) the Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and conduct its business as described in
the Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free
Writing Prospectuses, if any, to execute and deliver this Agreement and to issue, sell and
deliver the Shares as contemplated herein;
(g) the Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, either (i) have a
material adverse effect on the business, properties, financial condition, results of
operations or prospects of the Company and the Subsidiary (as defined below) taken as a
whole, (ii) prevent or materially interfere with consummation of the transactions
contemplated hereby or (iii) result in the delisting of shares of Common Stock from the
NASDAQ (the occurrence of any such effect or any such prevention or interference or any such
result described in the foregoing clauses (i), (ii) and (iii) being herein referred to as a
“Material Adverse Effect”);
(h) the Company has no subsidiaries (as defined under the Act) other than StemCells
California, Inc. (the “Subsidiary”); the Company owns all of the issued and
outstanding capital stock of the Subsidiary; other than the capital stock of the Subsidiary,
the Company does not own, directly or indirectly, any shares of stock or any other equity
interests or long-term debt securities of any corporation, firm, partnership, joint venture,
association or other entity, other than the Company’s equity interest in ReNeuron Group
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plc, as disclosed in the Registration Statement, Basic Prospectus and the Prospectus;
complete and correct copies of the charters and the bylaws of the Company and the Subsidiary
and all amendments thereto have been delivered to you, and no changes therein will be made
on or after the date hereof through and including the time of purchase; the Subsidiary has
been duly incorporated and is validly existing as a corporation in good standing under the
laws of the State of California, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Registration
Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing Prospectuses,
if any; the Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect; all of the outstanding shares of capital stock of the Subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable, have been issued in
compliance with all applicable securities laws, were not issued in violation of any
preemptive right, resale right, right of first refusal or similar right and are owned by the
Company subject to no security interest, other encumbrance or adverse claims; no options,
warrants or other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligation into shares of capital stock or ownership interests in the
Subsidiary are outstanding;
(i) the Shares have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued, fully paid and
non-assessable and free of statutory and contractual preemptive rights, resale rights,
rights of first refusal and similar rights; the Shares, when issued and delivered against
payment therefor as provided herein, will be free of any restriction upon the voting or
transfer thereof pursuant to the Company’s charter or bylaws or any agreement or other
instrument to which the Company is a party;
(j) the capital stock of the Company, including the Shares, conforms in all material
respects to each description thereof, if any, contained or incorporated by reference in the
Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing
Prospectus; and the certificates for the Shares are in due and proper form;
(k) this Agreement has been duly authorized, executed and delivered by the Company;
(l) neither the Company nor the Subsidiary is in breach or violation of or in default
under (nor has any event occurred which, with notice, lapse of time or both, would result in
any breach or violation of, constitute a default under or give the holder of any
indebtedness (or a person acting on such holder’s behalf) the right to require the
repurchase, redemption or repayment of all or a part of such indebtedness under) (A) its
charter or bylaws, or (B) any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any license, lease, contract or other
agreement or instrument to which it is a party or by which it or any of its properties may
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be bound or affected, or (C) any federal, state, local or foreign law, regulation or
rule, or (D) any rule or regulation of any self-regulatory organization or other
non-governmental regulatory authority (including, without limitation, the rules and
regulations of the NASDAQ), or (E) any decree, judgment or order applicable to it or any of
its properties, except, with respect to clauses (B), (C), (D) or (E), for such breaches,
violations, defaults and events as would not, individually or in the aggregate, have a
Material Adverse Effect;
(m) the execution, delivery and performance of this Agreement, the issuance and sale of
the Shares and the consummation of the transactions contemplated hereby will not conflict
with, result in any breach or violation of or constitute a default under (nor constitute any
event which, with notice, lapse of time or both, would result in any breach or violation of,
constitute a default under or give the holder of any indebtedness (or a person acting on
such holder’s behalf) the right to require the repurchase, redemption or repayment of all or
a part of such indebtedness under) (or result in the creation or imposition of a lien,
charge or encumbrance on any property or assets of the Company or the Subsidiary pursuant
to) (A) the charter or bylaws of the Company or the Subsidiary, or (B) any indenture,
mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or
any license, lease, contract or other agreement or instrument to which the Company or the
Subsidiary is a party or by which any of them or any of their respective properties may be
bound or affected, or (C) any federal, state, local or foreign law, regulation or rule, or
(D) any rule or regulation of any self-regulatory organization or other non-governmental
regulatory authority (including, without limitation, the rules and regulations of the
NASDAQ), or (E) any decree, judgment or order applicable to the Company or the Subsidiary or
any of their respective properties, except, with respect to clause (B), for such conflicts,
breaches, violations, defaults and events as would not, individually or in the aggregate,
have a Material Adverse Effect;
(n) except as have been obtained or made, no approval, authorization, consent or order
of or filing with any federal, state, local or foreign governmental or regulatory
commission, board, body, authority or agency, or of or with any self-regulatory organization
or other non-governmental regulatory authority, or approval of the stockholders of the
Company, is required in connection with the issuance and sale of the Shares or the
consummation by the Company of the transactions contemplated hereby, other than (i)
registration of the Shares under the Act, which has been effected (or, with respect to any
registration statement to be filed hereunder pursuant to Rule 462(b) under the Act, will be
effected in accordance herewith), (ii) any necessary qualification under the securities or
blue sky laws of the various jurisdictions in which the Shares are being offered, (iii)
under the Conduct Rules of the National Association of Securities Dealers, Inc. (the
“NASD”) or (iv) any necessary qualification with or notice to NASDAQ, which shall be
effected or made in a timely manner;
(o) except as described in the Registration Statement, the Basic Prospectus and the
Prospectus, (i) no person has the right, contractual or otherwise, to cause the Company to
issue or sell to it any shares of Common Stock or shares of any other capital stock or other
equity interests of the Company, (ii) no person has any preemptive rights,
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resale rights, rights of first refusal or other rights to purchase any shares of Common
Stock or shares of any other capital stock of or other equity interests in the Company and
(iii) no person has the right to act as an underwriter or placement agent or as a financial
advisor to the Company in connection with the offer and sale of the Shares; no person has
the right, contractual or otherwise, to cause the Company to register
under the Act any shares of Common Stock or shares of any other capital stock of or other equity interests in
the Company, or to include any such shares or interests in the Registration Statement or the
offering contemplated thereby;
(p) each of the Company and the Subsidiary has all necessary licenses, authorizations,
consents and approvals and has made all necessary filings required under any applicable law,
regulation or rule, and has obtained all necessary licenses, authorizations, consents and
approvals from other persons, in order to conduct its business, except where the failure to
have or obtain such licenses, authorizations, consents and approvals, or to make such
filings, would not, individually or in the aggregate, have a Material Adverse Effect;
neither the Company nor the Subsidiary is in violation of, or in default under, or has
received notice of any proceedings relating to revocation or modification of, any such
license, authorization, consent or approval or any federal, state, local or foreign law,
regulation or rule or any decree, order or judgment applicable to the Company or the
Subsidiary, except where such violation, default, revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect;
(q) there are no actions, suits, claims, investigations or proceedings pending or, to
the Company’s knowledge, threatened or contemplated to which the Company or the Subsidiary
or any of their respective directors or officers is or would be a party or of which any of
their respective properties is or would be subject at law or in equity, before or by any
federal, state, local or foreign governmental or regulatory commission, board, body,
authority or agency, or before or by any self-regulatory organization or other
non-governmental regulatory authority (including, without limitation, the NASDAQ), except
any such action, suit, claim, investigation or proceeding which, if resolved adversely to
the Company or the Subsidiary, would not, individually or in the aggregate, have a Material
Adverse Effect;
(r) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports on the consolidated financial statements of the
Company and the Subsidiary are incorporated by reference in the Registration Statement, the
Basic Prospectus and the Prospectus, is an independent registered public accountant as
required by the Act and by the rules of the Public Company Accounting Oversight Board (the
“PCAOB”);
(s) the financial statements included or incorporated by reference in the Registration
Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus,
together with the related notes and schedules, present fairly the consolidated financial
position of the Company and the Subsidiary as of the dates indicated and the consolidated
results of operations, cash flows and changes in stockholders’ equity of the Company for the
periods specified and have been prepared in
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compliance with the requirements of the Act and Exchange Act and in conformity with
U.S. generally accepted accounting principles applied on a consistent basis during the
periods involved; all pro forma financial statements, if any, and pro forma financial data
included or incorporated by reference in the Registration Statement, the Basic Prospectus,
the Prospectus or any Permitted Free Writing Prospectus comply with the requirements of the
Act and the Exchange Act, and the assumptions used in the preparation of such pro forma
financial statements and data are reasonable, the pro forma adjustments used therein are
appropriate to give effect to the transactions or circumstances described therein and the
pro forma adjustments have been properly applied to the historical amounts in the
compilation of those statements and data; the other financial and statistical data contained
or incorporated by reference in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus are accurately and fairly presented and
prepared on a basis consistent with the financial statements and books and records of the
Company; there are no financial statements (historical or pro forma) that are required to be
included or incorporated by reference in the Registration Statement, the Basic Prospectus or
the Prospectus that are not included or incorporated by reference as required; the Company
and the Subsidiary do not have any material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations), not described in the Registration Statement,
the Basic Prospectus and the Prospectus; and all disclosures contained or incorporated by
reference in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus 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 Act, to the extent applicable;
(t) subsequent to the respective dates as of which information is given in the
Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing
Prospectuses, if any, in each case excluding any amendments or supplements to the foregoing
made after the execution of this Agreement, there has not been (i) any material adverse
change, or any development involving a prospective material adverse change, in the business,
properties, management, financial condition or results of operations of the Company and the
Subsidiary taken as a whole, (ii) any transaction which is material to the Company and the
Subsidiary taken as a whole, (iii) any obligation or liability, direct or contingent
(including any off-balance sheet obligations), incurred by the Company or the Subsidiary,
which is material to the Company and the Subsidiary taken as a whole, (iv) any change in the
capital stock or outstanding indebtedness of the Company or the Subsidiary (excluding, for
purposes of this clause (iv), (A) any such changes due to the issuance of shares of Common
Stock upon exercise of stock options and warrants disclosed as outstanding in the
Registration Statement, the Basic Prospectus and the Prospectus or the grant of options
under existing stock option plans described in the Registration Statement, the Basic
Prospectus and the Prospectus, and (B) any incurrence of indebtedness made in the ordinary
course of the Company’s business as contemplated by the Registration Statement, the Basic
Prospectus and the Prospectus) or (v) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company or the Subsidiary;
- 10 -
(u) neither the Company nor the Subsidiary is, and at no time during which a prospectus
is required by the Act to be delivered (whether physically or through compliance with Rule
172 under the Act or any similar rule) in connection with any sale of Shares will either of
them be, and, after giving effect to the offering and sale of the Shares and the application
of the proceeds thereof, neither of them will be, an “investment company” or an entity
“controlled” by an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended (the “Investment Company Act”);
(v) the Company and the Subsidiary have good and marketable title to all property (real
and personal) described in the Registration Statement, the Basic Prospectus, the Prospectus
or any Permitted Free Writing Prospectus as being owned by any of them, free and clear of
all liens, claims, security interests or other encumbrances, except to the extent such
liens, claims, security interests or other encumbrances are disclosed in the Registration
Statement, the Basic Prospectus and the Prospectus; all the property described in the
Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free Writing
Prospectus as being held under lease by the Company or the Subsidiary is held thereby under
valid, subsisting and enforceable leases;
(w) the Company and the Subsidiary own, or have obtained valid and enforceable licenses
for, or other rights to use, the inventions, patent applications, patents, trademarks (both
registered and unregistered), tradenames, service names, copyrights, trade secrets and other
proprietary information described in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus as being owned or licensed by them or
which are necessary for the conduct of their respective businesses as currently conducted or
as proposed (in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus) to be conducted (including the commercialization of
products or services described in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus as under development), except where the
failure to own, license or have such rights would not, individually or in the aggregate,
have a Material Adverse Effect (collectively, “Intellectual Property”); (i) there
are no third parties who have or, to the Company’s knowledge, will be able to establish
rights to any Intellectual Property, except for, and to the extent of, the ownership rights
of the owners of the Intellectual Property which the Registration Statement, the Basic
Prospectus and the Prospectus disclose is licensed to the Company; (ii) to the Company’s
knowledge, there is no infringement by third parties of any Intellectual Property; (iii)
there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the Company’s rights in or to any Intellectual Property, and the
Company is unaware of any facts which could form a reasonable basis for any such action,
suit, proceeding or claim; (iv) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging the validity,
enforceability or scope of any Intellectual Property, and the Company is unaware of any
facts which could form a reasonable basis for any such action, suit, proceeding or claim;
(v) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others that the Company or the Subsidiary infringes
- 11 -
or otherwise violates, or would, upon the commercialization of any product or service
described in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus as under development, infringe or violate, any patent,
trademark, tradename, service name, copyright, trade secret or other proprietary rights of
others, and the Company is unaware of any facts which could form a reasonable basis for any
such action, suit, proceeding or claim; (vi) the Company and the Subsidiary have complied
with the terms of each agreement pursuant to which Intellectual Property has been licensed
to the Company or the Subsidiary (except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect), and all such agreements
are in full force and effect; (vii) to the Company’s knowledge, there is no patent or patent
application that contains claims that interfere with the issued or pending claims of any of
the Intellectual Property or that challenges the validity, enforceability or scope of any of
the Intellectual Property; (viii) to the Company’s knowledge, there is no prior art that may
render any patent application within the Intellectual Property unpatentable that has not
been disclosed to the U.S. Patent and Trademark Office; and (ix) except as disclosed in the
Registration Statement, the Basic Prospectus and the Prospectus, the manufacture, use or
sale of the product candidates described in the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus as under development by
the Company or the Subsidiary falls or would fall within the scope of one or more claims of
one or more patents or patent applications owned by, or exclusively licensed to, the Company
or the Subsidiary;
(x) neither the Company nor the Subsidiary is engaged in any unfair labor practice;
except for matters which would not, individually or in the aggregate, have a Material
Adverse Effect, (i) there is no (A) unfair labor practice complaint pending or, to the
Company’s knowledge, threatened against the Company or the Subsidiary before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending or, to the Company’s knowledge, threatened, (B)
strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge,
threatened against the Company or the Subsidiary and (C) union representation dispute
currently existing concerning the employees of the Company or the Subsidiary, (ii) to the
Company’s knowledge, no union organizing activities are currently taking place concerning
the employees of the Company or the Subsidiary and (iii) neither the Company nor the
Subsidiary has violated any federal, state, local or foreign law relating to discrimination
in the hiring, promotion or pay of employees, any applicable wage or hour laws or any
provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) or the
rules and regulations promulgated thereunder concerning the employees of the Company or the
Subsidiary;
(y) the Company and the Subsidiary and their respective properties, assets and
operations are in compliance with, and the Company and the Subsidiary hold all permits,
authorizations and approvals required under, Environmental Laws (as defined below), except
to the extent that failure to so comply or to hold such permits, authorizations or approvals
would not, individually or in the aggregate, have a Material Adverse Effect; there are no
past, present or, to the Company’s knowledge, reasonably anticipated future events,
conditions, circumstances, activities, practices, actions, omissions or plans that
- 12 -
could reasonably be expected to give rise to any material costs or liabilities to the
Company or the Subsidiary under, or to interfere with or prevent compliance by the Company
or the Subsidiary with, Environmental Laws; except as would not, individually or in the
aggregate, have a Material Adverse Effect, neither the Company nor the Subsidiary (i) is the
subject of any investigation, (ii) has received any notice or claim, (iii) is a party to or
affected by any pending or, to the Company’s knowledge, threatened action, suit or
proceeding, (iv) is bound by any judgment, decree or order or (v) has entered into any
agreement, in each case relating to any alleged violation of any Environmental Law or any
actual or alleged release or threatened release or cleanup at any location of any Hazardous
Materials (as defined below) (as used herein, “Environmental Law” means any federal,
state, local or foreign law, statute, ordinance, rule, regulation, order, decree, judgment,
injunction, permit, license, authorization or other binding requirement, or common law,
relating to health, safety or the protection, cleanup or restoration of the environment or
natural resources, including those relating to the distribution, processing, generation,
treatment, storage, disposal, transportation, other handling or release or threatened
release of Hazardous Materials, and “Hazardous Materials” means any material
(including, without limitation, pollutants, contaminants, hazardous or toxic substances or
wastes) that is regulated by or may give rise to liability under any Environmental Law);
(z) the Company and the Subsidiary periodically review the effect of the Environmental
Laws on their respective businesses, operations and properties, in the course of which they
identify and evaluate associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for cleanup, closure of properties or compliance
with the Environmental Laws or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties);
(aa) all tax returns required to be filed by the Company or the Subsidiary have been
timely filed, and all taxes and other assessments of a similar nature (whether imposed
directly or through withholding) including any interest, additions to tax or penalties
applicable thereto due or claimed to be due from such entities have been timely paid, other
than those being contested in good faith and for which adequate reserves have been provided;
(bb) the Company and the Subsidiary maintain insurance covering their respective
properties, operations, personnel and businesses as the Company reasonably deems adequate;
such insurance insures against such losses and risks to an extent which is adequate in
accordance with customary industry practice to protect the Company and the Subsidiary and
their respective businesses; all such insurance is fully in force on the date hereof and
will be fully in force at the time of purchase; neither the Company nor the Subsidiary has
reason to believe that it will not be able to renew any such insurance as and when such
insurance expires;
(cc) neither the Company nor the Subsidiary has sent or received any communication
regarding termination of, or intent not to renew, any of the contracts or
- 13 -
agreements referred to or described in the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus, or referred to or described in, or filed as an exhibit
to, the Registration Statement or any Incorporated Document, and no such termination or
non-renewal has been threatened by the Company or the Subsidiary or, to the Company’s
knowledge, any other party to any such contract or agreement, except where the terminations
or non-renewals of such contracts or agreements would not, individually or in the aggregate,
have a Material Adverse Effect;
(dd) the Company and the Subsidiary maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any differences;
(ee) the Company has established and maintains and evaluates “disclosure controls and
procedures” (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act) and
“internal control over financial reporting” (as such term is defined in Rule 13a-15 and
15d-15 under the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to the Company, including its consolidated
subsidiary, is made known to the Company’s Chief Executive Officer and its Chief Financial
Officer by others within those entities, and such disclosure controls and procedures are
effective to perform the functions for which they were established; the Company’s
independent auditors and the Audit Committee of the Board of Directors of the Company have
been advised of: (i) all significant deficiencies, if any, in the design or operation of
internal controls which could adversely affect the Company’s ability to record, process,
summarize and report financial data; and (ii) all fraud, if any, whether or not material,
that involves management or other employees who have a role in the Company’s internal
controls; all material weaknesses, if any, in internal controls have been identified to the
Company’s independent auditors; since the date of the most recent evaluation of such
disclosure controls and procedures and internal controls, there have been no significant
changes in internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant deficiencies and
material weaknesses; the Company remediated the material weakness, significant deficiencies
and ineffectiveness of internal controls over financial reporting disclosed in the Company’s
Annual Report on Form 10-K filed with the Commission on March 15, 2005; all “significant
deficiencies” and “material weaknesses” (as such terms are defined in PCAOB Auditing
Standard No. 2) of the Company, if any, have been disclosed in the Registration Statement,
the Basic Prospectus and the Prospectus; the principal executive officers (or their
equivalents) and principal financial officers (or their equivalents) of the Company have
made all certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act”) and any related rules and regulations promulgated by the Commission, and the
statements contained in
- 14 -
each such certification are complete and correct; the Company, the Subsidiary and the
Company’s directors and officers are each in compliance in all material respects with all
applicable effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the rules and regulations of
the Commission and the NASDAQ promulgated thereunder;
(ff) all statistical or market-related data included or incorporated by reference in
the Registration Statement, the Basic Prospectus, the Prospectus or any Permitted Free
Writing Prospectus are based on or derived from sources that the Company believes to be
reliable and accurate, and the Company has obtained the written consent to the use of such
data from such sources to the extent required;
(gg) neither the Company nor the Subsidiary nor, to the Company’s knowledge, any
employee or agent of the Company or the Subsidiary has made any payment of funds of the
Company or the Subsidiary or received or retained any funds in violation of any law, rule or
regulation (including, without limitation, the Foreign Corrupt Practices Act of 1977), which
payment, receipt or retention of funds is of a character required to be disclosed in the
Registration Statement, the Basic Prospectus or the Prospectus;
(hh) the Subsidiary is not currently prohibited, directly or indirectly, from paying
any dividends to the Company, from making any other distribution on the Subsidiary’s capital
stock, from repaying to the Company any loans or advances to the Subsidiary from the Company
or from transferring any of the Subsidiary’s property or assets to the Company, except as
described in the Registration Statement, the Basic Prospectus and the Prospectus;
(ii) the preclinical tests and clinical trials that are described in, or the results of
which are referred to in, the Registration Statement, the Basic Prospectus, the Prospectus
or any Permitted Free Writing Prospectus were and, if begun and still pending, are being
conducted in all material respects in accordance with protocols, if any, filed with the
appropriate regulatory authorities for each such test or trial, as the case may be, and with
standard medical and scientific research procedures; the description of the results of such
tests and trials contained in the Registration Statement, the Basic Prospectus, the
Prospectus or any Permitted Free Writing Prospectus are accurate and complete in all
material respects and fairly present the data derived from such tests and trials, and the
Company and the Subsidiary have no knowledge of any other studies or tests the results of
which are inconsistent with, or otherwise call into question, the results described or
referred to in the Registration Statement, the Basic Prospectus, the Prospectus or any
Permitted Free Writing Prospectus; except as disclosed in the Registration Statement, the
Basic Prospectus and the Prospectus, neither the Company nor the Subsidiary has received any
notices or other correspondence from the Food and Drug Administration of the U.S. Department
of Health and Human Services or any committee thereof or from any other U.S. or foreign
government or drug or medical device regulatory agency (the “Regulatory Agencies”)
prohibiting the commencement or requiring the termination, suspension or modification of any
preclinical tests or clinical trials that are described or referred to in the Registration
Statement, the Basic Prospectus, the Prospectus or any
- 15 -
Permitted Free Writing Prospectus; and the Company and the Subsidiary have each
operated and currently are in compliance in all material respects with all applicable rules,
regulations and policies of the Regulatory Agencies;
(jj) the issuance and sale of the Shares as contemplated hereby will not cause any
holder of any shares of capital stock, securities convertible into or exchangeable or
exercisable for capital stock or options, warrants or other rights to purchase capital stock
or any other securities of the Company to have any right to acquire any shares of preferred
stock of the Company;
(kk) since September 30, 2005, the Company has not received any notice from the NASDAQ
regarding the delisting of the Common Stock from the NASDAQ;
(ll) neither the Company nor the Subsidiary nor, to the Company’s knowledge, any of
their respective directors, officers, affiliates or controlling persons has taken, directly
or indirectly, any action designed, or which has constituted or might reasonably be expected
to cause or result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(mm) to the Company’s knowledge, there are no affiliations or associations between (i)
any member of the NASD and (ii) the Company or any of the Company’s officers, directors or
5% or greater security holders or any beneficial owner of the Company’s unregistered equity
securities that were acquired at any time on or after the 180th day immediately preceding
the date the Registration Statement was initially filed with the Commission, except as
disclosed in the Registration Statement, the Basic Prospectus and the Prospectus;
(nn) the Company has not offered, or caused the Placement Agent to offer, Shares to any
person with the intent to influence unlawfully (A) a customer or supplier of the Company or
the Subsidiary to alter the customer’s or supplier’s level or type of business with the
Company or the Subsidiary or (B) a trade journalist or publication to write or publish
favorable information about the Company or the Subsidiary or any of their respective
products or services; and
(oo) except pursuant to this Agreement or as would not, individually or in the
aggregate, have a Material Adverse Effect, neither the Company nor the Subsidiary has
incurred any liability for any finder’s or broker’s fee or agent’s commission in connection
with the execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby or by the Registration Statement.
In addition, any certificate signed by any officer of the Company or the Subsidiary and
delivered to the Placement Agent or counsel for the Placement Agent in connection with the offering
of the Shares shall be deemed to be a representation and warranty by the Company, as to matters
covered thereby, to the Placement Agent.
4. Certain Covenants of the Company. The Company hereby agrees:
- 16 -
(a) to furnish such information as may be required and otherwise to cooperate in
qualifying the Shares for offering and sale under the securities or blue sky laws of such
states or other jurisdictions as you may designate and to maintain such qualifications in
effect so long as you may request for the distribution of the Shares; provided,
however, that the Company shall not be required to qualify as a foreign corporation
or to consent to the service of process under the laws of any such jurisdiction (except
service of process with respect to the offering and sale of the Shares); and to promptly
advise you of the receipt by the Company of any notification with respect to the suspension
of the qualification of the Shares for offer or sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose;
(b) to make available to the Placement Agent in New York City, as soon as practicable
after this Agreement becomes effective, and thereafter from time to time to furnish to the
Placement Agent, as many copies of the Prospectus (or of the Prospectus as amended or
supplemented if the Company shall have made any amendments or supplements thereto after the
effective date of the Registration Statement) as the Placement Agent may reasonably request;
in case delivery (whether physically or through compliance with Rule 172 under the Act or
any similar rule) of a prospectus in connection with the sale of the Shares is required
after the nine-month period referred to in Section 10(a)(3) of the Act, and after the time a
post-effective amendment to the Registration Statement is required pursuant to Item 512(a)
of Regulation S-K under the Act, the Company will promptly prepare, at its expense, such
amendment or amendments to the Registration Statement and the Prospectus as may be necessary
to permit compliance with the requirements of Section 10(a)(3) of the Act or Item 512(a) of
Regulation S-K under the Act, as the case may be;
(c) if, at the time this Agreement is executed and delivered, it is necessary for a
post-effective amendment to the Registration Statement, or a Registration Statement under
Rule 462(b) under the Act, to be filed with the Commission and become effective before the
Shares may be sold, the Company will use its best efforts to cause such post-effective
amendment or such Registration Statement to be filed and become effective as soon as
possible, and the Company will advise you promptly and, if requested by you, will confirm
such advice in writing, (i) when such post-effective amendment or such Registration
Statement has become effective, and (ii) if Rule 430A under the Act is used, when the
Prospectus is filed with the Commission pursuant to Rule 424(b) under the Act (which the
Company agrees to file in a timely manner in accordance with such Rules);
(d) if, at any time during the period when a prospectus is required by the Act to be
delivered (whether physically or through compliance with Rule 172 under the Act or any
similar rule) in connection with any sale of Shares, the Registration Statement shall cease
to comply with the requirements of the Act with respect to eligibility for the use of the
form on which the Registration Statement was filed with the Commission, to (i) promptly
notify you, (ii) promptly file with the Commission a new registration statement under the
Act, relating to the Shares, or a post-effective amendment to the Registration Statement,
which new registration statement or post-effective amendment
- 17 -
shall comply with the requirements of the Act and shall be in a form satisfactory to
you, (iii) use its best efforts to cause such new registration statement or post-effective
amendment to become effective under the Act as soon as practicable, (iv) promptly notify you
of such effectiveness and (v) take all other action necessary or appropriate to permit the
offering and sale of the Shares to continue as contemplated in the Prospectus; all
references herein to the Registration Statement shall be deemed to include each such new
registration statement or post-effective amendment, if any;
(e) if the period during which a prospectus is required by the Act to be delivered
(whether physically or through compliance with Rule 172 under the Act or any similar rule)
in connection with any sale of Shares shall extend to or beyond December 1, 2008, to (i)
file with the Commission, prior to December 1, 2008, a new registration statement under the
Act relating to the Shares, which new registration statement shall comply with the
requirements of the Act (including, without limitation, Rule 415(a)(6) under the Act) and
shall be in a form satisfactory to you; and (ii) use its best efforts to cause such new
registration statement to become effective under the Act as soon as practicable, but in any
event within 180 days after December 1, 2008 and promptly notify you of such effectiveness;
the Company shall take all other action necessary or appropriate to permit the offering and
sale of the Shares to continue as contemplated in the Prospectus; all references herein to
the Registration Statement shall be deemed to include each such new registration statement,
if any;
(f) to advise you promptly, confirming such advice in writing, of any request by the
Commission for amendments or supplements to the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus, or for additional
information with respect thereto, or of notice of institution of proceedings for, or the
entry of a stop order, suspending the effectiveness of the Registration Statement and, if
the Commission should enter a stop order suspending the effectiveness of the Registration
Statement, to use its best efforts to obtain the lifting or removal of such order as soon as
possible; to advise you promptly of any proposal to amend or supplement the Registration
Statement, the Basic Prospectus or the Prospectus, and to provide you and Placement Agent’s
counsel copies of any such documents for review and comment a reasonable amount of time
prior to any proposed filing and to file no such amendment or supplement to which you shall
object in writing;
(g) subject to Section 4(f) hereof, to file promptly all reports and documents and any
preliminary or definitive proxy or information statement required to be filed by the Company
with the Commission in order to comply with the Exchange Act for so long as a prospectus is
required by the Act to be delivered (whether physically or through compliance with Rule 172
under the Act or any similar rule) in connection with any sale of Shares; and to provide
you, for your review and comment, with a copy of such reports and statements and other
documents to be filed by the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act
during such period a reasonable amount of time prior to any proposed filing, and to file no
such report, statement or document to which you shall have objected in writing; and to
promptly notify you of such filing;
- 18 -
(h) to advise the Placement Agent promptly of the happening of any event within the
period during which a prospectus is required by the Act to be delivered (whether physically
or through compliance with Rule 172 under the Act or any similar rule) in connection with
any sale of Shares, which event could require the making of any change in the Prospectus
then being used so that the Prospectus would not include an 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 are made, not misleading, and to advise the
Placement Agent promptly if, during such period, it shall become necessary to amend or
supplement the Prospectus to cause the Prospectus to comply with the requirements of the
Act, and, in each case, during such time, subject to Section 4(f) hereof, to prepare and
furnish, at the Company’s expense, to the Placement Agent promptly such amendments or
supplements to such Prospectus as may be necessary to reflect any such change or to effect
such compliance;
(i) to make generally available to its security holders, and to deliver to you, an
earnings statement of the Company (which will satisfy the provisions of Section 11(a) of the
Act) covering a period of twelve months beginning after the effective date of the
Registration Statement (as defined in Rule 158(c) under the Act) as soon as is reasonably
practicable after the termination of such twelve-month period but in any case not later than
March 15, 2007;
(j) to furnish to you two copies of the Registration Statement, as initially filed with
the Commission, and of all amendments thereto (including all exhibits thereto and documents
incorporated by reference therein);
(k) to furnish to you as early as practicable prior to the time of purchase, but not
later than two business days prior thereto, a copy of the latest available unaudited interim
and monthly consolidated financial statements, if any, of the Company and the Subsidiary
which have been read by the Company’s independent registered public accountants, as stated
in their letter to be furnished pursuant to Section 6(d) hereof;
(l) to apply the net proceeds from the sale of the Shares in the manner set forth under
the caption “Use of proceeds” in the Basic Prospectus and in the Prospectus Supplement;
(m) to reimburse the Placement Agent for expenses as set forth in Section 2 of the
Engagement Letter and to pay all costs, expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, the Basic Prospectus, the Prospectus
Supplement, the Prospectus, the Permitted Free Writing Prospectuses and any amendments or
supplements thereto, and the printing and furnishing of copies of each thereof to the
Placement Agent and to dealers (including costs of mailing and shipment), (ii) the
registration, issue, sale and delivery of the Shares including any stock or transfer taxes
and stamp or similar duties payable upon the sale, issuance or delivery of the Shares to the
Placement Agent, (iii) the producing, word processing and/or printing of this Agreement and
any closing documents (including compilations thereof) and the reproduction and/or printing
and furnishing of copies of each thereof to the Placement
- 19 -
Agent and (except closing documents) to dealers (including costs of mailing and
shipment), (iv) the qualification of the Shares for offering and sale under state or foreign
laws and the determination of their eligibility for investment under state or foreign law
(including the legal fees and filing fees and other disbursements of counsel for the
Placement Agent) and the printing and furnishing of copies of any blue sky surveys or legal
investment surveys to the Placement Agent and to dealers, (v) any listing of the Shares on
any securities exchange or qualification of the Shares for quotation on the NASDAQ and any
registration thereof under the Exchange Act, (vi) any filing for review of the offering of
the Shares by the NASD, including the legal fees and filing fees and other disbursements of
counsel to the Placement Agent relating to NASD matters, (vii) the fees and disbursements of
any transfer agent or registrar for the Shares, (viii) the costs and expenses of the Company
relating to presentations or meetings undertaken in connection with the marketing of the
offering and sale of the Shares to prospective investors and the Placement Agent’s sales
forces, including, without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in connection with the
road show presentations, travel, lodging and other expenses incurred by the officers of the
Company and any such consultants, and the cost of any aircraft chartered by the Company in
connection with the road show, and (ix) the performance of the Company’s other obligations
hereunder;
(n) to comply with Rule 433(d) under the Act (without reliance on Rule 164(b) under the
Act) and with Rule 433(g) under the Act;
(o) beginning on the date hereof and ending on, and including, the date that is 90 days
after the date of the Prospectus Supplement (the “Lock-Up Period”), without the
prior written consent of UBS, not to (i) issue, sell, offer to sell, contract or agree to
sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to
dispose of, directly or indirectly, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section 16 of the
Exchange Act and the rules and regulations of the Commission promulgated thereunder, with
respect to, any Common Stock or any other securities of the Company that are substantially
similar to Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any warrants or other rights to purchase, the foregoing, (ii) file or cause to
become effective a registration statement under the Act relating to the offer and sale of
any Common Stock or any other securities of the Company that are substantially similar to
Common Stock, or any securities convertible into or exchangeable or exercisable for, or any
warrants or other rights to purchase, the foregoing, (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 Common Stock or any other securities of the Company that are substantially
similar to Common Stock, or any securities convertible into or exchangeable or exercisable
for, or any warrants or other rights to purchase, the foregoing, whether any such
transaction is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise or (iv) publicly announce an intention to effect any transaction specified in
clause (i), (ii) or (iii), except, in each case, for (A) the registration of the offer and
sale of the Shares as contemplated by this Agreement, (B) issuances of Common Stock upon the
exercise of options or warrants disclosed as
- 20 -
outstanding in the Registration Statement, the Basic Prospectus and the Prospectus, (C)
the issuance of employee stock options not exercisable during the Lock-Up Period pursuant to
stock option plans described in the Registration Statement, the Basic Prospectus and the
Prospectus, (D) the issuance, other than pursuant to stock option plans described in the
Registration Statement, the Basic Prospectus or the Prospectus, of options and warrants for
Common Stock to directors, officers, employees or consultants of the Company, as
compensation for services rendered or to be rendered by them to the Company, provided such
options and warrants are not exercisable during the Lock-Up Period and (E) the issuance of
Common Stock or securities convertible into or exercisable for Common Stock in connection
with a partnership, research, licensing, collaboration, joint venture or similar
arrangement, or an acquisition of any other business or entity, or any stock, assets or
technology thereof (any such arrangement or transaction, a “Strategic Transaction”),
provided that, in each case, (x) the aggregate number of shares of Common Stock issued or
issuable (or underlying convertible or exercisable securities issued or issuable) pursuant
to Strategic Transactions in reliance upon this clause (E) does not exceed 20% of the number
of shares of Common Stock outstanding immediately prior to the Strategic Transaction (or the
first Strategic Transaction, if more than one) and (y) each recipient of such shares of
Common Stock or securities convertible into or exercisable for Common Stock has theretofore
executed a binding lock-up agreement agreeing with UBS not to transfer, directly or
indirectly, any such shares or securities (or shares of Common Stock underlying such
securities) during the Lock-Up Period;
(p) prior to the time of purchase, to issue no press release or other communication
directly or indirectly and hold no press conferences with respect to the Company or the
Subsidiary, the financial condition, results of operations, business, properties, assets, or
liabilities of the Company or the Subsidiary, or the offering of the Shares, without your
prior consent;
(q) not, at any time at or after the execution of this Agreement, to, directly or
indirectly, offer or sell any Shares by means of any “prospectus” (within the meaning of the
Act), or use any “prospectus” (within the meaning of the Act) in connection with the offer
or sale of the Shares, in each case other than the Prospectus;
(r) not to, and to cause the Subsidiary not to, take, directly or indirectly, any
action designed, or which will constitute, or has constituted, or might reasonably be
expected to cause or result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares;
(s) to use its best efforts to cause the Shares to be listed for quotation on the
NASDAQ and to maintain the listing of the Common Stock, including the Shares, on the NASDAQ;
and
(t) to maintain a transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar for the Common Stock.
- 21 -
5. Reimbursement of Placement Agent’s Expenses. If this Agreement is terminated by
the Placement Agent pursuant to Section 7, if any of the conditions set forth in Section 6 are not
satisfied in accordance with Section 6 or if the sale of the Shares to the Investors is not
consummated because of any refusal, inability or failure on the part of the Company to perform any
agreement or obligation, or to comply with any provision, of this Agreement, the Engagement Letter
or any Purchase Agreement, then the Company shall, in addition to paying the amounts described in
Section 4(m) hereof, reimburse the Placement Agent for all of its reasonable out-of-pocket
expenses, including the fees and disbursements of its counsel.
6. Conditions of Placement Agent’s Obligations. The obligations of the Placement
Agent hereunder are subject to the accuracy of the representations and warranties on the part of
the Company on the date hereof and at the time of purchase and the performance by the Company of
its obligations hereunder and to the following additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase an opinion of Ropes & ▇▇▇▇
LLP, counsel for the Company, addressed to the Placement Agent, and dated the time of
purchase, and in form and substance satisfactory to UBS, in the form set forth in
Exhibit C hereto.
(b) The Company shall furnish to you at the time of purchase, an opinion of ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ P.C., special counsel for the Company with respect to patents
and proprietary rights, addressed to the Placement Agent, and dated the time of purchase,
and in form and substance satisfactory to the Placement Agent, in the form set forth in
Exhibit D hereto.
(c) The Company shall furnish to you at the time of purchase, an opinion of ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, special counsel for the Company with respect to regulatory matters, addressed to
the Placement Agent, and dated the time of purchase, and in form and substance satisfactory
to the Placement Agent, in the form set forth in Exhibit E hereto.
(d) You shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP letters dated, respectively, the
date of this Agreement, the date of the Prospectus Supplement and the time of purchase, and
addressed to the Placement Agent in the forms satisfactory to the Placement Agent, which
letters shall cover, without limitation, the various financial disclosures contained in the
Registration Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing
Prospectuses, if any.
(e) You shall have received at the time of purchase, the favorable opinion of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ LLP, counsel for the Placement Agent, dated the time of purchase, in form and
substance reasonably satisfactory to the Placement Agent.
(f) No Prospectus or amendment or supplement to the Registration Statement or the
Prospectus shall have been filed to which you shall have objected in writing.
(g) The Registration Statement and any registration statement required to be
- 22 -
filed, prior to the sale of the Shares, under the Act pursuant to Rule 462(b) shall
have been filed and shall have become effective under the Act. The Prospectus Supplement
shall have been filed with the Commission pursuant to Rule 424(b) under the Act at or before
5:30 P.M., New York City time, on the second full business day after the date of this
Agreement (or such earlier time as may be required under the Act).
(h) Prior to and at the time of purchase, (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued under the Act or
proceedings initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement
and all amendments thereto shall not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements
therein not misleading; (iii) none of the Basic Prospectus or the Prospectus, and no
amendment or supplement thereto, shall include an 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 are made, not misleading; (iv) no Disclosure
Package, and no amendment or supplement thereto, shall include an 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 are made, not misleading; and
(v) none of the Permitted Free Writing Prospectuses, if any, shall include an 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 are made, not
misleading.
(i) The Company will, at the time of purchase, deliver to you a certificate of its
Chief Executive Officer and its Chief Financial Officer, dated the time of purchase, in the
form attached as Exhibit F hereto.
(j) You shall have received the agreement (a “Lock-Up Agreement”), in the form
set forth as Exhibit B hereto, of each of the Company’s directors and “officers”
(within the meaning of Rule 16a-1(f) under the Exchange Act), and each such Lock-Up
Agreement shall be in full force and effect at the time of purchase.
(k) The Company shall have furnished to you such other documents and certificates as to
the accuracy and completeness of any statement in the Registration Statement, the Basic
Prospectus, the Prospectus or any Permitted Free Writing Prospectus as of the time of
purchase as you may reasonably request on the basis of any change in circumstances or
potential change in circumstances from the time of execution of this Agreement until the
time of purchase which affects or could reasonably be expected to affect, or otherwise calls
into question, the accuracy and completeness of any such statement.
(l) The Shares shall have been approved for quotation on the NASDAQ, subject only to
notice of issuance at or prior to the time of purchase.
(m) The NASD shall not have raised any objection with respect to the fairness or
reasonableness of the placement agency, or other arrangements of the transactions,
- 23 -
contemplated hereby.
7. Effective Date of Agreement; Termination. This Agreement shall become effective
when the parties hereto have executed and delivered this Agreement.
The obligations of the Placement Agent hereunder shall be subject to termination in the
absolute discretion of the Placement Agent, if (1) since the time of execution of this Agreement or
the earlier respective dates as of which information is given in the Registration Statement, the
Basic Prospectus, the Prospectus and the Permitted Free Writing Prospectuses, if any, there has
been any change or any development involving a prospective change in the business, properties,
management, financial condition or results of operations of the Company and the Subsidiary taken as
a whole, the effect of which change or development is, in the sole judgment of the Placement Agent,
so material and adverse as to make it impractical or inadvisable to proceed with the offering or
the delivery of the Shares on the terms and in the manner contemplated in the Registration
Statement, the Basic Prospectus, the Prospectus and the Permitted Free Writing Prospectuses, if
any, or (2) since the time of execution of this Agreement, there shall have occurred: (A) a
suspension or material limitation in trading in securities generally on the NYSE, the American
Stock Exchange or the NASDAQ; (B) a suspension or material limitation in trading in the Company’s
securities on the NASDAQ; (C) a general moratorium on commercial banking activities declared by
either federal or New York State authorities or a material disruption in commercial banking or
securities settlement or clearance services in the United States; (D) an outbreak or escalation of
hostilities or acts of terrorism involving the United States or a declaration by the United States
of a national emergency or war; or (E) any other calamity or crisis or any change in financial,
political or economic conditions in the United States or elsewhere, if the effect of any such event
specified in clause (D) or (E), in the sole judgment of the Placement Agent, makes it impractical
or inadvisable to proceed with the offering or the delivery of the Shares on the terms and in the
manner contemplated in the Registration Statement, the Basic Prospectus, the Prospectus and the
Permitted Free Writing Prospectuses, if any, or (3) since the time of execution of this Agreement,
there shall have occurred any downgrading, or any notice or announcement shall have been given or
made of: (A) any intended or potential downgrading or (B) any watch, review or possible change that
does not indicate an affirmation or improvement in the rating accorded any securities of or
guaranteed by the Company or the Subsidiary by any “nationally recognized statistical rating
organization,” as that term is defined in Rule 436(g)(2) under the Act.
If the Placement Agent elects to terminate this Agreement as provided in this Section 7, the
Company shall be notified promptly in writing.
If the sale of the Shares, as contemplated by this Agreement and the Purchase Agreements, is
not carried out for any reason permitted under this Agreement or the Purchase Agreements, or if
such sale is not carried out because the Company shall be unable to comply with any of the terms of
this Agreement or the Purchase Agreements, the Company shall not be under any obligation or
liability under this Agreement (except to the extent provided in Sections 4(m), 5 and 8 hereof),
and the Placement Agent shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 8 hereof). Under such circumstances, the
Engagement Letter shall remain in full force and effect in accordance with its
- 24 -
terms.
8. Indemnity and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless the Placement Agent, its
affiliates, each other person, if any, controlling the Placement Agent or its affiliates,
their respective officers, current and former directors, employees and agents, and the
successors and assigns of all of the foregoing persons, to the extent set forth in the
Engagement Letter, which indemnification provisions are incorporated by reference herein.
(b) The Placement Agent agrees to indemnify, defend and hold harmless the Company, its
directors and officers, and any person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, and the successors and assigns of
all of the foregoing persons, from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally, the Company or
any such person may incur under the Act, the Exchange Act, the common law or otherwise,
insofar as such loss, damage, expense, liability or claim arises out of or is based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in, and in
conformity with information concerning the Placement Agent furnished in writing by or on
behalf of the Placement Agent through you to the Company expressly for use in, the
Registration Statement (or in the Registration Statement as amended by any post-effective
amendment thereof by the Company), or arises out of or is based upon any omission or alleged
omission to state a material fact in such Registration Statement in connection with such
information, which material fact was not contained in such information and which material
fact was required to be stated in such Registration Statement or was necessary to make such
information not misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in, and in conformity with information concerning the Placement
Agent furnished in writing by or on behalf of the Placement Agent through you to the Company
expressly for use in, a Prospectus or a Permitted Free Writing Prospectus, or arises out of
or is based upon any omission or alleged omission to state a material fact in such
Prospectus or Permitted Free Writing Prospectus in connection with such information, which
material fact was not contained in such information and which material fact was necessary in
order to make the statements in such information, in the light of the circumstances under
which they were made, not misleading.
(c) If any action, suit or proceeding (each, a “Proceeding”) is brought against
a person (an “indemnified party”) in respect of which indemnity may be sought
against the Company or the Placement Agent (as applicable, the “indemnifying party”)
pursuant to subsection (a) or (b), respectively, of this Section 8, such indemnified party
shall promptly notify such indemnifying party in writing of the institution of such
Proceeding and such indemnifying party shall assume the defense of such Proceeding,
including the employment of counsel satisfactory to such indemnified party and payment of
all reasonable fees and expenses; provided, however, that the omission to so
notify such indemnifying party shall not relieve such indemnifying party from any liability
which
- 25 -
such indemnifying party may have to any indemnified party or otherwise. The
indemnified party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense of such
Proceeding or the indemnifying party shall not have, within a reasonable period of time in
light of the circumstances, employed counsel to defend such Proceeding or such indemnified
party or parties shall have reasonably concluded that there may be defenses available to it
or them which are different from, additional to or in conflict with those available to such
indemnifying party (in which case such indemnifying party shall not have the right to direct
the defense of such Proceeding on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by such indemnifying party and paid as
incurred (it being understood, however, that such indemnifying party shall not be liable for
the expenses of more than one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction representing the
indemnified parties who are parties to such Proceeding). The indemnifying party shall not
be liable for any settlement of any Proceeding effected without its written consent but, if
settled with its written consent, such indemnifying party agrees to indemnify and hold
harmless the indemnified party or parties from and against any loss or liability by reason
of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel as contemplated by the second sentence of this Section 8(c), then
the indemnifying party agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is entered into more than 60
business days after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have fully reimbursed the indemnified party in accordance with
such request prior to the date of such settlement and (iii) such indemnified party shall
have given the indemnifying party at least 30 days’ prior notice of its intention to settle.
No indemnifying party shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability in any way related to or arising out of
such Proceeding and does not contain any factual or legal admission by or with respect to
such indemnified party or any adverse statement with respect to the character,
professionalism, due care, loyalty, expertise or reputation of such indemnified party or any
action or inaction by such indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to an
indemnified party under subsection (a) of this Section 8 or insufficient to hold harmless
any such indemnified party in respect of any losses, damages, expenses, liabilities or
claims referred to therein, then the Company shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, damages, expenses, liabilities or
claims in the manner set forth in the Engagement Letter. If the indemnification provided for
in this Section 8 is unavailable to an indemnified party
- 26 -
under subsection (b) of this Section 8 or insufficient to hold such indemnified party
harmless in respect of any losses, damages, expenses, liabilities or claims referred to
therein, then the Placement Agent shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, damages, expenses, liabilities or claims (i)
in such proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Placement Agent on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one hand and of the
Placement Agent on the other in connection with the statements or omissions which resulted
in such losses, damages, expenses, liabilities or claims, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the one hand and
the Placement Agent on the other shall be deemed to be in the same respective proportions as
the total proceeds from the offering (net of placement fees but before deducting expenses)
received by the Company, and the total placement fees received by the Placement Agent, bear
to the aggregate offering price to Investors of the Shares. The relative fault of the
Company on the one hand and of the Placement Agent on the other shall be determined by
reference to, among other things, whether the untrue statement or alleged untrue statement
of a material fact or omission or alleged omission relates to information supplied by the
Company or by the Placement Agent and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, damages, expenses, liabilities and
claims referred to in this subsection shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with investigating, preparing to
defend or defending any Proceeding.
(e) The Company and the Placement Agent agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable considerations
referred to in subsection (d) above. Notwithstanding the provisions of this Section 8, the
Placement Agent shall not be required to contribute any amount in excess of the amount by
which the total price at which the Shares were offered to Investors exceeds the amount of
any damage which the Placement Agent has otherwise been required to pay by reason of such
untrue statement or alleged untrue statement or omission or alleged omission No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 8 and the
covenants, warranties and representations of the Company contained in this Agreement shall
remain in full force and effect regardless of any investigation made by or on behalf of the
Placement Agent, its partners, directors or officers or any person (including each partner,
officer or director of such person) who controls the Placement Agent within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, or by or on behalf of the Company,
its directors or officers or any person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act,
- 27 -
and shall survive any termination of this Agreement or the issuance and delivery of the
Shares. The Company and the Placement Agent agree promptly to notify each other of the
commencement of any Proceeding against it and, in the case of the Company, against any of
the Company’s officers or directors in connection with the issuance and sale of the Shares,
or in connection with the Registration Statement, the Basic Prospectus, the Prospectus or
any Permitted Free Writing Prospectus.
9. Information Furnished by the Placement Agent. The statements set forth under the
caption “Plan of distribution—Price stabilization” in the Prospectus Supplement, only insofar as
such statements relate to the stabilization activities that may be undertaken by the Placement
Agent, constitute the only information furnished by the Placement Agent, as such information is
referred to in Sections 3 and 8 hereof.
10. Notices. Except as otherwise herein provided, all statements, requests, notices
and agreements shall be in writing or by telegram or facsimile and, if to the Placement Agent,
shall be sufficient in all respects if delivered or sent to UBS Securities LLC, 299 ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇tention: Syndicate Department and, if to the Company, shall be
sufficient in all respects if delivered or sent to the Company at the offices of the Company at
3155 ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇tention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President and Chief Executive
Officer, with a copy to Ropes & ▇▇▇▇ LLP, One ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
▇▇tention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
11. Governing Law; Construction. This Agreement and any claim, counterclaim or
dispute of any kind or nature whatsoever arising out of or in any way relating to this Agreement
(“Claim”), directly or indirectly, shall be governed by, and construed in accordance with,
the laws of the State of New York. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
12. Submission to Jurisdiction. Except as set forth below, no Claim may be commenced,
prosecuted or continued in any court other than the courts of the State of New York located in the
City and County of New York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such matters, and the Company
consents to the jurisdiction of such courts and personal service with respect thereto. The Company
hereby consents to personal jurisdiction, service and venue in any court in which any Claim arising
out of or in any way relating to this Agreement is brought by any third party against the Placement
Agent or any indemnified party. The Placement Agent and the Company (on its behalf and, to the
extent permitted by applicable law, on behalf of its stockholders and affiliates) waive all right
to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) in any way arising out of or relating to this Agreement. The Company agrees that a
final judgment in any such action, proceeding or counterclaim brought in any such court shall be
conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction
of which the Company is or may be subject, by suit upon such judgment.
13. Parties at Interest. The Agreement herein set forth has been and is made solely
for the benefit of the Placement Agent and the Company and to the extent provided in Section 8
- 28 -
hereof the controlling persons, partners, directors and officers referred to in such Section,
and their respective successors, assigns, heirs, personal representatives and executors and
administrators. No other person, partnership, association or corporation (including a purchaser,
as such purchaser, from the Company) shall acquire or have any right under or by virtue of this
Agreement.
14. No Fiduciary Relationship. The Company hereby acknowledges that the Placement
Agent is acting solely as placement agent in connection with the purchase and sale of the Company’s
securities. The Company further acknowledges that the Placement Agent is acting pursuant to a
contractual relationship created solely by this Agreement and the Engagement Letter entered into on
an arm’s length basis, and in no event do the parties intend that the Placement Agent act or be
responsible as a fiduciary to the Company, its management, stockholders or creditors or any other
person in connection with any activity that the Placement Agent may undertake or have undertaken in
furtherance of the purchase and sale of the Company’s securities, either before or after the date
hereof or the date of the Engagement Letter. The Placement Agent hereby expressly disclaim any
fiduciary or similar obligations to the Company, either in connection with the transactions
contemplated by this Agreement, the Engagement Letter or any matters leading up to such
transactions, and the Company hereby confirms its understanding and agreement to that effect. The
Company and the Placement Agent agree that they are each responsible for making their own
independent judgments with respect to any such transactions and that any opinions or views
expressed by the Placement Agent to the Company regarding such transactions, including, but not
limited to, any opinions or views with respect to the price or market for the Company’s securities,
do not constitute advice or recommendations to the Company. The Company hereby waives and
releases, to the fullest extent permitted by law, any claims that the Company may have against the
Placement Agent with respect to any breach or alleged breach of any fiduciary or similar duty to
the Company in connection with the transactions contemplated by this Agreement, the Engagement
Letter or any matters leading up to such transactions.
15. Counterparts. This Agreement may be signed by the parties in one or more
counterparts which together shall constitute one and the same agreement among the parties.
16. Successors and Assigns. This Agreement shall be binding upon the Placement Agent
and the Company and their successors and assigns and any successor or assign of any substantial
portion of the Company’s and the Placement Agent’s respective businesses and/or assets.
17. Engagement Letter. Except to the extent specifically stated herein, the
Engagement Letter shall remain in full force and effect in accordance with its terms.
18. Miscellaneous. UBS, an indirect, wholly owned subsidiary of UBS AG, is not a bank
and is separate from any affiliated bank, including any U.S. branch or agency of UBS AG. Because
UBS is a separately incorporated entity, it is solely responsible for its own contractual
obligations and commitments, including obligations with respect to sales and purchases of
securities. Securities sold, offered or recommended by UBS are not deposits, are not insured by
the Federal Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are not
- 29 -
otherwise an obligation or responsibility of a branch or agency.
[The Remainder of This Page Intentionally Left Blank; Signature Page Follows]
- 30 -
If the foregoing correctly sets forth the understanding between the Company and the Placement
Agent, please so indicate in the space provided below for that purpose, whereupon this Agreement
and your acceptance shall constitute a binding agreement between the Company and the Placement
Agent.
| Very truly yours, | ||||||||
| StemCells, Inc. | ||||||||
| By: | /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||||||
| Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | ||||||||
| Title: PRESIDENT & CEO | ||||||||
F-31
Accepted and agreed to as of the date
first above written
first above written
| UBS Securities LLC | ||||
By: |
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Title: Managing Director | ||||
By: |
/s/ ▇▇▇▇▇ ▇▇▇▇ | |||
| Title: Associate Director | ||||
F-32
Exhibit
A
Form of Confirmation
StemCells, Inc.
3155 ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
3155 ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇dies and Gentlemen:
The undersigned, (the “Investor”), hereby confirms its agreement
with you as follows:
1. This Confirmation (the “Confirmation”) is made as of , 2006
between StemCells, Inc., a Delaware corporation (the “Company”), and the Investor.
2. The Company and the Investor have agreed that the Investor will purchase from the Company
and the Company will issue and sell to the Investor
shares of common stock
(the “Shares”) of the Company, at a purchase price
of $ per Share, or an
aggregate purchase price of $ . The Investor acknowledges that the offering of the
Shares is not a firm commitment underwriting.
3. The completion of the purchase and sale of the Shares (the “Closing”) shall occur
on , 2006 (the “time of purchase”). At the Closing, the Company shall
deliver to the Investor, using customary book-entry procedures, the number of Shares as set forth
above in Section 2, and the Investor shall deliver, or cause to be delivered, to the Company by
Federal Funds wire transfer the full amount of the purchase price for the Shares being purchased.
4. This Confirmation shall be governed by, and construed in accordance with, the internal laws
of the State of New York, without giving effect to the principles of conflicts of law.
5. This Confirmation may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute but one instrument,
and shall become effective when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
6. A prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as
amended, may be obtained, when available, from the Company at 3155 ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, ▇▇tention: Chief Executive Officer.
7. The Company confirms that it has entered into a Placement Agency Agreement (the
“Placement Agency Agreement”) with UBS Securities LLC that contains certain
representations, warranties, covenants and agreements of the Company that may be relied upon by the
Investor, which shall be a third party beneficiary thereof. A copy of the Placement Agency
Agreement is available upon request.
8. The Company further confirms that the Investor’s obligation to purchase the Shares is
subject to the accuracy of the representations and warranties made by the Company in the Placement
Agency Agreement and the fulfillment of those undertakings of the Company to be fulfilled, pursuant
to the Placement Agency Agreement, prior to the Closing. The Investor confirms that its obligations
are expressly not conditioned on the purchase by any other investors of shares of the Company’s
common stock that they have agreed to purchase from the Company.
Please acknowledge that the foregoing correctly confirms the agreement between us by signing in the
space provided below for that purpose.
Name of Investor: |
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| Name: | ||
| Title: | ||
Address: |
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Tax ID No.: |
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Contact Name: |
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Telephone: |
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Name in which book entry should be made: |
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Contact Name: |
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ACKNOWLEDGED AND AGREED
StemCells, Inc.
By: |
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| Title: |
Exhibit B
Lock-Up Agreement
___________ ___, 2006
UBS Securities LLC
299 ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
299 ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇dies and Gentlemen:
This Lock-Up Agreement is being delivered to you in connection with the proposed Placement
Agency Agreement (the “Placement Agency Agreement”) to be entered into by StemCells, Inc.,
a Delaware corporation (the “Company”), and you, as Placement Agent, with respect to the
offering (the “Offering”) of common stock, par value $0.01 per share, of the Company (the
“Common Stock”).
In order to induce you to enter into the Placement Agency Agreement, the undersigned agrees
that, for a period (the “Lock-Up Period”) beginning on the date hereof and ending on, and
including, the date that is 90 days after the date of the final prospectus supplement relating to
the Offering, the undersigned will not, without the prior written consent of UBS Securities LLC,
(i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or
participate in the filing of) a registration statement with the Securities and Exchange Commission
(the “Commission”) in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated
thereunder (the “Exchange Act”) with respect to, any Common Stock or any other securities
of the Company that are substantially similar to Common Stock, or any securities convertible into
or exchangeable or exercisable for, or any warrants or other rights to purchase, the foregoing,
(ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of Common Stock or any other securities of the Company
that are substantially similar to Common Stock, or any securities convertible into or exchangeable
or exercisable for, or any warrants or other rights to purchase, the foregoing, whether any such
transaction is to be settled by delivery of Common Stock or such other securities, in cash or
otherwise or (iii) publicly announce an intention to effect any transaction specified in clause (i)
or (ii). The foregoing sentence shall not apply to (a) the registration of the offer and sale of
Common Stock as contemplated by the Placement Agency Agreement, (b) bona fide gifts, provided the
recipient thereof agrees in writing with the Placement Agent to be bound by the terms of this
Lock-Up Agreement[,] [or] (c) dispositions to any trust for the direct or indirect benefit of the
undersigned and/or the immediate family of the undersigned, provided that such trust agrees in
writing with the Placement Agent to be bound by the terms of this Lock-Up Agreement [or (d) sales
of Common Stock in accordance with the provisions of an existing Rule 10b5-1 sales plan heretofore
entered into by the undersigned, as in effect on the date hereof and without regard to any
subsequent amendments or modifications
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thereto or reinstatements thereof, provided that in no event will such plan permit (A) the sale in
aggregate of more than [___] shares of Common Stock during the Lock-Up Period or (B) any sales of
Common Stock during the Lock-Up Period at a price less than $[___] per share * ]. For
purposes of this paragraph, “immediate family” shall mean the undersigned and the spouse, any
lineal descendent, father, mother, brother or sister of the undersigned.
In addition, the undersigned hereby waives any rights the undersigned may have to require
registration of Common Stock in connection with the filing of a registration statement relating to
the Offering. The undersigned further agrees that, for the Lock-Up Period, the undersigned will
not, without the prior written consent of UBS Securities LLC, make any demand for, or exercise any
right with respect to, the registration of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or warrants or other rights to purchase Common Stock
or any such securities.
The undersigned hereby confirms that the undersigned has not, directly or indirectly, taken,
and hereby covenants that the undersigned will not, directly or indirectly, take, any action
designed, or which has constituted or will constitute or might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of shares of Common Stock.
* * *
| * | Insert, with the approval of the Placement Agent, for any person signing a Lock-Up Agreement who has a Rule 10b5-1 sales plan. |
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If (i) the Company notifies you in writing that it does not intend to proceed with the
Offering, (ii) the registration statement filed with the Commission with respect to the Offering is
withdrawn or (iii) for any reason the Placement Agency Agreement shall be terminated prior to the
“time of purchase” (as defined in the Placement Agency Agreement), this Lock-Up Agreement shall be
terminated and the undersigned shall be released from its obligations hereunder.
| Yours very truly, |
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| Name: | ||||
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