EXHIBIT 1.1
STEMCELLS, INC.
Up to 7,500,000 Shares
Common Stock
($0.01 Par Value)
AGENCY AGREEMENT
October 25, 2004
AGENCY AGREEMENT
October 25, 2004
C.E. Unterberg, Towbin, LLC
350 Madison Avenue
New York, NY 10017
Shoreline Pacific, LLC
655 Montgomery Street
San Francisco, CA 94111
as Agents
Ladies and Gentlemen:
StemCells, Inc., a Delaware corporation (the "Company"), proposes, upon
the terms and subject to the conditions set forth in this Agreement (together
with the exhibits attached hereto (the "Agreement")) to offer for sale (the
"Offering") up to 7,500,000 shares (the "Shares") of Common Stock, $.01 par
value per share (the "Common Stock"), of the Company. In connection with the
Offering, the Company desires to engage C.E. Unterberg, Towbin, LLC ("CEUT") and
Shoreline Pacific, LLC ("SP") as its exclusive agents (the "Agents"), upon the
terms and subject to the conditions set forth in this Agreement. The Shares and
the Offering are described in the Prospectus that 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 under the Act on Form S-3
(File No. 333-83992) filed with the Commission on March 8, 2002 (such
registration statement as amended (including Amendment No. 1 thereto filed with
the Commission on July 2, 2002) or supplemented (other than supplements relating
to offerings of securities other than the Offering) from time to time, the
"registration statement"). The registration statement has been declared by the
Commission to be effective under the Act. The Company will file with the
Commission pursuant to Rule 424(b) under the Act a final prospectus supplement
to the Basic Prospectus (as defined below), describing the Shares and the
offering thereof, in such form as has been provided to or discussed with, and
approved, by the Agents.
The term "Registration Statement" as used in this Agreement means the
registration statement, at the time it became effective and as supplemented
(other than supplements relating to offerings of securities other than the
Offering) or amended, including (i) all financial schedules and exhibits
thereto, and (ii) all documents incorporated by reference or deemed to be
incorporated by reference therein, which schedules, exhibits and documents have
been filed with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval System ("EDGAR"). The term "Basic Prospectus" as used in
this Agreement means the basic prospectus dated July 3, 2002 filed with the
Commission under Rule 424(b)(2) on August 28, 2002 for use in connection with
the offer and/or sale of the Shares pursuant to this Agreement. "Preliminary
Prospectus Supplement" shall mean any preliminary prospectus supplement to the
Basic Prospectus that describes the Shares and the Offering and is used prior to
filing of the Prospectus Supplement, together with the Basic Prospectus. The
term "Prospectus Supplement" as used in this Agreement means any final
prospectus supplement specifically relating to the Shares, in the form filed
with, or transmitted for filing to, the Commission pursuant to Rule 424 under
the Act. The term "Prospectus" as used in this Agreement means the Basic
Prospectus as supplemented by the
Prospectus Supplement except that if such Basic Prospectus is amended or
supplemented (other than supplements relating to offerings of securities other
than the Offering) on or prior to the date on which the Prospectus Supplement
was first filed pursuant to Rule 424, the term "Prospectus" shall refer to the
Basic Prospectus as so amended or supplemented and as supplemented by the
Prospectus Supplement. Any reference herein to the registration statement, the
Registration Statement, the Basic Prospectus, any Preliminary Prospectus
Supplement, any Prospectus Supplement or the Prospectus shall be deemed to refer
to and include (i) the documents incorporated by reference therein pursuant to
Form S-3 (the "Incorporated Documents") and (ii) the copy of the Registration
Statement, the Basic Prospectus, the Prospectus Supplement, the Prospectus or
the Incorporated Documents filed with the Commission pursuant to EDGAR. Any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement, the Basic Prospectus, the Preliminary Prospectus
Supplement, the Prospectus Supplement or the 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") after the effective date of the Registration Statement, or the
date of the Basic Prospectus, the Preliminary Prospectus Supplement or the
Prospectus Supplement, as the case may be, deemed to be incorporated therein by
reference. As used herein, "business day" shall mean a day on which the New York
Stock Exchange is open for trading.
The Company hereby confirms its agreement with the Agents as follows:
1. Agreement to Act as Agents. 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 October 25, 2004 between the
Company and the Agents (the "Engagement Letter"), the Company engages the
Agents, severally and not jointly, to act as its exclusive agents, on a
reasonable "best efforts" basis, in connection with the offer and sale by the
Company of the Shares. As compensation for services rendered, at the time of
purchase (as defined below), the Company shall pay to the Agents a fee (to be
divided equally between the Agents and paid in the manner described below) equal
to 6.0% of the gross proceeds received by the Company from the sale of the
Shares in the Offering. The Shares are being offered and sold at a price of
$3.00 per Share.
This Agreement shall not give rise to any commitment by the Agents or
any of their affiliates to underwrite or purchase any of the Shares or otherwise
provide any financing. Subscription for Shares shall be evidenced by, and the
sale of such Shares shall be made pursuant to, purchase agreements in
substantially the form included as Exhibit A hereto duly executed by each
purchaser of the Shares and the Company (the "Purchase Agreements"). Persons who
agree to purchase Shares pursuant to the Purchase Agreements that are accepted
by the Company are hereinafter referred to as the "Purchasers."
2. Payment and Delivery. Subject to the terms and conditions hereof and
of the Purchase Agreements, payment of the purchase price for, and delivery of
certificates for, the Shares for which the Company has received Purchase
Agreements acceptable to the Company shall be made at the office of CEUT in New
York City (or at such other place as shall be agreed upon by the Agents and the
Company), at 10:00 A.M., New York City time, on or about October 28, 2004
(unless another time shall be agreed to by the Agents and the Company). The time
at which such payment and delivery are made is hereinafter sometimes called "the
time of purchase" and the date upon which the time of purchase occurs is
hereinafter sometimes called the "Closing Date." Subject to the terms and
conditions hereof and of the Purchase Agreements, payment of the purchase price
for the Shares purchased by a Purchaser shall be made to the Company in the
manner described below against delivery of certificates for the Shares, through
the facilities of The Depository Trust Company ("DTC") for subsequent delivery
to such Purchaser, and such Shares shall be registered in such name or names and
shall be in such denominations, as the Purchaser thereof may request at least
one business day before the time of purchase.
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CEUT agrees to hold the purchase price delivered to it by persons who
agree to purchase Shares in escrow as contemplated by the form of Purchase
Agreement included as Exhibit A hereto. CEUT will, from time to time upon
request of the Company, confirm to the Company the aggregate amount of funds
delivered to it in escrow by persons who have executed and delivered a Purchase
Agreement. Subject to the terms and conditions hereof and of the Purchase
Agreements, at the time of purchase CEUT shall deliver to the Company by Federal
Funds wire transfer of same day funds the purchase price for any such Shares
payable to the Company that has been deposited in the escrow account by the
Purchasers, reduced by the amount of the fee payable to the Agents hereunder and
the Agents' bona fide estimate of the amount of expense reimbursement to which
they are entitled hereunder, against delivery of such Shares to the Purchasers
through DTC as described above. CEUT shall concurrently deliver to SP by Federal
Funds wire transfer of same day funds the fee payable to SP hereunder and SP's
bona fide estimate of the amount of expense reimbursement to which SP is
entitled hereunder. As soon as practicable after the Closing Date, the Agents
will submit to the Company their final expense reimbursement invoices and the
Company and/or CEUT, as appropriate, will make the necessary reconciling
payment(s).
Deliveries of the documents described in Section 5 hereof with respect
to the purchase of the Shares shall be made at the offices of CEUT in New York
City at 10:00 A.M., New York City time, on the Closing Date.
3. Representations and Warranties of the Company. The Company
represents, warrants and covenants to and agrees with the Agents that:
(a) the Registration Statement was declared effective under
the Act on July 2, 2002; no stop order of the Commission preventing or
suspending the use of the Basic Prospectus, the Preliminary Prospectus
Supplement, the Prospectus Supplement or the 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 threatened by the Commission; the Company is eligible to
use Form S-3 for the Offering; such Registration Statement at the date
of this Agreement meets, and the Offering complies with, the
requirements of Rule 415 under the Act. The Registration Statement
complied when it became effective, complies, and will comply at the
time of purchase, and the Prospectus conformed as of its date,
conforms, and will conform at the time of purchase, in each case in all
material respects with the requirements of the Act; any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement have been and will be
so described or filed; there are no documents required to be filed with
the Commission in connection with the transaction contemplated hereby
that have not been filed as required pursuant to the Act or will not be
filed within the requisite time period; and the Registration Statement
did not at the time of effectiveness, does not and will not at the time
of purchase 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, and the Prospectus did not
as of its date, does not and will not at the time of purchase contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no warranty or
representation with respect to any statement contained in the
Registration Statement or the Prospectus in reliance upon and in
conformity with information concerning an Agent and furnished in
writing by or on behalf of such Agent to the Company expressly
for use in the Registration Statement or the Prospectus; the Company
has not distributed and will not distribute any offering material in
connection with the offering or sale of the Shares other than the
Registration Statement, the then most recent Preliminary Prospectus
Supplement or Prospectus Supplement, as applicable, the Basic
Prospectus and the Prospectus; the Company has timely filed all reports
required of it to be filed
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pursuant to the Act and the Exchange Act and has filed all such reports
in the manner prescribed thereby; the Incorporated Documents, when they
were filed with the Commission (or, to the extent such documents were
amended, as amended), conformed in all material respects to the
requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder, and none of such documents,
when they were filed with the Commission(or, to the extent such
documents were amended, as amended), contained any untrue statement of
a material fact or omitted to state a material fact necessary to make
the statements, in light of the circumstances under which they were
made, therein not misleading; and any further documents so filed and
incorporated by reference in the Basic Prospectus or Prospectus
Supplement, when such documents are filed with the Commission, will
comply in all material respects with the requirements of the Exchange
Act and the applicable rules and regulations of the Commission
thereunder, as applicable, and will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(b) as of the date of the Prospectus Supplement the Company
has, and as of the time of purchase the Company shall have, an
authorized capitalization as set forth in the Prospectus Supplement
under the caption "Description of Capital Stock"; 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 federal and
state securities laws and were not issued in violation of any
preemptive right, resale right, right of first refusal or similar
right;
(c) as of October 22, 2004 there were 54,256,938 shares of
Common Stock outstanding and the Company had reserved an aggregate of
12,255,819 shares of Common Stock for issuance upon exercise of
outstanding stock options and warrants, in each case as described in
the Prospectus; since October 22, 2004, the Company has not issued any
securities other than Common Stock of the Company pursuant to the
exercise of previously outstanding options in connection with the
Company's employee stock purchase and option plans (the "Plans"),
options granted pursuant to the Plans in the ordinary course of
business consistent with past practice and Common Stock issued pursuant
to the exercise of previously outstanding warrants, in each case as
disclosed in the Prospectus; there are no authorized or outstanding
options, warrants, preemptive rights, resale rights, rights of first
refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock
or other securities of the Company other than pursuant to the Purchase
Agreements and this Agreement and those described in the Prospectus;
the description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options, warrants or other rights
granted thereunder, set forth in the Registration Statement and the
Prospectus accurately and fairly presents the information required by
the Act to be disclosed therein with respect to such plans,
arrangements, options and rights; the Rights are not now and never have
been transferable separately from the shares of Common Stock or
exercisable; no person, including any of the Company's stockholders at
the time of the issuance of the Rights, has to the knowledge of the
Company at any time been an Acquiring Person and no Distribution Date
or Shares Acquisition Date has occurred or been proposed;
(d) 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 and the Prospectus, to execute and deliver this
Agreement and to issue, sell and deliver the Shares as contemplated
herein; no governmental proceeding has been instituted in the State of
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Delaware revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority.
(e) 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 and in good standing would not, individually or in the
aggregate, have a material adverse effect on the business, properties,
management, condition, financial or otherwise, operations, prospects or
results of operation of the Company and the Subsidiaries (as
hereinafter defined) taken as a whole (a "Material Adverse Effect"); no
governmental proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such qualification, except for such proceedings as would not,
individually or in the aggregate, have a Material Adverse Effect.
(f) The Company has no subsidiaries (as defined in the Act)
other than StemCells California, Inc., a California corporation
(collectively, the "Subsidiaries"); except as disclosed in the
Registration Statement or the Prospectus, the Company owns all of the
issued and outstanding capital stock of each of the Subsidiaries; none
of the subsidiaries is a "significant subsidiary" within the meaning of
rule 1-02(w) of Regulation S-X or is otherwise material to the business
or operations of the Company; other than the capital stock of the
Subsidiaries and except as disclosed in the Registration Statement or
the Prospectus, the Company does not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint
venture, association or other entity; complete and correct copies of
the certificate of incorporation and the bylaws of the Company and the
Subsidiaries and all amendments thereto have been delivered to the
Agents, and no changes therein will be made subsequent to the date
hereof and prior to the time of purchase; each Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
or the Prospectus; each 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 and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect; no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification, except for any such proceedings as would not,
individually or in the aggregate, have a Material Adverse Effect; all
of the outstanding shares of capital stock of each of the Subsidiaries
held by the Company have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company subject to
no security interest, other encumbrance or adverse claims except as
disclosed in the Registration Statement or the Prospectus, and 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 Subsidiaries are
outstanding except as disclosed in the Registration Statement or the
Prospectus;
(g) the Shares have been duly and validly authorized by the
Company and, when the Shares are issued and delivered against payment
therefor as provided herein, the Shares will be duly and validly
issued, fully paid and non-assessable and will not be issued in
violation of statutory and contractual preemptive rights, resale
rights, rights of first refusal and similar rights;
(h) the Common Stock (including the Shares) conforms in all
material respects to the description thereof contained in the
Registration Statement or the Prospectus, the certificates for
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the Shares are in due and proper form and the holders of the Shares
will not be subject to personal liability under Delaware corporate law
by reason of being such holders;
(i) this Agreement has been duly authorized, executed and
delivered by the Company;
(j) except as disclosed in the Registration Statement or the
Prospectus, neither the Company nor any of the Subsidiaries 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) (i) its respective certificate of
incorporation or bylaws, (ii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the
Company or any of its Subsidiaries or over their respective properties,
or (iii) 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 any
of the Subsidiaries is a party or by which any of them or any of their
properties is bound, except in the case of clause (ii) and (iii) above
where such breach, violation or default would not, individually or in
the aggregate, have a Material Adverse Effect and in the case of clause
(i) above for such breaches, violations or defaults with respect to the
certificate of incorporation or bylaws of Subsidiaries of the Company
as would not, individually or in the aggregate, have a Material Adverse
Effect;
(k) the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and
thereby, including the issuance and sale of the Shares, 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 or 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)
(i) the certificate of incorporation or bylaws of the Company or any of
the Subsidiaries, (ii) 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 any of the Subsidiaries is a party or by which any of them
or any of their respective properties is bound, or (iii) any federal,
state, local or foreign statute, law, regulation or rule or any decree,
judgment or order applicable to the Company or any of the Subsidiaries
or any of their respect properties, except where such breach, violation
or default would not, individually or in the aggregate, have a Material
Adverse Effect;
(l) the Common Stock (including the Shares) is registered
under the Exchange Act and the outstanding shares of Common Stock of
the Company are quoted on The Nasdaq SmallCap Market ("Nasdaq") and the
Company has taken no action designed to, or likely to have the effect
of terminating the registration of the Common Stock under the Exchange
Act or delisting or suspending from trading the Shares from Nasdaq, nor
has the Company received any information suggesting that the Commission
or (except as disclosed in the Prospectus) Nasdaq is contemplating
terminating or suspending such registration or listing. All of the
shares of Common Stock included in, or issuable upon exercise or
conversion of, the Shares were described in a "Notification Form for
Listing of Additional Shares" filed with Nasdaq. The Company has
complied with the requirements of Rule 4350(i)(2) of the Nasdaq
Marketplace Rules in connection with the Offering;
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(m) 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 Nasdaq, or
approval of the shareholders 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 registration
under the Act of the offer and sale of the Shares and filings with
Nasdaq, each of which has been effected, and any necessary
qualification under the securities or blue sky laws of the various
jurisdictions in which Shares are being offered or under the rules and
regulations of the National Association of Securities Dealers, Inc.;
(n) except as disclosed in the Registration Statement or 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, and (ii) except as provided herein or in the Engagement
Letter, no person has the right to act as an underwriter, placement
agent or financial advisor to the Company in connection with the offer
and sale of the Shares, in the case of each of the foregoing clauses
(i) and (ii), whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Shares as contemplated
thereby or otherwise; except as disclosed in the Registration Statement
or the Prospectus, 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 or other securities of the
Company, or to include any such shares or interests in the Registration
Statement or the Offering, whether as a result of the filing or
effectiveness of the Registration Statement or the sale of the Shares
as contemplated thereby or otherwise;
(o) each of the Company and the Subsidiaries has all necessary
licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state, local or foreign
law, regulation or rule, in order to conduct its respective business as
currently conducted and has conducted such business in accordance with
such laws, regulations and rules, except where the failure to have such
licenses, authorizations, consents and approvals or the failure to
conduct business in accordance with such laws, rules and regulations
would not, individually or in the aggregate, have a Material Adverse
Effect; neither the Company nor any of the Subsidiaries 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 any of such Subsidiaries, except where
such violation, default, revocation or modification would not,
individually or in the aggregate, have a Material Adverse Effect;
(p) all legal or governmental proceedings, affiliate
transactions, contracts, licenses, agreements, leases or documents of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
have been so described or filed as required;
(q) except as disclosed in the Registration Statement or the
Prospectus, there are no actions, suits, claims, investigations or
proceedings pending or, to the Company's knowledge, threatened to which
the Company or any of the Subsidiaries 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, except any
such action, suit, claim, investigation or proceeding which would not
result in a judgment, decree or order having, individually or in the
aggregate, a Material Adverse Effect or prevent consummation of the
transactions contemplated hereby;
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(r) Grant Thornton LLP and Ernst & Young LLP, whose reports on
the consolidated financial statements of the Company and the
Subsidiaries are filed with the Commission as part of the Registration
Statement and the Prospectus, are independent public accountants as
required by the Act and the Exchange Act;
(s) the consolidated financial statements included in the
Registration Statement or the Prospectus, together with the related
notes and schedules, present fairly in all material respects the
consolidated financial position of the Company and the consolidated
Subsidiaries as of the dates indicated and the consolidated results of
operations and cash flows of the Company and the consolidated
Subsidiaries for the periods specified and comply in all material
respects with the requirements of the Act and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved except as set forth in the
notes thereto and subject, in the case of unaudited financial
statements, to normal year-end adjustments, which are not expected to
be material in amount; any pro forma financial statements or data
included in the Registration Statement or the Prospectus comply with
the requirements of Regulation S-X of the Act, 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 supporting
exhibits and schedules in the Registration Statement, if any, present
fairly in all material respects the information required to be stated
therein; the other financial and statistical data set forth in the
Registration Statement or the Prospectus are accurately 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) or supporting schedules or exhibits that are
required to be included in the Registration Statement or the Prospectus
that are not included as required; and the Company and the consolidated
Subsidiaries do not have any material liabilities or obligations,
direct or contingent (including any off-balance sheet obligations), not
disclosed in the Registration Statement or the Prospectus;
(t) except as set forth in the Registration Statement or the
Prospectus, subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has
not been (i) any material adverse change, or any development involving
a prospective material adverse change, in the business, properties,
management, condition, financial or otherwise, operations, prospects or
results of operation of the Company and the Subsidiaries taken as a
whole, (ii) any transaction which is material to the Company and the
Subsidiaries taken as a whole, (iii) any obligation, direct or
contingent (including any off-balance sheet obligations), incurred by
the Company or the Subsidiaries, which is material to the Company and
the Subsidiaries taken as a whole, (iv) any change in the capital stock
(other than pursuant to the exercise or conversion of outstanding stock
options or warrants described in the Prospectus) or any material change
in the outstanding indebtedness of the Company or the Subsidiaries or
(v) any dividend or distribution of any kind declared, paid or made on
any class of capital stock of the Company;
(u) neither the Company nor any of the Subsidiaries is nor,
after giving effect to the Offering as described in the Prospectus,
will any of them 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 any "employee benefit plan" (as defined
under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company or
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its "ERISA Affiliates" (as defined below) are in compliance in all
material respects with ERISA; "ERISA Affiliate" means, with respect to
the Company, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended, and the regulations and published interpretations
thereunder (the "Code") of which the Company is a member; no
"reportable event" (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any "employee benefit
plan" established or maintained by the Company or any of its ERISA
Affiliates; no "employee benefit plan" established or maintained by the
Company or any of its ERISA Affiliates, if such "employee benefit plan"
were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA); neither the Company nor any of
its ERISA Affiliates has incurred or reasonably expects to incur any
liability under: (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any "employee benefit plan"; or (ii) Sections 412,
4971, 4975 or 4980B of the Code; each "employee benefit plan"
established or maintained by the Company or any of its ERISA Affiliates
that is intended to be qualified under Section 401(a) of the Code is so
qualified and nothing has occurred, whether by action or failure to
act, which would reasonably be expected to cause the loss of such
qualification;
(w) except as disclosed in the Registration Statement or the
Prospectus, the Company and each of the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Registration Statement or in the Prospectus as being owned by each of
them, free and clear of all liens, claims, security interests or other
encumbrances, except where the failure to do so would not, individually
or in the aggregate, have a Material Adverse Effect; all the property
(real and personal) described in the Registration Statement or the
Prospectus as being held under lease by the Company or a Subsidiary is
held thereby under valid, subsisting and enforceable leases, except
where the failure to do so would not, individually or in the aggregate,
have a Material Adverse Effect;
(x) except as disclosed in the Registration Statement or the
Prospectus, the Company and the Subsidiaries own, or have obtained
licenses for, or have other rights to use, the inventions, patent
applications, patents, trademarks (both registered and unregistered),
trade names, copyrights, trade secrets and other proprietary
information described in the Registration Statement or the Prospectus
as being owned or licensed by them, except where the failure to own,
license or have such rights would not, individually or in the
aggregate, have a Material Adverse Effect; the expiration of any
registered patents, trademarks, service marks or copyrights owned by
the Company or any of its Subsidiaries would not result in a Material
Adverse Effect that is not otherwise specifically disclosed in the
Basic Prospectus and Prospectus Supplement; except as disclosed in the
Registration Statement or the Prospectus, there are no third parties
who have or, to the Company's knowledge, will be able to establish
rights to any material intellectual property owned by the Company; to
the knowledge of the Company, there is no infringement by third parties
of any material intellectual property owned by the Company; there is no
pending or, to the knowledge of the Company, threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to
any material intellectual property or challenging the validity or scope
of any material intellectual property owned by the Company; except as
disclosed in the Registration Statement or the Prospectus, there is no
pending or, to the knowledge of the Company, threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other
proprietary rights of others; except as disclosed in the Registration
Statement or the Prospectus, there is no patent or patent application
that contains claims that interfere with the issued or pending claims
of any patent or patent application owned by the Company; and to the
knowledge of the Company, there is no prior art that could reasonably
be expected to render any patent application owned by the Company
unpatentable that has not been disclosed to the U.S. Patent and
Trademark Office.
9
(y) except as disclosed in the Registration Statement or the
Prospectus, neither the Company nor any of the Subsidiaries is engaged
in any unfair labor practice; except for matters which would not,
individually or in the aggregate, have a Material Adverse Effect and
except as disclosed in the Registration Statement or the Prospectus,
(i) there is (A) no unfair labor practice complaint pending or, to the
Company's knowledge, threatened against the Company or any of the
Subsidiaries before the National Labor Relations Board, and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is pending or threatened, (B) no strike, labor
dispute, slowdown or stoppage pending or, to the Company's knowledge,
threatened against the Company or any of the Subsidiaries and (C) no
union representation dispute currently existing concerning the
employees of the Company or any of the Subsidiaries, and (ii) to the
Company's knowledge, (A) no union organizing activities are currently
taking place concerning the employees of the Company or any of the
Subsidiaries and (B) there has been no violation of 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, as
amended, or the rules and regulations promulgated thereunder concerning
the employees of the Company or any of the Subsidiaries;
(z) except as disclosed in the Registration Statement or the
Prospectus, the Company and the Subsidiaries and their properties,
assets and operations are in compliance with, and 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; except as
disclosed in the Registration Statement or the Prospectus, there are no
past or present conditions, circumstances, activities, practices,
actions, omissions or plans that would reasonably be expected to give
rise to any material costs or liabilities to the Company or the
Subsidiaries under, or to interfere with or prevent compliance by the
Company or the Subsidiaries with, Environmental Laws; except as would
not, individually or in the aggregate, have a Material Adverse Effect
and except as disclosed in the Registration Statement or the
Prospectus, neither the Company nor any of the Subsidiaries (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 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); no property which is owned,
leased or occupied by the Company or any Subsidiary has been designated
as a Superfund site pursuant to the U.S. Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss.
9601, et seq.), or otherwise designated as a contaminated site under
applicable federal, state or local law; in the ordinary course of its
business, the Company periodically reviews the effect of Environmental
Laws on the business, operations and properties of the Company and its
Subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties); on the basis of such
review, the Company has reasonably concluded that such associated costs
and liabilities would not, singly or in the aggregate, have a Material
Adverse Effect, whether or not arising from transactions in the
ordinary course of business (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,
10
without limitation, pollutants, contaminants, hazardous or toxic
substances or wastes) that is regulated by or may give rise to
liability under any Environmental Law);
(aa) all tax returns required to be filed by the Company and
each of the Subsidiaries have been 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
shown as due thereon from such entities have been paid, other than
those being contested in good faith and for which adequate reserves
have been provided, except as would not, individually or in the
aggregate, have a Material Adverse Effect;
(bb) the Company and each of the Subsidiaries maintains
insurance policies covering its properties, operations, personnel and
businesses with recognized, financially sound and reputable
institutions in such amounts and with such deductibles and covering
such risks as are prudent and customary in the business in which it is
engaged; all such insurance is fully in force on the date hereof and
will be fully in force at the time of purchase except as would not,
individually or in the aggregate, have a Material Adverse Effect; the
Company has no reason to believe that it will not be able: (i) to renew
its existing insurance coverage as and when such policies expire to the
extent such coverage is available on commercially reasonable terms; or
(ii) to obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted and
at a cost that would not reasonably be expected to result in a Material
Adverse Effect; the Company has not been denied any insurance coverage
that it has sought or for which it has applied;
(cc) neither the Company nor any of the Subsidiaries has
sustained since the date of the last audited financial statements in
the Registration Statement or the Prospectus any loss or interference
with its respective business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree except as
disclosed in the Registration Statement or the Prospectus or as would
not, individually or in the aggregate, have a Material Adverse Effect;
(dd) each agreement described in or filed as an exhibit to the
Registration Statement or the Prospectus is in full force and effect
and is valid and enforceable by the Company in accordance with its
terms, except for such as would not, individually or in the aggregate,
have a Material Adverse Effect; neither the Company nor, to the
Company's knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under any
such agreement, and no event has occurred that with notice or lapse of
time or both would constitute such a default, in any such case where
such default or event would have a Material Adverse Effect; except as
disclosed in the Registration Statement or the Prospectus and except as
would not, individually or in the aggregate, have a Material Adverse
Effect, the Company has not sent or received any written communication
regarding termination of any of the contracts or agreements referred to
or described in, or filed as an exhibit to, the Registration Statement,
and no such termination has been threatened by the Company or, to the
Company's knowledge, any other party to any such contract or agreement;
(ee) the Company and each of the Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific 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
11
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences;
(ff) the Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act) as required by and in compliance in
all material respects with the Exchange Act; the principal executive
officers (or their equivalents) and principal financial officers (or
their equivalents) of the Company have made all certifications required
by the Sarbanes-Oxley Act of 2002 and any related rules and regulations
promulgated by the Commission as currently in effect (the
"Sarbanes-Oxley Act"), and the statements contained in any such
certification are complete and correct in all material respects; there
is and has been no failure on the part of the Company and any of the
Company's directors or officers, in their capacities as such, to comply
with any provision of the Sarbanes-Oxley Act of 2002, including Section
402 related to loans and Sections 302 and 906 related to
certifications;
(gg) the Company has made available to the Agents (including
through the public availability of documents filed on EDGAR) true,
correct, and complete copies of all documentation pertaining to any
extension of credit in the form of a personal loan made, directly or
indirectly, by the Company to any director or executive officer of the
Company, or, to the knowledge of the Company, any family member or
affiliate of any director or executive officer of the Company; and
since January 1, 2004, the Company has not, directly or indirectly,
including through any Subsidiary: (i) extended credit, arranged to
extend credit, or renewed any extension of credit, in the form of a
personal loan, to or for any director or executive officer of the
Company, or, to the knowledge of the Company, to or for any family
member or affiliate of any director or executive officer of the
Company; or, (ii) made any material modification, including any renewal
thereof, to any term of any personal loan to any director or executive
officer of the Company, or, to the knowledge of the Company, any family
member or affiliate of any director or executive officer, which loan
was outstanding on the date of this Agreement;
(hh) neither the Company nor any of its Subsidiaries nor, to
the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its Subsidiaries is aware of or has
taken any action, directly or indirectly, that would result in a
violation by such persons of the Foreign Corrupt Practice Act of 1977,
as amended and the rules and regulations thereunder (the "FCPA") and
the Company and its Subsidiaries have conducted their business in
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance therewith;
(ii) any statistical and market-related data included in the
Registration Statement or the 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;
(jj) neither the Company nor any of the Subsidiaries nor, to
the Company's knowledge, any employee or agent of the Company or the
Subsidiaries (acting on behalf of the Company or the Subsidiary) has
made any payment of funds of the Company or the Subsidiaries or
received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Registration Statement or the
Prospectus; and
12
(kk) neither the Company nor any of the Subsidiaries 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 would reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares in violation of
applicable law.
In addition, any certificate signed by any officer of the Company and
delivered to the Agents or counsel for the Agents in connection with the Closing
shall be deemed to be a representation and warranty by the Company as to matters
covered thereby, to the Agents.
4. Certain Covenants of the Company. The Company hereby agrees:
(a) to furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and sale
by the Company under the securities or blue sky laws of such states or
other jurisdictions as the Agents may designate and to maintain such
qualifications in effect so long as the Agents may request for the
distribution of the Shares; provided that the Company shall not be
required to qualify as a foreign corporation, 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 by the
Company) or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise subject; and to
promptly advise the Agents of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose;
(b) to make available to the Agents electronic copies of the
Basic Prospectus, any Preliminary Prospectus Supplement and the
Prospectus (in each case as amended or supplemented if the Company
shall have made any amendments or supplements thereto after the
respective dates of such documents); to furnish the Agents, without
charge, during the period beginning on the date hereof and ending on
the later of the time of purchase or such date, as in the opinion of
counsel for the Agents, the Prospectus Supplement is no longer required
by law to be delivered in connection with sales by the Agents, as many
copies of the Prospectus and any amendments and supplements thereto
(including any Incorporated Documents) as the Agents may reasonably
request.
(c) if, at the time this Agreement is executed and delivered,
it is necessary for the Registration Statement or any post-effective
amendment thereto to be declared effective before the Shares may be
sold in the Offering, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become
effective as soon as possible and the Company will advise the Agents
promptly and, if requested by the Agents, will confirm such advice in
writing when the Registration Statement and any such post-effective
amendment thereto has become effective;
(d) to advise the Agents promptly, confirming such advice in
writing, of any request by the Commission, made prior to the time of
purchase, for amendments or supplements to the Registration Statement
or the Prospectus or for additional information with respect thereto,
or of notice of institution of proceedings for, or the entry of a stop
order, made prior to the time of purchase, suspending the effectiveness
of the Registration Statement and, if the Commission should enter a
stop order prior to the time of purchase 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 the
Agents promptly of any proposal to amend or supplement the
13
Registration Statement or the Prospectus, made prior to the time of
purchase, including by filing any documents that would be incorporated
therein by reference, to provide the Agents and their counsel copies of
any such documents for review and comment a reasonable amount of time
prior to any proposed filing;
(e) subject to Section 4(d) hereof, to file promptly all
reports and any definitive proxy or information statement required to
be filed by the Company with the Commission in order to comply with the
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required to be delivered in
connection with the Offering;
(f) to advise the Agents promptly of the happening of any
event within the time during which a prospectus for the Offering is
required to be delivered under the Act, which requires the making of
any change in the Prospectus then being used so that the Prospectus
would not include an untrue statement of material fact or omit to state
a material fact necessary to make the statements therein, in the light
of the circumstances under which they are made, not misleading, and,
during such time, subject to Section 4(d) hereof, to prepare and
furnish, at the Company's expense, to the Agents promptly such
amendments or supplements to such Prospectus as may be necessary to
reflect any such change; before amending the Registration Statement or
supplementing any Preliminary Prospectus Supplement or the Prospectus
in connection with the Offering, the Company will furnish you with a
copy of such proposed amendment or supplement and will not file such
amendment or supplement to which you reasonably object;
(g) to make generally available to its security holders, and
to deliver to the Agents, 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;
(h) for so long as a prospectus is required to be delivered
under the Act in connection with the Offering, to comply with all the
undertakings contained in the Registration Statement;
(i) to apply the net proceeds from the sale of the Shares in
the manner set forth under the caption "Use of Proceeds" in the
Prospectus;
(j) without duplication, to reimburse the Agents for expenses
in accordance with Section 4 of the Engagement Letter and to pay all of
the Company's costs, expenses, fees and taxes in connection with (i)
the preparation and filing of the Registration Statement, the Basic
Prospectus, each Preliminary Prospectus Supplement and Prospectus
Supplement, and any amendments or supplements thereto, and the printing
and furnishing of copies of each thereof to the Agents (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 by the Company upon the sale, issuance or
delivery of the Shares sold by the Company in the Offering, (iii) the
producing, word processing and/or printing of this Agreement, any
Purchase Agreements, any Powers of Attorney and any closing documents
(including compilations thereof) and the reproduction and/or printing
and furnishing of copies of each thereof to the Agents and the
Purchasers, (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 as aforesaid (including the
legal fees and filing fees and other disbursements of counsel for the
Agents) and the printing and furnishing of copies of any blue sky
surveys or legal investment surveys to the Agents and to dealers, (v)
any qualification of the Shares for quotation on Nasdaq and any
14
registration thereof under the Exchange Act, (vi) the fees and
disbursements of any transfer agent or registrar for the Shares, (vii)
the costs and expenses of the Company relating to any presentations or
meetings undertaken in connection with the marketing of the offering
and sale of the Shares, and (viii) the performance of the Company's
other obligations hereunder;
(k) until the completion of the distribution of the Shares in
the Offering, not to take, directly or indirectly, any action designed
to or that would constitute or that would reasonably be expected to
cause or result in, under the Exchange Act or otherwise, stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares; and
(l) the Company will timely, and in any event prior to the
time of purchase, file this Agreement with the Commission on an
appropriate form.
5. Conditions of Agents' Obligations. The obligations of the Agents
hereunder are subject to the accuracy of the representations and warranties of
the Company contained herein 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 the Agents at the time of
purchase an opinion of Ropes & Gray LLP, special counsel for the
Company, addressed to the Agents, and dated the time of purchase, in
form and substance as set forth on Exhibit B hereto. ---------
(b) The Agents shall have received from Grant Thornton LLP
letters dated, respectively, the date of this Agreement and the time of
purchase, and addressed to the Agents in the form and substance
heretofore approved by, or otherwise satisfactory to, the Agents.
(c) The Agents shall have received from Cooley Godward LLP,
counsel for the Agents, such opinion or opinions dated the time of
purchase and addressed to the Agents, with respect to the issuance and
sale of the Shares, the Registration Statement, the Prospectus and
other related matters as the Agents may reasonably require, and the
Company shall have furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(d) No Prospectus or amendment or supplement to the
Registration Statement or the Prospectus, including documents deemed to
be incorporated by reference therein, shall have been filed to which
you reasonably object in writing.
(e) Prior to the time of purchase, (i) the Prospectus
Supplement shall have been duly filed with the Commission in accordance
with Rule 424(b); (ii) 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; (iii) no
order preventing or suspending the use of the Prospectus Supplement
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; (iv) no order having
the effect of ceasing or suspending the distribution of the Shares or
any other securities of the Company shall have been issued by the
Commission or Nasdaq and no proceedings for that purpose shall have
been instituted or shall be pending or, to the knowledge of the
Company, contemplated by the Commission or Nasdaq; (v) 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; and (vi) the Prospectus and all amendments or supplements
thereto shall not contain an untrue statement of a material fact or
15
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(f) Between the time of execution of this Agreement and the
time of purchase, no material adverse change or any development
involving a prospective material adverse change in business,
properties, management, condition, financial or otherwise, operations,
prospects or results of operation of the Company and the Subsidiaries
taken as a whole shall occur or become known, which, in the sole
judgment of the Agents, makes it impracticable or inadvisable to
proceed with the Offering on the terms and in the manner contemplated
by the Prospectus.
(g) The Company shall have furnished to the Agents a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the date of the time of purchase, to the effect that the
signers of such certificate have carefully examined the Registration
Statement, the Prospectus, any supplements to the Prospectus and this
Agreement and that to the knowledge of such person after reasonable
inquiry:
(1) the representations and warranties of the
Company in this Agreement are true and
correct on and as of the time of purchase
with the same effect as if made at the time
of purchase and the Company has complied
with all the agreements and satisfied all
the conditions on its part to be performed
or satisfied at or prior to the time of
purchase;
(2) The Registration Statement has become
effective and no stop order suspending the
effectiveness of the Registration Statement
has been issued and no proceedings for that
purpose have been instituted or, to such
person's knowledge, threatened; and
(3) since the date of the most recent financial
statements included or incorporated by
reference in the Prospectus, except as
disclosed in the Prospectus there has been
no material adverse change or any
development involving a prospective material
adverse change in business, properties,
management, condition, financial or
otherwise, operations, prospects or results
of operation of the Company and the
Subsidiaries taken as a whole.
(h) The Company shall have furnished to you such other
documents and certificates as the Agents may reasonably request.
6. Effective Date of Agreement; Termination. This Agreement shall
become effective when the parties hereto have executed and delivered this
Agreement.
The obligations of the Agents hereunder shall be subject to termination
in the absolute discretion of the Agents if (x) any of the conditions specified
in Section 5 have not been fulfilled as of 10:00 A.M. New York City time on the
date specified in Section 2, or (y) since the time of execution of this
Agreement, there shall have occurred: (i) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or Nasdaq; (ii) a suspension or material limitation in trading in
the Company's securities on Nasdaq; (iii) 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; (iv) 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 (v) any other calamity or crisis or
any change in
16
financial, political or economic conditions in the United States or elsewhere,
if the effect of any such event specified in clause (iv) or (v) in the Agents'
sole judgment makes it impracticable 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 and the Prospectus, or (z) 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 (i) any intended or potential
downgrading or (ii) 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 any Subsidiary by any "nationally recognized
statistical rating organization," as that term is defined in Rule 436(g)(2)
under the Act.
If the Agents elect to terminate this Agreement as provided in this
Section 6, the Company shall be notified promptly in writing.
If the sale of the Shares, as contemplated by this Agreement, is not
carried out by the Agents for any reason permitted under this Agreement or if
such sale is not carried out because of any refusal, inability or failure on the
part of the Company to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or liability under this Agreement
(except to the extent provided in Sections 4(j) hereof), and neither of the
Agents shall be under any obligation or liability to the Company or the other
Agent under this Agreement. Under such circumstances, the Engagement Letter
shall remain in full force and effect in accordance with its terms.
7. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each of the
Agents, the directors, officers, employees and agents of such Agent and each
person who controls such Agent within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or in any amendment thereof, or in the Basic Prospectus, any
Preliminary Prospectus Supplement or the Prospectus, or in any amendment thereof
or supplement thereto, arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out of or are
based upon any act or failure to act or any alleged act or failure to act by the
Agent in connection with, or relating in any manner to, the Shares or the
Offering, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon matters covered above
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by the Agent seeking (or whose director,
officer, employee, agent or control person is seeking) indemnification
specifically for inclusion therein; provided, further, that with respect to any
Preliminary Prospectus Supplement, the foregoing indemnity agreement shall not
inure to the benefit of any indemnified party if the Company identified the
untrue statement or omission in writing to the Agents and copies of the
Prospectus were timely delivered to the Agents pursuant to this Agreement and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of either of the Agents to such person asserting such loss, claim,
damage, liability or expense, if required by law to have been so delivered, at
or prior to the written confirmation of the sale of the Shares to such person,
and if the delivery of such Prospectus (as
17
so amended or supplemented) would have caused such loss, claim, damage,
liability or expense not to have been incurred. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) Each of the Agents agrees to indemnify and hold harmless the
Company and the other Agent, as well as the respective directors, officers,
employees and agents of the Company and such other Agent and each person who
controls the Company or such other Agent within the meaning of either the Act or
the Exchange Act, to the same extent as the foregoing indemnity from the Company
to such Agent, but only with reference to written information relating to such
Agent furnished to the Company by such Agent specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which the Agents may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph "(a)" or "(b)" above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph "(a)" or "(b)"
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with an actual or reasonably likely conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded based upon the advice of
counsel that there may be legal defenses available to it which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party; provided that the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions arising out of the same allegations be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time for all
indemnified parties (in addition to any local counsel), which firm shall be
designated in writing by the Agents if more than one indemnified party seeks
indemnification under paragraph (a) above. An indemnifying party will not,
without the prior written consent of the indemnified parties covered thereby,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder by the indemnified
parties covered thereby (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each such indemnified party from
all liability arising out of such claim, action, suit or proceeding. No
indemnifying party shall be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to indemnify
each indemnified party from and against any loss or liability by reason of such
settlement or judgment if it would be otherwise obligated to do so hereunder.
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(d) In the event that the indemnity provided in paragraph "(a)" or
"(b)" of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Agents severally agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and the Agents may
be subject in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and by the Agents on the other from the
offering of the Shares. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company and the Agents severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the Agents on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by it, and
benefits received by each of the Agents shall be deemed to be equal to the total
compensation of such Agent as set forth in this Agreement. Relative fault shall
be determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company on the
one hand or the Agents on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Agents agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph "(d)," (i) neither of the Agents shall be required to contribute
any amount in excess of the amount of the placement agent fees actually received
by such Agent pursuant to this Agreement, and (ii) 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. For purposes of this Section 7, each person who
controls an Agent within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of an Agent shall have the same
rights to contribution as such Agent, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
(e) The respective agreements, representations, warranties,
indemnities and other statements of the Company or its officers and of the
Agents set forth in or made in a certificate delivered pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Agents or the Company or any of the officers,
directors or controlling persons referred to in Section 7 hereof, and will
survive delivery of and payment for the Shares. The provisions of Sections 4(j)
and 7 hereof shall survive the termination or cancellation of this Agreement.
8. Information Furnished by the Agents. The statements set forth in the
tenth paragraph relating to stabilization under the caption "Plan of
Distribution" in the Prospectus Supplement constitute the only information
furnished by or on behalf of the Agents as such information is referred to in
Sections 3 and 7 hereof.
9. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing and shall be delivered or
sent by courier, hand delivery, mail, facsimile transmission or telegram and, if
to the Agents, shall be sufficient in all respects if delivered or sent to both
C.E. Unterberg, Towbin, LLC, 350 Madison Avenue, New York, NY 10017, Facsimile
number (212) 389-8881, Attention: General Counsel, and Shoreline Pacific, LLC,
655 Montgomery Street, Suite 1000, San Francisco, CA 94111, Facsimile number
(415) 399-1366, Attention: Harlan Kleiman; and, if to the Company, shall be
sufficient in all respects if delivered or sent to the Company at the offices of
the
19
Company at 3155 Porter Drive, Palo Alto, CA 94304 Facsimile number (650)
475-3101, Attention: General Counsel.
10. 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.
11. 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 each of the Agents
and the Company hereby consents to the jurisdiction of such courts and personal
service with respect thereto. Each of the Agents and the Company hereby consents
to personal jurisdiction, service and venue in any court in which any Claim is
brought by any third party against either of the Agents or any indemnified
party. Each of the Agents and the Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its shareholders and affiliates)
waives 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. Each of Agents and 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 the Agents and may be
enforced in any other courts to the jurisdiction of which either the Company or
either of the Agents is or may be subject, by suit upon such judgment.
12. Parties at Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Agents and the Company and to the extent
provided in Section 7 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) shall
acquire or have any right under or by virtue of this Agreement.
13. 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.
14. Successors and Assigns. This Agreement shall be binding upon the
Agents and the Company and their successors and assigns and any successor or
assign of the Company's and the Agents' respective businesses and/or assets.
15. Engagement Letter. Except to the extent specifically stated herein,
the Engagement Letter shall remain in full force and effect in accordance with
its terms; provided, however, that to the extent any provision of this Agreement
conflicts with, or addresses representations, warranties, rights or obligations
also addressed by, the Engagement Letter (including without limitation, the
separate letter agreement signed concurrently with the Engagement Letter and
dated October 25, 2004 between the parties regarding indemnification), the
provisions of this Agreement shall supersede the conflicting or duplicative
provisions of the Engagement Letter solely with respect to the Offering. Except
as provided in this Section 15, this Agreement constitutes the entire agreement
of the parties hereto and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. In this Agreement, the masculine, feminine and neuter
genders and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement.
20
This Agreement may be amended or modified, and the observance of any term of
this Agreement may be waived, only by a writing signed by the Company and the
Agents.
If the foregoing correctly sets forth the understanding between the
Company and the Agents, 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 Agents.
Very truly yours,
STEMCELLS, INC.
By:/s/ Martin McGlynn
--------------------
Name: Martin McGlynn
Title: President and CEO
Accepted and agreed to as of the
date first above written
C.E. UNTERBERG, TOWBIN, LLC
By: /s/ Andrew Armo
-----------------
Name: Andrew Armo
Title: Co-President
SHORELINE PACIFIC, LLC
By: /s/ Harlan P. Kleiman
------------------------
Name: Harlan P. Kleiman
Title: CEO
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Exhibit A
FORM OF PURCHASE AGREEMENT
Exhibit B
FORM OF OPINION OF ROPES & GRAY LLP