34,972,678 Shares Warrants to Purchase 12,240,437 Shares AVANIR PHARMACEUTICALS Common Stock PLACEMENT AGENCY AGREEMENT
Exhibit 1.1
34,972,678
Shares
Warrants
to Purchase 12,240,437 Shares
Common Stock
March 26, 2008
Xxxxx Xxxxxxx & Co.
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Ladies and Gentlemen:
Avanir Pharmaceuticals, a California corporation (the “Company”), proposes, subject to the
terms and conditions stated herein, to issue and sell to certain investors (each an “Investor” and,
collectively, the “Investors”), (i) up to
34,972,678 shares (the “Shares”) of the Company’s Class
A common stock, no par value per share (the “Common Stock”), and (ii) warrants to purchase up to
12,240,437
shares of Common Stock (the “Warrants” and together with the Shares, the “Securities”).
The shares of Common Stock issuable upon exercise of the Warrants are hereinafter referred to as
the “Warrant Shares”. The Company desires to engage Xxxxx Xxxxxxx & Co. as its exclusive placement
agent (the “Placement Agent”) in connection with such issuance and sale. The Securities are more
fully described in the Registration Statements (as hereinafter defined).
The Company has prepared and filed in conformity with the requirements of the Securities Act
of 1933, as amended (the “Securities Act”), and the published rules and regulations thereunder (the
“Rules and Regulations”) adopted by the Securities and Exchange Commission (the “Commission”) (i) a
Registration Statement on Form S-3 (No. 333-125979) (the “First Registration Statement” ) and (ii)
a Registration Statement on Form S-3 (No. 333-149125) (the “Second Registration Statement” ),
relating to the Securities and the offering thereof from time to time in accordance with Rule 415
of the Rules and Regulations, and such amendments thereof as may have been required. The First
Registration Statement includes a prospectus dated August 3, 2005 (the “First Base Prospectus”).
The Second Registration Statement includes a prospectus dated February 19, 2008 (the “Second Base
Prospectus” and together with the First Base Prospectus, the “Base Prospectuses”). The Company has
filed each of the Base Prospectuses with the Commission and has filed with, or transmitted for
filing to, or shall promptly hereafter file with or transmit for filing to the Commission, a
prospectus supplement relating to the Securities in accordance with Rule 424(b) under the Act (the
“Final Prospectus Supplement”). The term “Registration Statements” as used in this Agreement means
(i) the First Registration Statement (including all exhibits, financial schedules and all documents
and information deemed to be a part of the First Registration Statement (through incorporation by
reference or otherwise)), as amended, at the time and on the date it became effective, including
the information (if any) contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations and deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A of the Rules and Regulations, and (ii) the Second Registration
Statement (including all exhibits, financial schedules and all documents and
information deemed to be a part of the Second Registration Statement (through incorporation by
reference or otherwise)), as amended, at the time and on the date it became effective, including
the information (if any) contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations and deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A of the Rules and Regulations. The date a Registration Statement
became effective is referred to herein as the “Effective Date”. The term “Prospectus” as used in
this Agreement means the Base Prospectuses together with the Final Prospectus Supplement. Any
preliminary prospectus or prospectus subject to completion included in the Registration Statements
or filed with the Commission pursuant to Rule 424 under the Securities Act is hereafter called a
“Preliminary Prospectus.” As used herein, the terms “Base Prospectuses,” “Prospectus,”
“Registration Statements,” “Preliminary Prospectus” and “Final Prospectus Supplement” shall include
any documents incorporated by reference therein; and any reference to any amendment or supplement
to the Registration Statements or the Prospectus shall be deemed to refer to and include any
document filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after
the date of either of the Base Prospectuses by the Company with the Commission and on or before the
last to occur of the Effective Date, the date of the Preliminary Prospectus, or the date of the
Prospectus; and any reference herein to the terms “amend,” “amendment,” or “supplement” with
respect to the Registration Statements, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the filing of any document under the Exchange Act before or after
the applicable Effective Date, the date of such Preliminary Prospectus or the date of the
Prospectus, as the case may be, which is incorporated by reference into such amendment or
supplement, but excluding any documents or information furnished to the Commission under Item 2.02
or Item 7.01 of any Current Report on Form 8-K. If the Company has filed one or more abbreviated
registration statements to register additional Shares and Warrants pursuant to Rule 462(b) under
the Rules and Regulations (each a “Rule 462(b) Registration Statement”), then any reference herein
to the term “Registration Statements” shall also be deemed to include any such Rule 462(b)
Registration Statement. The Company hereby confirms that the Placement Agent, in connection with
its duties in such capacity, is authorized to distribute or cause to be distributed the Prospectus
(as from time to time amended or supplemented if the Company furnishes amendments or supplements
thereto to such Placement Agent).
All references in this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the Registration Statements or the Prospectus (or
other references of like import) shall be deemed to mean and include all such financial statements
and schedules and other information which is incorporated by reference in the Registration
Statements or the Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statements or the Prospectus shall be deemed to mean
and include the filing of any document under the Exchange Act on or before the Closing Date (as
defined herein), which is incorporated by reference in the Registration Statements or the
Prospectus, as the case may be.
For purposes of this Agreement, all references to the Registration Statements, any Rule 462(b)
Registration Statement, the Base Prospectuses, any Preliminary Prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“XXXXX”).
1. Agreement to Act as Placement Agent; Delivery and Payment. On the basis of the
representations, warranties and agreements of the Company herein contained, and subject to the
terms and conditions set forth in this Agreement:
(a) The Company hereby engages the Placement Agent to act as its exclusive placement agent in
connection with the issuance and sale, by the Company, of Securities to the Investors and the
Placement Agent hereby agrees, as an agent of the Company, to use its best efforts to solicit
offers to purchase the Securities from the Company upon the terms and conditions set forth in the
Prospectus. The Company expressly acknowledges and agrees that this Agreement shall not give rise
to a
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commitment by the Placement Agent or any of its affiliates to underwrite or purchase any of
the Securities or otherwise provide any financing, and the Placement Agent shall have no authority
to bind (and agrees not to purport to bind) the Company in respect of the sale of any Securities.
(b) Concurrently with the execution and delivery of this Agreement, the Company, the Placement
Agent and XX Xxxxxx Chase, as escrow agent (the “Escrow Agent”), shall enter into an escrow
agreement, dated as of the date hereof (the “Escrow Agreement”) pursuant to which an escrow account
will be established, at the Company’s expense, for the benefit of the Company and the Investors
(the “Escrow Account”). Prior to the Closing Date, (i) each Investor will deposit in the Escrow
Account an amount equal to $1.14375 per unit (each unit consisting of one Share and a Warrant to
purchase 0.35 shares of Common Stock) multiplied by the number of units to be purchased by such
Investor (the “Purchase Amount”), and (ii) the Escrow Agent will notify the Company and the
Placement Agent in writing of the amount of funds deposited in the Escrow Account.
(c) Upon the occurrence of the Closing (as hereinafter defined), the Company shall pay to the
Placement Agent, by wire transfer of immediately available funds payable to the order of the
Placement Agent, to an account designated by the Placement Agent, an aggregate of six percent
(6.0%) of the gross proceeds received by the Company from its sale of the Securities at such
Closing to all Investors other than those Investors whose names are set forth on Schedule
II attached hereto (the “Agency Fee”).
(d) Payment of the purchase price for, and delivery of, the Securities shall be made at a
closing (the “Closing”) at the offices of Xxxxxxx Procter LLP, counsel for the Company, located at
0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx at 10:00 a.m., local time, on April 4,
2008 or at such other time and date as the Investor and the Company determine pursuant to Rule
15c6-1(a) under the Exchange Act (such date of payment and delivery being herein referred to as the
“Closing Date”), and upon satisfaction of the conditions set forth in this Agreement and the
Subscription Agreements (as defined below), the Company shall deliver the Securities, which shall
be registered in the name or names and shall be in such denominations as the Placement Agent may
request at least one business day before the Closing Date, to the Investors, which delivery, with
respect to the Shares, may be made through the facilities of the Depository Trust Company, and the
Escrow Agent will disburse the aggregate funds in the Escrow Account to the Company reduced by an
amount equal to the sum of the aggregate Agency Fee payable to the Placement Agent 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, with such amounts being delivered to the
Placement Agent, by wire in federal (same day) funds, as provided in the Escrow Agreement. All such
actions taken at the Closing shall be deemed to have occurred simultaneously. Each of the Company
and the Placement Agent hereby agree to deliver to the Escrow Agent a Closing Notice in the form
attached as Exhibit C to the Escrow Agreement at least one day prior to the Closing Date. At least
one day prior to the Closing Date, the Placement Agent shall submit to the Company its bona fide
estimate of the amount, if any, of expenses for which such Placement Agent is entitled to
reimbursement pursuant hereto. If the Company shall default in its obligations to deliver
Securities to an Investor whose offer it has accepted, the Company shall indemnify and hold the
Placement Agent harmless against any loss, claim or damage arising from or as a result of such
default by the Company.
(e) The sale of the Securities shall be made pursuant to subscription agreements in the form
included as Exhibit A hereto (the “Subscription Agreements”). The Company shall have the
sole right to accept offers to purchase the Securities and may reject any such offer in whole or in
part, and, except as set forth in Section 4 hereof, in no event shall fees be payable on any
proposed purchase which is rejected for any reason or which otherwise does not close for any
reason.
(f) Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the
Closing Date, the Company shall not, without the prior written consent of the Placement Agent,
solicit or accept offers to purchase Securities of the Company (other than pursuant to the exercise
of options or
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warrants to purchase shares of Common Stock that are outstanding at the date hereof) otherwise
than through the Placement Agent in accordance herewith.
2. Representations and Warranties of the Company. The Company represents and warrants to the
Placement Agent as of the date hereof and as of the Closing Date, and agrees with the Placement
Agent, as follows:
(a) Registration Statements and Prospectus. The Company and the transactions contemplated by
this Agreement meet the requirements and comply with the conditions for the use of Form S-3 under
the Securities Act. The offering of the Securities by the Company complies with the applicable
requirements of Rule 415 under the Securities Act. The Company has complied to the Commission’s
satisfaction with all requests of the Commission for additional or supplemental information. Each
of the Registration Statements has become effective under the Securities Act. No stop order
preventing or suspending use of the Registration Statements or the Prospectus or the effectiveness
of the Registration Statements, has been issued by the Commission, and no proceedings for such
purpose have been instituted or are pending or, to the Company’s knowledge, are contemplated or
threatened by the Commission.
(b) Compliance with Registration Requirements. Each part of the Registration Statements and
any post-effective amendments thereto, at the time such part became effective (including each
deemed effective date with respect to the Placement Agent pursuant to Rule 430B under the
Securities Act) and as of the Closing Date, complied and will comply, in all material respects,
with the requirements of the Securities Act, the Rules and Regulations and the Exchange Act and did
not and will not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading. The
Prospectus (or any amendment or supplement to the Prospectus), at the time of filing or the time of
first use within the meaning of the Rules and Regulations and as of the Closing Date, complied and
will comply, in all material respects, with the requirements of the Securities Act, the Rules and
Regulations and the Exchange Act and did not and will not contain 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, that the Company
makes no representations or warranties in this paragraph with respect to any Placement Agent
Information (as defined in Section 7).
(c) Disclosure Package. As of the Time of Sale (as hereinafter defined) and as of the Closing
Date, neither (A) any Issuer General Use Free Writing Prospectus(es)(as defined below), if any,
issued at or prior to the Time of Sale, the Statutory Prospectus (as hereinafter defined) and the
information contained on Schedule III, which will be conveyed orally by the Placement Agent
to the Investors prior to the Time of Sale, all considered together (collectively, the “Disclosure
Package”), nor (B) any individual Issuer Limited-Use Free Writing Prospectus (as hereinafter
defined), when considered together with the Disclosure Package, included or will include any untrue
statement of a material fact or omitted or will omit to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided, that the Company makes no representations or warranty in this paragraph with
respect to statements in or omissions from the Disclosure Package in reliance upon, and in
conformity with any Placement Agent Information. No statement of material fact included in the
Prospectus has been omitted from the Disclosure Package and no statement of material fact included
in the Disclosure Package that is required to be included in the Prospectus has been omitted
therefrom. As used in this paragraph and elsewhere in this Agreement:
(1) “Time of Sale” with respect to any Investor, means 6:30 p.m. New York City
time on the date of this Agreement.
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(2) “Statutory Prospectus” means the Preliminary Prospectus, if any, and the
Base Prospectuses, each as amended and supplemented as of immediately prior to the
Time of Sale, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof. For purposes of this definition,
information contained in a form of prospectus that is deemed retroactively to be a
part of either of the Registration Statements pursuant to Rule 430B under the
Securities Act shall be considered to be included in the Statutory Prospectus as of
the actual time that form of prospectus is filed with the Commission pursuant to
Rule 424(b) under the Securities Act.
(3) “Issuer Free Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 under the Securities Act (“Rule 433”), relating
to the Securities in the form filed or required to be filed with the Commission or,
if not required to be filed, in the form retained in the Company’s records pursuant
to Rule 433(g) under the Securities Act.
(4) “Issuer General Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective investors as
identified on Schedule I hereto, and does not include a “bona fide
electronic road show” as defined in Rule 433.
(5) “Issuer Limited-Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is not an Issuer General Free Writing Prospectus, including any
“bona fide electronic road show” as defined in Rule 433, that is made available
without restriction pursuant to Rule 433(d)(8)(ii), even though not required to be
filed with the Commission.
(d) Conflict with Registration Statements. Each Issuer Free Writing Prospectus, as of its
issue date and at all subsequent times through the completion of the offering and sale of the
Securities or until any earlier date that the Company notified or notifies the Placement Agent, did
not, does not and will not include any information that conflicted, conflicts or will conflict with
the information contained in the Registration Statements, any Statutory Prospectus or the
Prospectus including any document incorporated by reference therein and any prospectus supplement
deemed to be a part thereof that has not been superseded or modified or included an untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; provided, that the Company makes
no representations or warranty in this paragraph with respect to any Placement Agent Information.
(e) Distributed Materials. The Company has not, directly or indirectly, distributed and will
not distribute any prospectus or other offering material in connection with the offering and sale
of the Securities other than the Disclosure Package or the Prospectus, and other materials, if any,
permitted under the Securities Act to be distributed and consistent with Section 3 below.
The Company will file with the Commission all Issuer Free Writing Prospectuses required to be filed
in the time required under Rule 433(d) under the Securities Act. The Company has satisfied or will
satisfy the conditions in Rule 433 under the Securities Act to avoid a requirement to file with the
Commission any electronic road show. The parties hereto agree and understand that the content of
any and all “road shows” related to the offering of the Securities contemplated hereby is solely
the property of the Company.
(f) Not an Ineligible Issuer. (1) At the earliest time after the filing of the Registration
Statements that the Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) under the Securities Act) of the Securities and (2) at the date hereof,
the
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Company was not and is not an “ineligible issuer,” as defined in Rule 405 under the Securities
Act, without taking account of any determination by the Commission pursuant to Rule 405 that it is
not necessary that the Company be considered an ineligible issuer, including, without limitation,
for purposes of Rules 164 and 433 under the Securities Act with respect to the offering of the
Securities as contemplated by the Registration Statements.
(g) Incorporated Documents. The documents incorporated by reference in the Disclosure Package
and in the Prospectus, when they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and were filed on a timely basis with the Commission and none of such
documents contained an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(h) Due Incorporation. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation, with the
corporate power and authority to own its properties and to conduct its business as currently being
carried on and as described in the Registration Statements, the Disclosure Package and the
Prospectus and is duly qualified to transact business as a foreign corporation in good standing
under the laws of each other jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to be so qualified
and in good standing (i) would not, individually or in the aggregate, result in any material
adverse effect upon, or change in, the general affairs, business, operations, prospects,
properties, financial condition, or results of operations of the Company taken as a whole or (ii)
would not impair in any material respect the ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by this Agreement, the
Disclosure Package or the Prospectus (any such effect as described in clauses (i) or (ii), a
“Material Adverse Effect”).
(i) Capitalization. All of the issued and outstanding shares of capital stock of the Company,
including the outstanding shares of Common Stock, have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase or acquire any securities of the Company that have not been
waived in writing.
(j) The Securities. The Shares have been duly and validly authorized by the Company and, when
issued, delivered and paid for in accordance with the terms of this Agreement and the Subscription
Agreements, will have been duly and validly issued and will be fully paid and nonassessable and
will not be subject to any statutory or contractual preemptive rights or other rights to subscribe
for or purchase or acquire any shares of Common Stock of the Company, which have not been waived or
complied with and will conform in all material respects to the description thereof contained in the
Disclosure Package and the Prospectus and such description conforms in all material respects to the
rights set forth in the instruments defining the same. The Warrants conform, or when issued will
conform, to the description thereof contained in the Disclosure Package and the Prospectus and have
been duly and validly authorized by the Company and upon delivery to the Investors at the Closing
Date will be valid and binding obligations of the Company, enforceable in accordance with their
terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors generally or subject to
general principles of equity. The Warrant Shares initially issuable upon exercise of the Warrants
conform, or when issued will conform, to the description thereof contained in the Disclosure
Package and the Prospectus and have been duly authorized and reserved for issuance and when issued
in accordance with the terms thereof will be validly issued, fully paid and nonassessable.
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(k) Description of Capital Stock. The capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof, if any, contained in the
Registration Statements, the Statutory Prospectus and the Prospectus, and as of the date thereof,
the Company had authorized capital stock as set forth therein. The Securities are in due and
proper form and the holders of the Securities will not be subject to personal liability by reason
of being such holders.
(l) No Registration Rights. Except as otherwise described in the Disclosure Package, there
are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon
the voting of transfer of, any shares of Common Stock pursuant to the Company’s charter, by-laws or
any agreement or other instrument to which the Company is a party or by which the Company is bound.
There are no contracts, agreements or understandings between the Company and any person granting
such person the right (other than rights which have been waived in writing in connection with the
transactions contemplated by this Agreement or otherwise satisfied) to require the Company to file
a registration statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statements or in any securities being registered
pursuant to any other registration statement filed by the Company under the Securities Act.
(m) Subsidiaries. The Company has no significant subsidiaries (as such term is defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission).
(n) Due Authorization and Enforceability. The Company has the full right, power and
authority to enter into this Agreement, each of the Subscription Agreements and the Escrow
Agreement, and to perform and discharge its obligations hereunder and thereunder; and each of this
Agreement, the Escrow Agreement and each Subscription Agreement has been duly authorized, executed
and delivered by the Company, and constitutes a valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as rights to indemnity
hereunder may be limited by federal or state securities laws and except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(o) No Conflict. The execution, delivery and performance by the Company of this Agreement
each Subscription Agreement and the Escrow Agreement and the consummation of the transactions
herein contemplated, including the issuance and sale by the Company of the Securities and the
issuance of the Warrant Shares upon due exercise of the Warrants in accordance with their terms,
will not conflict with or result in a 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) (i) the provisions of the charter or by-laws of the
Company, (ii) any material 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 is a party or by which it or any of its properties may be bound or affected, or
(iii) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order
applicable to the Company.
(p) No Consents Required. 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 (including, without limitation, the National Association of Securities Dealers Automated
Quotation (“Nasdaq”) Global Market, or approval of the stockholders of the Company (including such
as may be required pursuant to Rule 4350 of the Nasdaq Marketplace Rules), is required in
connection with the execution, delivery and performance of this Agreement, the Subscription
Agreements and the Escrow
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Agreement by the Company, the issuance and sale of the Securities and the issuance of the
Warrant Shares upon due exercise of the Warrants in accordance with their terms, or the
consummation by the Company of the transactions contemplated hereby other than (i) as may be
required under the Securities Act, (ii) any necessary qualification of the Securities under the
securities or blue sky laws of the various jurisdictions in which the Securities are being offered
by the Placement Agent and (iii) under the rules and regulations of the Financial Industry
Regulatory Authority (“FINRA”).
(q) No Violation. The Company is not in breach or violation of or in default (nor has any
event occurred which with notice, lapse of time or both would result in any breach or violation of,
or constitute a default) (i) under the provisions of its charter or bylaws or (ii) in the
performance or observance of any term, covenant, obligation, agreement or condition contained in
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
is a party or by which it or any of its properties may be bound or affected, or (iii) in the
performance or observance of any statute, law, rule, regulation, ordinance, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its properties, as applicable (including,
without limitation, those administered by the Food and Drug Administration of the U.S. Department
of Health and Human Services (the “FDA”) or by any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the FDA), except, with
respect to clauses (ii) and (iii) above, to the extent any such contravention has been waived or
would not result in a Material Adverse Effect.
(r) Absence of Material Changes. Subsequent to the respective dates as of which information is
given in the Disclosure Package (and taking into account any updates included within the Disclosure
Package), (a) the Company has not sustained any loss or interference with its 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, (b) the Company has not incurred any material
liability or obligation, direct or contingent, or entered into any material transaction not in the
ordinary course of business; (c) the Company has not purchased any of the Company’s outstanding
capital stock, or declared, paid or otherwise made any dividend or distribution of any kind on the
Company’s capital stock; and (d) there has not been any change in the capital stock (other than a
change in the number of outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or the conversion of convertible indebtedness), or
material change in the short-term debt or long-term debt of the Company (other than upon conversion
of convertible indebtedness) or any issue of options, warrants, convertible securities or other
rights to purchase the capital stock (other than grants of stock options under the Company’s equity
incentive plans existing on the date hereof) of the Company, or any Material Adverse Effect.
(s) Permits. The Company possesses, and is operating in compliance in all material respects
with, all necessary franchises, licenses, grants, permits, easements, authorizations, consents,
certificates and orders of any governmental or self-regulatory body required for the conduct of its
business and all such franchises, licenses, grants, permits, easements, authorizations, consents,
certificates and orders are valid and in full force and effect. The Company has made all necessary
material filings required under any federal, state, local or foreign law, regulation or rule
(including, without limitation, those from the FDA, and any other foreign, federal, state or local
government or regulatory authorities performing functions similar to those performed by the FDA),
in order to conduct its business. The Company has not received notice of any proceedings relating
to revocation or modification of, any such franchise, license, grant, permit, easement,
authorization, consent, certificate or order, except where such violation, default or proceeding
would not, individually or in the aggregate, have a Material Adverse Effect.
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(t) Legal Proceedings. There are no legal or governmental proceedings pending or, to the
Company’s knowledge, threatened or contemplated to which the Company is or would be a party or of
which any of its 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, Nasdaq), except (i) as described in the Registration Statements,
the Prospectus, and the Disclosure Package, (ii) any such proceeding, which if resolved adversely
to the Company, would not result in a judgment, decree or order having, individually or in the
aggregate, a Material Adverse Effect or (iii) any such proceeding that would not prevent or
materially and adversely affect the ability of the Company to consummate the transactions
contemplated hereby. The Disclosure Package contains in all material respects the same description
of the foregoing matters contained in the Prospectus.
(u) Statutes; Contracts. There are no statutes or regulations applicable to the Company or
contracts or other documents of the Company which are required to be described in the Registration
Statements, the Disclosure Package or the Prospectus or filed as exhibits to the Registration
Statements by the Securities Act or by the Rules and Regulations which have not been so described
or filed.
(v) Good Title to Property. The Company has good and valid title to all property (whether
real or personal) described in the Registration Statements, the Disclosure Package and the
Prospectus as being owned by it, in each case free and clear of all liens, claims, security
interests, other encumbrances or defects except such as are described in the Registration
Statements, the Disclosure Package and the Prospectus and those that would not, individually or in
the aggregate materially affect the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company. All of the property described in
the Registration Statements, the Disclosure Package and the Prospectus as being held under lease by
the Company is held thereby under valid, subsisting and enforceable leases, without any liens,
restrictions, encumbrances or claims, except those that, individually or in the aggregate, are not
material and do not materially interfere with the use made and proposed to be made of such property
by the Company.
(w) Intellectual Property Rights. The Company owns, or has obtained valid and enforceable
licenses for, or other rights to use, the inventions, patent applications, patents, trademarks
(both registered and unregistered), tradenames, copyrights, trade secrets and other proprietary
information described in the Registration Statements, the Disclosure Package and the Prospectus as
being owned or licensed by it or which are necessary for the conduct of its business, except where
the failure to own, license or have such rights would not, individually or in the aggregate, result
in a Material Adverse Effect (collectively, “Intellectual Property”); except as described in the
Registration Statements, the Disclosure Package and the Prospectus (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 the ownership rights of the owners of the Intellectual Property which 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, or the
validity, enforceability, or scope of, any Intellectual Property owned by or licensed to the
Company, and the Company is unaware of any facts which could form a reasonable basis for any such
claim; (iv) there is no pending or, to the Company’s knowledge, 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, and the Company is unaware of any
facts which could form a reasonable basis for any such claim; (v) 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; and (vi) to the Company’s knowledge, each issued patent
was validly issued under the laws of
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the country that issued it; except in each case of (i) through (vi) above, where any such
exceptions would not, individually or in the aggregate, have a Material Adverse Effect.
(x) Financial Statements. The financial statements of the Company, together with the related
schedules and notes thereto, set forth or incorporated by reference in the Registration Statements,
the Disclosure Package and the Prospectus comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as applicable, and present fairly in all
material respects (i) the financial condition of the Company, taken as a whole, as of the dates
indicated and (ii) the consolidated results of operations, stockholders’ equity and changes in cash
flows of the Company, taken as a whole, for the periods therein specified; and such financial
statements and related schedules and notes thereto have been prepared in conformity with United
States generally accepted accounting principles, consistently applied throughout the periods
involved (except as otherwise stated therein and subject, in the case of unaudited financial
statements, to the absence of footnotes and normal year-end adjustments). There are no other
financial statements (historical or pro forma) that are required to be included in the Registration
Statements, the Disclosure Package and the Prospectus; and the Company does not have any material
liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not
disclosed in the Registration Statements, the Disclosure Package and the Prospectus; and all
disclosures contained in the Registration Statements, the Disclosure Package and the 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(e) of Regulation S-K of
the Commission, to the extent applicable, and present fairly the information shown therein and the
Company’s basis for using such measures.
(y) Independent Accountants. To the Company’s knowledge, KMJ Xxxxxx & Company, LLP, who have
certified certain of the financial statements of the Company, is (i) an independent public
accounting firm within the meaning of the Securities Act and the Rules and Regulations, (ii) a
registered public accounting firm (as defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act of 2002
(the “Xxxxxxxx-Xxxxx Act”)), and (iii) not in violation of the auditor independence requirements of
the Xxxxxxxx-Xxxxx Act.
(z) Taxes. The Company has timely filed all federal, state, local and foreign income and
franchise tax returns (or timely filed applicable extensions therefore) that have been required to
be filed and are not in default in the payment of any taxes which were payable pursuant to said
returns or any assessments with respect thereto, other than any which the Company is contesting in
good faith and for which adequate reserves have been provided and reflected in the Company’s
financial statements included in the Registration Statements, the Disclosure Package and the
Prospectus. The Company does not have any tax deficiency that has been or, to the knowledge of the
Company, might be asserted or threatened against it that would result in a Material Adverse Effect.
(aa) Nasdaq; Exchange Act Registration. The Common Stock is registered pursuant to Section
12(b) or 12(g) of the Exchange Act and is accepted for quotation on the Nasdaq Global Market, and
the Company has taken no action designed to terminate the registration of the Common Stock under
the Exchange Act or delisting the Common Stock from the Nasdaq Global Market, nor, except as
disclosed in the Disclosure Package and the Prospectus, has the Company received any notification
that the Commission or FINRA is contemplating terminating such registration or listing. Except as
disclosed in the Disclosure Package and the Prospectus, the Company has complied in all material
respects with the applicable requirements of the Nasdaq Global Market for maintenance of inclusion
of the Common Stock thereon. The Company has filed an application to include the Shares and
Warrant Shares on the Nasdaq Global Market.
-10-
(bb) Accounting Controls. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances 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. Except as described in the Registration
Statements, in the Disclosure Package and in the Prospectus, since the most recent audit of the
effectiveness of the Company’s internal control over financial reporting, there has been (i) no
material weakness in the Company’s internal control over financial reporting (whether or not
remediated) and (ii) no change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
(cc) Disclosure Controls. The Company has established, maintains and evaluates “disclosure
controls and procedures” (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act), which (i) are designed to ensure that material information relating to the Company
is made known to the Company’s principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as
of the end of the last fiscal period covered by the Registration Statements; and (iii) such
disclosure controls and procedures are effective to perform the functions for which they were
established. There are no significant deficiencies and material weaknesses in the design or
operation of internal controls which could adversely affect the Company’s ability to record,
process, summarize, and report financial data to management and the Board of Directors. The Company
is not aware of any fraud, whether or not material, that involves management or other employees who
have a role in the Company’s internal controls; and since the date of the most recent evaluation of
such disclosure controls and procedures, 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.
(dd) Xxxxxxxx-Xxxxx Act. The Company, and to its knowledge, all of the Company’s directors or
officers, in their capacities as such, is in compliance in all material respects with all
applicable effective provisions of the Xxxxxxxx-Xxxxx Act and any related rules and regulations
promulgated by the Commission.
(ee) Minute Books. Copies of the contents of the minute books of the Company since October 1,
2004 have been made available to the Placement Agent and counsel for the Placement Agent, and such
books (i) contain a complete summary of all meetings and actions of the board of directors
(including each board committee) and shareholders of the Company (or analogous governing bodies and
interest holders, as applicable) since that time through the date of the latest meeting and action,
and (ii) accurately in all material respects reflect all transactions referred to in such minutes.
(ff) Not an Investment Company. The Company is not, nor after giving effect to the offering
and sale of the Securities and the application of the proceeds thereof as described in the
Prospectus, will be, (i) required to register as an “investment company” as defined in the
Investment Company Act of 1940, as amended (the “ Investment Company Act ”), and the rules and
regulations of the Commission thereunder or (ii) a “business development company” (as defined in
Section 2(a)(48) of the Investment Company Act).
(gg) Insurance. The Company maintains insurance in such amounts and covering such risks as it
reasonably considers to be adequate for the conduct of its business and the value of its properties
and as is customary for companies engaged in similar businesses in similar industries. All such
insurance is fully in force on the date hereof and will be fully in force as of the Closing Date.
The
-11-
Company has no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(hh) Brokers Fees. The Company is not a party to any contract, agreement or understanding
with any person (other than this Agreement) that would give rise to a valid claim against the
Company or the Placement Agent for a brokerage commission, finder’s fee or other like payment in
connection with the offering and sale of the Securities.
(ii) Integration. The Company has not sold or issued any securities that would be integrated
with the offering of the Securities contemplated by this Agreement pursuant to the Securities Act,
the Rules and Regulations or the interpretations thereof by the Commission.
(jj) Corrupt Practices. Neither the Company nor, to the Company’s knowledge, any other person
associated with or acting on behalf of the Company, including without limitation any director,
officer, agent or employee of the Company has, directly or indirectly, while acting on behalf of
the Company (i) used any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political parties or campaigns
from corporate funds, (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended or (iv) made any other unlawful payment.
(kk) Critical Accounting Policies. The section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates for
Continuing Operations” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Critical Accounting Policies and Estimates for Discontinued Operations” in the
Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q accurately and
fully describes (A) the accounting policies that the Company believes are the most important in the
portrayal of the Company’s financial condition and results of operations and that require
management’s most difficult, subjective or complex judgments (“Critical Accounting Policies”); and
(B) the judgments and uncertainties affecting the application of Critical Accounting Policies.
(ll) No Price Stabilization. Neither the Company nor, to the Company’s knowledge, any of its
officers, directors, affiliates or controlling persons has taken or will take, directly or
indirectly, any action designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities.
(mm) No Undisclosed Relationships. No relationship, direct or indirect, exists between or
among the Company on the one hand and the directors, officers, stockholders, customers or suppliers
of the Company on the other hand which is required to be described in the Registration Statements,
the Disclosure Package and the Prospectus which has not been so described.
(nn) Exchange Act Requirements. The Company has filed in a timely manner all reports required
to be filed pursuant to Sections 13(a), 13(e), 14 and 15(d) of the Exchange Act during the
preceding 12 months (except to the extent that Section 15(d) requires reports to be filed pursuant
to Sections 13(d) and 13(g) of the Exchange Act, which shall be governed by the next clause of this
sentence); and the Company has filed in a timely manner all reports required to be filed pursuant
to Sections 13(d) and 13(g) of the Exchange Act during the preceding 12 months, except where the
failure to timely file could not reasonably be expected individually or in the aggregate to have a
Material Adverse Effect.
-12-
(oo) FINRA Affiliations. To the Company’s knowledge, there are no affiliations or
associations between (i) any member of FINRA and (ii) the Company or any of the Company’s officers,
directors or 5% or greater securityholders or any beneficial owner of the Company’s unregistered
equity securities that were acquired from the Company at any time on or after the one hundred
eightieth (180th) day immediately preceding the date either of the Registration Statements was
initially filed with the Commission, except as set forth in the Registration Statements, the
Disclosure Package and the Prospectus.
(pp) Compliance with Environmental Laws. The Company (a) is in compliance with any and all
applicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees
and judgments relating to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (b) has received
all permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct its business and (c) is in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, individually or in the aggregate, result in a
Material Adverse Effect. There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to third parties) which
would, individually or in the aggregate, result in a Material Adverse Effect.
(qq) No Labor Disputes. The Company is not engaged in any unfair labor practice; except for
matters that would not, individually or in the aggregate, result in a Material Adverse Effect
(i) there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge after
due inquiry, threatened against the Company 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 after due inquiry, threatened against the Company and (C) no union
representation dispute currently existing concerning the employees of the Company, and (ii) to the
Company’s knowledge (A) no union organizing activities are currently taking place concerning the
employees of the Company 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 or any
applicable wage or hour laws concerning the employees of the Company.
(rr) ERISA. The Company is in compliance in all material respects with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which
the Company would have any liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any
“pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the “Code”); and each “pension
plan” for which the Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(ss) Statistical or Market-Related Data. Any statistical, industry-related and market-related
data included or incorporated by reference in the Registration Statements, the Disclosure Package
-13-
and the Prospectus, are based on or derived from sources that the Company reasonably and in
good faith believes to be reliable and accurate, and such data agree with the sources from which
they are derived.
(tt) Clinical Studies. The clinical, pre-clinical and other studies and tests conducted by or
on behalf of or sponsored by the Company or in which the Company or products or product candidates
have participated that are described in the Registration Statements, the Disclosure Package and the
Prospectus were and, if still pending, are being conducted in accordance in all material respects
with all statutes, laws, rules and regulations, as applicable (including, without limitation, those
administered by the FDA or by any foreign, federal, state or local governmental or regulatory
authority performing functions similar to those performed by the FDA) and with standard medical and
scientific research procedures. The descriptions in the Registration Statements, the Disclosure
Package and the Prospectus of the results of such studies and tests are accurate and complete in
all material respects and fairly present the published data derived from such studies and tests.
The Company has not received any notices or other correspondence from the FDA or any other foreign,
federal, state or local governmental or regulatory authority performing functions similar to those
performed by the FDA with respect to any ongoing clinical or pre-clinical studies or tests
requiring the termination, suspension or material modification of such studies or tests, which such
termination, suspension or material modification would reasonably be expected to result in a
Material Adverse Effect. The Company is in compliance with all applicable federal, state, local
and foreign laws, regulations, orders and decrees governing its business as prescribed by the FDA,
or any other federal, state or foreign agencies or bodies, including those bodies and agencies
engaged in the regulation of pharmaceuticals or biohazardous substances or materials, except where
noncompliance would not, singly or in the aggregate, result in a Material Adverse Effect.
Any certificate signed by any officer of the Company and delivered to the Placement Agent or
to counsel for the Placement Agent in connection with the offering of the Securities shall be
deemed a representation and warranty by the Company to the Placement Agent and the Investors as to
the matters covered thereby.
3. Covenants. The Company covenants and agrees with the Placement Agent as follows:
(a) Reporting Obligations; Exchange Act Compliance. The Company will (i) prepare the
Prospectus in a form approved by the Placement Agent containing information previously omitted at
the time of effectiveness of the Registration Statements in reliance on Rules 430A, 430B and 430C
and to file such Prospectus with the Commission within the time periods specified by Rule 424(b)
and Rules 430A and 430B, as applicable under the Securities Act, (ii) not file any amendment to the
Registration Statements or distribute an amendment or supplement to the Disclosure Package or the
Prospectus or document incorporated by reference therein of which the Placement Agent shall not
previously have been advised and furnished with a copy or to which the Placement Agent shall have
reasonably objected in writing or which is not in compliance with the Rules and Regulations and
(iii) promptly file all reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and during such period as the Prospectus
would be required by law to be delivered (whether physically or through compliance with Rule 172
under the Securities Act or any similar rule) (the “Prospectus Delivery Period”).
(b) Abbreviated Registration Statements. If the Company elects to rely upon Rule 462(b) under
the Securities Act, the Company shall file one or more registration statements under Rule 462(b)
with the Commission in compliance with Rule 462(b) by 8:00 a.m., New York City time, on the
business day next succeeding the date of this Agreement, and the Company shall at the time of
filing
-14-
either pay to the Commission the filing fee for such Rule 462(b) registration statements or
give irrevocable instructions for the payment of such fee pursuant to the Rules and Regulations.
(c) Issuer Free Writing Prospectuses. The Company will (i) not make any offer relating to the
Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a “free writing prospectus” (as defined in Rule 405 under the Securities Act) required
to be filed by the Company with the Commission under Rule 433 under the Securities Act unless the
Placement Agent approves its use in writing prior to first use (each, a “Permitted Free Writing
Prospectus”); provided that the prior written consent of the Placement Agent hereto shall be deemed
to have been given in respect of the Issuer Free Writing Prospectus(es) included in Schedule
I hereto, (ii) treat each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, (iii) comply with the requirements of Rules 164 and 433 under the Securities Act
applicable to any Issuer Free Writing Prospectus, including the requirements relating to timely
filing with the Commission, legending and record keeping and (iv) not take any action that would
result in a Placement Agent or the Company being required to file with the Commission pursuant to
Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of such
Placement Agent that such Placement Agent otherwise would not have been required to file
thereunder. The Company will satisfy the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road show.
(d) [Reserved].
(e) Notice to Placement Agent. The Company will notify the Placement Agent promptly, and
will, if requested, confirm such notification in writing: (i) of the receipt of any comments of, or
requests for additional or supplemental information from, the Commission; (ii) of the time and date
of any filing of any post-effective amendment to the Registration Statements or any amendment or
supplement to any Preliminary Prospectus, the Disclosure Package or the Prospectus, (iii) the time
and date when any post-effective amendment to the Registration Statements becomes effective, but
only during the Prospectus Delivery Period; (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statements, or any post-effective amendment
thereto or any order preventing or suspending the use of any Preliminary Prospectus, the Disclosure
Package, the Prospectus or any Issuer Free Writing Prospectus, or the initiation of any proceedings
for that purpose or pursuant to Section 8A of the Securities Act or the threat thereof, but only
during the Prospectus Delivery Period; (v) of receipt by the Company of any notification with
respect to any suspension of the approval of the Shares and Warrant Shares from any securities
exchange upon which it is listed for trading or included or designated for quotation, or the
initiation or threatening of any proceeding for such purpose. The Company will use its reasonable
best efforts to prevent the issuance or invocation of any such stop order or suspension by the
Commission and, if any such stop order or suspension is so issued or invoked, to obtain as soon as
possible the withdrawal or removal thereof.
(f) Filing of Amendments or Supplements. If, during the Prospectus Delivery Period, any event
shall occur or condition exist as a result of which, in the judgment of the Company or in the
reasonable opinion of the Placement Agent, it becomes necessary to amend or supplement the
Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Disclosure
Package) in order to make the statements therein, in the light of the circumstances when the
Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Disclosure
Package) is delivered to an Investor, not misleading, or if it is necessary to amend or supplement
the Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the
Disclosure Package) to comply with applicable law, forthwith to prepare, file with the Commission
and furnish, at its own expense, to the Placement Agent, either amendments or supplements to the
Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Disclosure
Package) so that the statements in the Prospectus (or, if the Prospectus is not yet available to
prospective purchasers, the Disclosure Package) as so amended or supplemented will not,
-15-
in the light of the circumstances when the Prospectus (or, if the Prospectus is not yet
available to prospective purchasers, the Disclosure Package) is delivered to an Investor, be
misleading or so that the Prospectus (or, if the Prospectus is not yet available to prospective
purchasers, the Disclosure Package), as amended or supplemented, will comply with law.
(g) Conflicting Issuer Free Writing Prospectus. If at any time following issuance of an
Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of
which such Issuer Free Writing Prospectus conflicted or would conflict with the information
contained in the Registration Statements relating to the Securities or included or would include an
untrue statement of a material fact or omitted or would omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances prevailing at that
subsequent time, not misleading, the Company promptly will notify the Placement Agent and will
promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or omission.
(h) Delivery of Copies. The Company will deliver promptly to the Placement Agent and its
counsel such number of the following documents as the Placement Agent shall reasonably request:
(i) conformed copies of the Registration Statements as originally filed with the Commission and
each amendment thereto (in each case excluding exhibits), (ii) copies of each Preliminary
Prospectus, if any; (iii) any Issuer Free Writing Prospectus, (iv) during the Prospectus Delivery
Period, copies of the Prospectus (or any amendments or supplements thereto); (v) any document
incorporated by reference in the Prospectus (other than any such document that is filed with the
Commission electronically via XXXXX or any successor system) and (vi) all correspondence to and
from, and all documents issued to and by, the Commission in connection with the registration of the
Securities under the Securities Act.
(i) Blue Sky Laws. The Company will promptly take or cause to be taken, from time to time,
such actions as the Placement Agent may reasonably request to qualify the Securities for offering
and sale under the state securities, or blue sky, laws of such states or other jurisdictions as the
Placement Agent may reasonably request and to maintain such qualifications in effect so long as the
Placement Agent may request for the distribution of the Securities, provided, that in no event
shall the Company be obligated to qualify as a foreign corporation in any jurisdiction in which it
is not so qualified or to file a general consent to service of process in any jurisdiction or
subject itself to taxation as doing business in any jurisdiction. The Company will advise the
Placement Agent promptly of the suspension of the qualification or registration of (or any
exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the event of the issuance of
any order suspending such qualification, registration or exemption, the Company shall use its best
efforts to obtain the withdrawal thereof at the earliest possible moment.
(j) Earnings Statement. As soon as practicable, but in any event not later than 18 months
after the effective date of the Registration Statements (as defined in Rule 158(c) under the
Securities Act), the Company will make generally available to holders of its securities and deliver
to the Placement Agent, an earnings statement of the Company (which need not be audited) that will
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and
Regulations.
(k) Use of Proceeds. The Company will apply the net proceeds from the sale of the Securities
in the manner set forth in the Disclosure Package and the Prospectus under the heading “Use of
Proceeds”.
(l) Lock-Up Period. Beginning on the date hereof and continuing for a period of 90 days after
the date of the Prospectus (the “Lock-Up Period”), the Company will not (1) offer to sell,
hypothecate, pledge, announce the intention to sell, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option, right or warrant
to purchase or
-16-
otherwise transfer or 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, with respect to, any shares of Common Stock, any securities
convertible into or exercisable or exchangeable for Common Stock; (2) file or cause to become
effective a registration statement under the Securities Act relating to the offer and sale of any
shares of Common Stock or securities convertible into or exercisable or exchangeable for Common
Stock except for a registration statement on Form S-8 relating to employee benefit plans or (3)
enter into any swap or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction described in clause
(i), (ii) or (iii) above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, without the prior written consent of the Placement Agent (which consent may be
withheld in its sole discretion), other than: (i) the Securities to be sold hereunder, (ii) the
issuance of employee stock options or restricted stock awards pursuant to equity incentive plans
described in the Registration Statements (excluding the exhibits thereto), the Disclosure Package
and the Prospectus, (iii) issuances of Common Stock upon the exercise of options or warrants
(either upon current terms thereof or upon subsequently amended terms but excluding a general
repricing) disclosed as outstanding in the Registration Statements (excluding the exhibits
thereto), the Disclosure Package and the Prospectus or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of the date of this Agreement; (iv) the
issuance by the Company of any shares of Common Stock as consideration for mergers, acquisitions,
other business combinations, or strategic alliances, occurring after the date of this Agreement;
provided that each recipient of shares pursuant to this clause (iv) agrees that all such shares
remain subject to restrictions substantially similar to those contained in this Section
3(l); or (v) the purchase or sale of the Company’s securities pursuant to a plan, contract or
instruction that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) that was in effect
prior to the date hereof. Notwithstanding the foregoing, for the purpose of allowing the Placement
Agent to comply with FINRA Rule 2711(f)(4), if (1) during the last 17 days of the Lock-Up Period,
the Company releases earnings results or publicly announces other material news or a material event
relating to the Company occurs or (2) prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the 16 day period beginning on the last day
of the Lock-Up Period, then in each case the Lock-Up Period will be extended until the expiration
of the 18 day period beginning on the date of release of the earnings results or the public
announcement regarding the material news or the occurrence of the material event, as applicable,
unless the Placement Agent waives, in writing, such extension. Without the prior written consent
of the Placement Agent, the Company agrees not to accelerate the vesting of any option or warrant
or the lapse of any repurchase right prior to the expiration of the Lock-Up Period.
(m) Lock-Up Agreements. The Company will cause each of its executive officers and directors
whose names are set forth on Exhibit C hereto to furnish to the Placement Agent, on the
date hereof, a letter, substantially in the form of Exhibit B hereto (the “Lock-Up
Agreement”). The Company will enforce the terms of each Lock-Up Agreement and issue stop transfer
instructions to the transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach or default under the applicable Lock-Up
Agreement.
(n) Public Communications. Prior to the Closing Date, the Company will not issue any press
release or other communication directly or indirectly or hold any press conference with respect to
the Company, its condition, financial or otherwise, or its earnings, business, operations or
prospects, or the offering of the Securities, without the prior consent of the Placement Agent,
unless in the reasonable judgment of the Company and its counsel, and after notification to the
Placement Agent, such press release or communication is required by law or by Nasdaq rules, in
which case the Company shall use its reasonable best efforts to allow the Placement Agent
reasonable time to comment on such release or other communication in advance of such issuance.
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(o) Stabilization. The Company will not take, directly or indirectly, any action designed, or
that might reasonably be expected to cause or result in, or that will constitute, stabilization or
manipulation of the price of any security of the Company to facilitate the sale or resale of any of
the Securities.
(p) Transfer Agent. The Company shall engage and maintain, at its expense, a transfer agent
and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the
Shares and Warrant Shares.
(q) Listing. The Company shall use its commercially reasonable efforts to cause the Shares
and Warrant Shares to be listed for quotation on the Nasdaq Global Market at the Closing Date and
to maintain a listing on a national securities exchange after the Closing Date.
(r) Investment Company Act. The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Securities in such a manner as would require the
Company to register as an investment company under the Investment Company Act.
(s) Broker’s Fee. The Company will not incur 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, except as set forth in this Agreement.
(t) Reservation of Warrant Shares. The Company shall reserve and keep available at all times
a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue the
Warrant Shares.
(u) Performance. The Company shall use its best efforts to do and perform all things required
to be done or performed under this Agreement by the Company prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Securities.
4. Costs and Expenses.
(a) Subject to the limits set forth below in subsection 4(b), the Company will pay or
reimburse if paid by the Placement Agent all reasonable costs and expenses incident to the
performance of the obligations of the Company under this Agreement and in connection with the
transactions contemplated hereby, including but not limited to costs and expenses of or relating to
(i) the preparation, printing, filing, delivery and shipping of the Registration Statements, any
Issuer Free Writing Prospectus, each Preliminary Prospectus, the Disclosure Package and the
Prospectus, and any amendment or supplement to any of the foregoing and the printing and furnishing
of copies of each thereof to the Placement Agent and dealers (including costs of mailing and
shipment), (ii) the registration, issue, sale and delivery of the Securities including any stock or
transfer taxes and stamp or similar duties payable upon the sale, issuance or delivery of the
Securities and the printing, delivery, and shipping of the certificates representing the
Securities, (iii) the registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions designated pursuant to Section 3(i),
(including the reasonable legal fees and filing fees, and other disbursements of counsel to the
Placement Agent in connection therewith), and, if reasonably requested by the Placement Agent, the
preparation and printing and furnishing of copies of any blue sky surveys to the Placement Agent
and to dealers, (iv) the fees and expenses of any transfer agent or registrar for the Shares and
Warrant Shares, (v) any filings required to be made by the Placement Agent or the Company with
FINRA, and the reasonable fees, disbursements and other charges of counsel for the Placement Agent
in connection with FINRA’s review and approval of the Placement Agent’s participation in the
offering (including all COBRADesk fees), (vi) fees, disbursements and other charges of counsel to
the Company, (vii) listing fees, if any, for the listing
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or quotation of the Shares and Warrant Shares on the Nasdaq Global Market, (viii) fees and
disbursements of the Company’s auditor incurred in delivering the letter(s) described in
Sections 5(j) and (k) of this Agreement, (ix) fees of the Escrow Agent, (x) fees,
disbursements and other charges of counsel to the Placement Agent (in addition to (iii) and (v)
above), and (xi) the costs and expenses of the Company and the Placement Agent in connection with
the marketing of the offering and the sale of the Securities to prospective investors including,
but not limited to, those related to any presentations or meetings undertaken in connection
therewith including, without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged with the written consent of the
Company 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 or other
transportation chartered in connection with the road show. If this Agreement shall be terminated
by the Placement Agent pursuant to Section 8 hereof, the Company will, in addition to
paying the amounts described in Section 4 hereof, reimburse the Placement Agent for all of
its reasonable out-of-pocket disbursements (including, but not limited to, the fees and
disbursements of its counsel) incurred by the Placement Agent in connection with its investigation,
preparing to market and marketing of the Securities or in contemplation of performing its
obligations hereunder.
(b) Notwithstanding Section 4(a), in no event shall the Company’s aggregate
reimbursement obligations under this Section 4 exceed (i) $100,000 if the transactions
contemplated hereunder are successfully closed, or (B) $50,000 if the transactions contemplated
hereunder are not successfully closed.
5. Conditions of Placement Agent’s Obligations. The obligations of the Placement Agent
hereunder and the Investors under the Subscription Agreements are subject to the following
conditions:
(a) Filings with the Commission. The Preliminary Prospectus (if any), Prospectus and any
Issuer Free Writing Prospectus required to be filed under the Securities Act or the Rules and
Regulations shall have been filed with the Commission pursuant to Rule 424(b) or Rule 164, as the
case may be, in the manner and within the time period so required.
(b) Abbreviated Registration Statements. If the Company has elected to rely upon Rule 462(b),
any registration statement filed under Rule 462(b) shall have become effective under the Securities
Act by 8:00 a.m., New York City time, on the business day next succeeding the date of this
Agreement.
(c) No Stop Orders. Prior to the Closing: (i) no stop order suspending the effectiveness of
the Registration Statements or any part thereof, preventing or suspending the use of any Base
Prospectus, any Preliminary Prospectus, the Prospectus or Permitted Free Writing Prospectus or any
part thereof shall have been issued under the Securities Act and no proceedings for that purpose or
pursuant to Section 8A under the Securities Act shall have been initiated or threatened by the
Commission, (ii) no order suspending the qualification or registration of the Securities under the
securities or blue sky laws of any jurisdiction shall be in effect and (iii) all requests for
additional information on the part of the Commission (to be included or incorporated by reference
in the Registration Statements, the Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the
Placement Agent.
(d) Action Preventing Issuance. No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any governmental agency or body
which would, as of the Closing Date, prevent the issuance or sale of the Securities or materially
and adversely affect or reasonably be believed to materially and adversely affect the business or
operations of the Company; and no injunction, restraining order or order of any other nature by any
federal or state court of
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competent jurisdiction shall have been issued as of the Closing Date which would prevent the
issuance or sale of the Securities or materially and adversely affect or reasonably be believed to
materially and adversely affect the business or operations of the Company.
(e) Objection of Placement Agent. No Prospectus or amendment or supplement to the
Registration Statements shall have been filed to which the Placement Agent shall have objected in
writing, which objection shall not be unreasonable. The Placement Agent shall not have in good
faith advised the Company on or prior to the Closing Date that the Registration Statements or any
amendments thereof or supplements thereto contains an untrue statement of fact which, in its
opinion, is material, or omits to state a fact which, in its opinion, is material and is required
to be stated therein or necessary to make the statements therein not misleading, or that the
Disclosure Package or any Issuer Free Writing Prospectus or the Prospectus or any amendment thereof
or supplement thereto contains an untrue statement of fact which, in its opinion, is material, or
omits to state a fact which, in its opinion, is material and is required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading.
(f) No Material Adverse Change. Prior to the Closing, there shall not have occurred any
change, or any development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects of the Company, taken as a whole,
from that set forth in the Disclosure Package and the Prospectus that, in the Placement Agent’s
judgment, is material and adverse and that makes it, in the Placement Agent’s judgment,
impracticable to market the Securities on the terms and in the manner contemplated in the
Disclosure Package.
(g) Representations and Warranties. Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects (except for those
representations and warranties which are qualified by materiality, in which case such
representations and warranties shall be true and correct in all respects) when made and on and as
of the Closing Date, as if made on such date (except that those representations and warranties that
address matters only as of a particular date shall remain true and correct in all material respects
(except for those representations and warranties which are qualified by materiality, in which case
such representations and warranties shall be true and correct in all respects) as of such date),
and all covenants and agreements herein contained to be performed on the part of the Company and
all conditions herein contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with in all material respects.
(h) Opinion of Counsel to the Company. The Placement Agent shall have received from Xxxxxxx
Procter LLP, counsel to the Company, such counsel’s written opinion, addressed to the Placement
Agent and the Investors and dated the Closing Date, in form and substance as is set forth on
Exhibit D attached hereto. Such counsel shall also have furnished to the Placement Agent a
written statement (“Negative Assurance”), addressed to the Placement Agent and dated the Closing
Date, in form and substance as set forth in Exhibit E attached hereto.
(i) Opinion of Counsel to the Placement Agent. The Placement Agent shall have received from
Xxxxxxxxxx Xxxxxxx PC, counsel to the Placement Agent, such opinion or opinions (including Negative
Assurance), dated the Closing Date and addressed to the Placement Agent, covering such matters as
are customarily covered in transactions of this type.
(j) Accountant’s Comfort Letter. The Placement Agent shall have received on the date of the
Time of Sale, a letter dated the date hereof, (the “Original Letter”), addressed to the Placement
Agent and in form and substance reasonably satisfactory to the Placement Agent and its counsel,
from KMJ Xxxxxx & Company, LLP, which letter shall cover, without limitation, the various financial
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disclosures, if any, contained in the Disclosure Package and shall contain statements and
information of the type customarily included in accountants’ “comfort letters” to underwriters,
delivered according to Statement of Auditing Standards No. 72 and Statement of Auditing Standard
No. 100 (or successor bulletins), with respect to the audited and unaudited financial statements
and certain financial information contained in or incorporated by reference into the Registration
Statements, the Disclosure Package and the Prospectus.
(k) Bring-Down Letter. At the Closing Date, the Placement Agent shall have received from KMJ
Xxxxxx & Company, LLP a letter (the “Bring-Down Letter”), dated the Closing Date, addressed to the
Placement Agent, which shall confirm, as of the date of the Bring-Down Letter (or, with respect to
matters involving changes or developments since the respective dates as of which specified
financial information is given in the Disclosure Package and the Prospectus, as the case may be, as
of a date not more than three (3) business days prior to the date of the Bring-Down Letter) that on
the basis of a review in accordance with the procedures set forth in the Original Letter, nothing
has come to their attention during the period from the date of the Original Letter referred to in
the prior sentence to a date (specified in the letter) not more than three days prior to the
Closing Date which would require any change in the Original Letter if it were required to be dated
and delivered at the Closing Date.
(l) Officer’s Certificate. The Placement Agent shall have received on the Closing Date a
certificate, addressed to the Placement Agent and dated the Closing Date, of the principal
executive officer and the principal financial officer of the Company to the effect that:
(i) each of the representations, warranties and agreements of the Company in this Agreement
were true and correct in all material respects (except for those representations and warranties
which are qualified by materiality, in which case such representations and warranties shall be true
and correct in all respects) when originally made and are true and correct in all material respects
(except for those representations and warranties which are qualified by materiality, in which case
such representations and warranties shall be true and correct in all respects) as of the Time of
Sale and the Closing Date; and the Company has complied in all material respects with all
agreements and satisfied all the conditions on its part required under this Agreement to be
performed or satisfied at or prior to the Closing Date;
(ii) subsequent to the respective dates as of which information is given in the Disclosure
Package (taking into account any updates included within the Disclosure Package), there has not
been (A) a material adverse change or any development involving a prospective material adverse
change in the general affairs, business, prospects, properties, management, financial condition or
results of operations of the Company, taken as a whole, (B) any transaction that is material to the
Company, taken as a whole, except transactions entered into in the ordinary course of business, (C)
any obligation, direct or contingent, that is material to the Company, taken as a whole, incurred
by the Company, except obligations incurred in the ordinary course of business, (D) any change in
the capital stock (other than a change in the number of outstanding shares of Common Stock due to
the issuance of shares upon the exercise of outstanding options or warrants) or any material change
in the short term or long term indebtedness of the Company, taken as a whole, (E) any dividend or
distribution of any kind declared, paid or made on the capital stock of the Company or (F) any loss
or damage (whether or not insured) to the property of the Company which has been sustained or will
have been sustained which has had or is reasonably likely to result in a Material Adverse Effect.
(iii) no stop order suspending the effectiveness of the Registration Statements or any part
thereof or any amendment thereof or the qualification of the Securities for offering or sale, nor
suspending or preventing the use of the Disclosure Package, the Prospectus or any Issuer Free
Writing Prospectus shall have been issued, and no proceedings for that purpose or pursuant to
Section 8A under
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the Securities Act shall be pending or to their knowledge, threatened by the Commission or any
state or regulatory body; and
(iv) the signers of said certificate have reviewed the Registration Statements, the Disclosure
Package, any Permitted Free Writing Prospectus and the Prospectus, and any amendments thereof or
supplements thereto (and any documents filed under the Exchange Act and deemed to be incorporated
by reference into the Disclosure Package and the Prospectus), and (A) (i) each part of the
Registration Statements and any amendments thereof do not and did not contain when the Registration
Statements (or such amendments) became effective, any untrue statement of a material fact or omit
to state, and did not omit to state when the Registration Statements (or such amendments) became
effective, any material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) as of the Time of Sale, neither the Disclosure Package nor any
individual Issuer Free Writing Prospectus, when considered together with the Disclosure Package,
contained any untrue statement of material fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading and (iii) the Prospectus, as amended or supplemented, does not contain, as of the
Closing Date, and did not contain, as of its issue date, any untrue statement of material fact or
omit to state and did not omit to state as of such date, a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading, and
(B) since the Time of Sale, there has occurred no event required to be set forth in an amendment or
supplement to the Registration Statements, the Disclosure Package or the Prospectus which has not
been so set forth and there has been no document required to be filed under the Exchange Act that
upon such filing would be deemed to be incorporated by reference in to the Disclosure Package and
into the Prospectus that has not been so filed.
(m) Secretary’s Certificate. On the Closing Date, the Company shall have furnished to the
Placement Agent a Secretary’s Certificate of the Company.
(n) The Nasdaq Global Market. The Shares and Warrant Shares shall have been listed and
authorized for trading on the Nasdaq Global Market as of the Closing Date.
(o) Other Filings with the Commission. The Company shall have prepared and filed with the
Commission a Current Report on Form 8-K with respect to the transactions contemplated hereby, and
filed with the Commission including as an exhibit thereto this Agreement and any other material
documents relating thereto.
(p) No FINRA Objection. FINRA shall not have raised any unresolved objection with respect to
the fairness and reasonableness of the placement agency terms and arrangements relating to the
issuance and sale of the Securities.
(q) Lock-Up Agreements. The Placement Agent shall have received copies of the executed
Lock-Up Agreements executed by each person listed on Exhibit C hereto, and such Lock-Up
Agreements shall be in full force and effect on the Closing Date.
(r) Subscription Agreements. The Company shall have entered into the Subscription Agreements
with each of the Investors, and such agreements shall be in full force and effect on the Closing
Date.
(s) Escrow Agreement. The Placement Agent shall have entered into the Escrow Agreement, and
such agreement shall be in full force and effect on the Closing Date.
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(t) Additional Documents. Prior to the Closing Date, the Company shall have furnished to the
Placement Agent such further information, certificates or documents as the Placement Agent shall
have reasonably requested.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are in form and
substance reasonably satisfactory to counsel for the Placement Agent.
6. Indemnification and Contribution.
(a) Indemnification of the Placement Agent. The Company agrees to indemnify, defend and hold
harmless the Placement Agent, its directors and officers, and each person, if any, who controls the
Placement Agent within the meaning of either Section 15 of the Securities 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, claim or liability, which, jointly or severally, the Placement Agent or any such
person may become subject under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, the common law or otherwise, (including in settlement of any
litigation, if such settlement is effected with the written consent of the Company), insofar as
such loss, damage, claim or liability (or actions in respect thereof as contemplated below) arises
out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statements, or any amendments thereto (including the information
deemed to be a part of the Registration Statements at the time of effectiveness and at any
subsequent time pursuant to Rules 430A and 430B of the Rules and Regulations, if applicable) or the
omission or alleged omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Base Prospectuses, any Preliminary Prospectus, any Issuer Free
Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d)
of the Rules and Regulations or the Prospectus (or any amendment or supplement thereto including
any documents filed under the Exchange Act and deemed to be incorporated by reference into the
Prospectus), or in any materials or information provided to investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Common Stock (“Marketing
Materials”), including any roadshow or investor presentations made to investors by the Company
(whether in person or electronically) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading; and, in the case of (i) and
(ii) above, to reimburse the Placement Agent and each such controlling person for any and all
reasonable expenses (including reasonable fees and disbursements of counsel) as such expenses are
incurred by the Placement Agent or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage, liability, expense or
action, (iii) any untrue statement or alleged untrue statement made by the Company in
Section 3 hereof or the failure by the Company to perform when and as required any
agreement or covenant contained herein or (iv) any untrue statement or alleged untrue statement of
any material fact contained in any audio or visual materials provided to Investors by or with the
approval of the Company or based upon written information furnished by or on behalf of the Company
including, without limitation, slides, videos, films or tape recordings used in any road show or
investor presentations made to investors by the Company (whether in person or electronically) or in
connection with the marketing of the Securities; provided, however, that the foregoing indemnity
shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the
extent, it arises out of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in or omitted from the Registration Statements, the Base Prospectuses, any
Preliminary Prospectus,
the Prospectus, or any such amendment or supplement, any Issuer Free
Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d)
of the Rules and Regulations or in any Marketing Materials, in reliance upon and in conformity with
information concerning the Placement Agent furnished in writing by or on
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behalf of the Placement Agent to the Company expressly for use therein, which information the
parties hereto agree is limited to the Placement Agent Information.
(b) Indemnification of the Company. The Placement Agent agrees to indemnify, defend and hold
harmless the Company, its directors and officers, and any person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
and the successors and assigns of all of the foregoing persons, from and against any loss, claim,
damage, liability or expense, as incurred to which, jointly or severally, the Company or any such
person may become subject under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, the common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the Placement Agent),
insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statements, or any amendments thereto,
or the omission or alleged omission therefrom to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Disclosure
Package, the Prospectus, or any amendment or supplement thereto or any Issuer Free Writing
Prospectus, or the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading, in the case of each of (i) and (ii) above, to the
extent but only to the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statements, the Disclosure Package, the Prospectus
(or any amendments or supplements thereto) or any Issuer Free Writing Prospectus in reliance upon
and in conformity with information concerning the Placement Agent furnished in writing by or on
behalf of the Placement Agent to the Company expressly for use therein, which information the
parties hereto agree is limited to the Placement Agent Information and shall reimburse the Company,
or any such director, officer or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim, damage, liability,
expense or action. Notwithstanding the provisions of this Section 6(b), in no event shall
any indemnity by the Placement Agent under this Section 6(b) exceed the total compensation
received by such Placement Agent in accordance with Section 1(c).
(c) Notice and Procedures. 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 6, 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
reasonably satisfactory to such indemnified party and payment of all fees and expenses; provided,
however, that the omission to so notify such indemnifying party shall not relieve such indemnifying
party from any liability which such indemnifying party may have to any indemnified party or
otherwise, except to the extent the indemnifying party does not otherwise learn of the Proceeding
and such failure results in the forfeiture by the indemnifying party of substantial rights or
defenses. 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 (i) the employment of such counsel shall have been authorized
in writing by the indemnifying party in connection with the defense of such Proceeding, (ii) the
indemnifying party shall not have, within a reasonable period of time in light of the
circumstances, employed counsel to defend such Proceeding or (iii) such indemnified party or
parties shall have reasonably concluded that there may be one or more legal 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
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indemnified party or parties ), in any of which events such reasonable 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). An
indemnifying party shall not be liable for any settlement of any Proceeding effected without its
written consent but, if settled with its written consent or if there be a final judgment for the
plaintiff, 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 or judgment.
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 6(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 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, compromise or consent to the entry of judgment in 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 on claims
that are the subject matter of such Proceeding and does not include an admission of fault or
culpability or a failure to act by or on behalf of such indemnified party.
(d) Contribution. If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under subsections (a) or (b) of this Section 6
or insufficient to hold an indemnified party harmless in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to
in subsection (a) or (b) above, (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand and the indemnified
party or parties on the other from the offering of the Securities 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 indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, 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 hand shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Securities (before deducting expenses) received by the Company
and the total placement agent commissions received by the Placement Agent, in each case as set
forth on the cover of the Prospectus, bear to the aggregate public offering price of the
Securities. The relative fault of the Company on the one hand and the Placement Agent on the other
hand shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company, on the one hand, or by the Placement Agent, on the other
hand, and the parties’ relevant intent, knowledge, access to information and opportunity to correct
or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto
agree that the written information furnished to the Company by the Placement Agent for use in any
Preliminary Prospectus, any Registration Statement or the Prospectus, or in any amendment or
supplement thereto, consists solely of the Placement Agent Information. The Company and the
Placement Agent agree that it would not be just and equitable if contribution pursuant to this
subsection (d) were to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the first sentence of
this Section 6(d). The amount paid or payable by an
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indemnified party as a result of the losses, claims, damages or liabilities referred to in the
first sentence of this Section 6(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating or defending against
any action or claim which is the subject of this Section 6(d). Notwithstanding the
provisions of this Section 6(d), the Placement Agent shall not be required to contribute
any amount in excess of the total commissions received by such Placement Agent in accordance with
Section 1(c). No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) Representations and Agreements to Survive Delivery. The obligations of the Company under
this Section 6 shall be in addition to any liability which the Company may otherwise have.
The indemnity and contribution agreements contained in this Section 6 and the covenants,
agreements, warranties and representations of the Company contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of the Placement Agent, any person who controls the
Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act or any affiliate of the Placement Agent, or by or on behalf of the Company, its
directors or officers or any person who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and
delivery of the Securities. 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 Securities, or
in connection with the Registration Statements, the Disclosure Package or the Prospectus.
7. Information Furnished by Placement Agent. The Company acknowledges that the statements set
forth in (i) the first sentence of the eighth paragraph and
(ii) the eleventh and fifteenth paragraphs under the heading “Plan of Distribution”
in the Prospectus (the “Placement Agent Information”) constitute the only information relating to
the Placement Agent furnished in writing to the Company by the Placement Agent as such information
is referred to in Sections 2 and 6 hereof.
8. Termination. (a) The Placement Agent shall have the right to terminate this Agreement by
giving notice as hereinafter specified at any time at or prior to the Closing Date, without
liability on the part of the Placement Agent to the Company, if (i) prior to delivery and payment
for the Securities (A) trading in securities generally shall have been suspended on or by the New
York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market or in the
over-the-counter market, (each, a “Trading Market”), (B) trading in the Common Stock of the Company
shall have been suspended on any such exchange, in the over-the-counter market or by the
Commission, (C) a general moratorium on commercial banking activities shall have been declared by
federal or New York state authorities or a material disruption shall have occurred in commercial
banking or securities settlement or clearance services in the United States, (D) there shall have
occurred any outbreak or material escalation of hostilities or acts of terrorism involving the
United States or there shall have been a declaration by the United States of a national emergency
or war, (E) there shall have occurred any other calamity or crisis or any material change in
general economic, political or financial conditions in the United States or elsewhere, if the
effect of any such event specified in clause (D) or (E), in the judgment of the Placement Agent, is
material and adverse and makes it impractical or inadvisable to proceed with the completion of the
sale of and payment for the Securities on the Closing Date on the terms and in the manner
contemplated by this Agreement, the Disclosure Package and the Prospectus, (ii) since the time of
execution of this Agreement or the earlier respective dates as of which information is given in the
Disclosure Package or incorporated by reference therein, there has been any Material Adverse Effect
or the Company shall have sustained a loss or interference with its business by strike, fire,
flood, earthquake, accident or other calamity, whether or not covered by insurance, of such
character that in the judgment of
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the Placement Agent would, individually or in the aggregate, result in a Material Adverse
Effect and which would, in the judgment of the Placement Agent, make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities on the terms and in the
manner contemplated in the Disclosure Package, (iii) the Company shall have failed, refused or been
unable to comply with the terms or perform any agreement or obligation of this Agreement or any
Subscription Agreement, other than by reason of a default by the Placement Agent, or (iv) any
condition of the Placement Agent’s obligations hereunder is not fulfilled. Any such termination
shall be without liability of any party to any other party except that the provisions of
Section 4, Section 6, and Section 11 hereof shall at all times be effective
notwithstanding such termination.
9. Notices. All statements, requests, notices and agreements hereunder shall be in writing or
by facsimile, and:
| (a) | if to the Placement Agent, shall be delivered or sent by mail or facsimile transmission to : |
Xxxxx Xxxxxxx & Co.
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxxxx Xxxxxxx PC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: 000-000-0000
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: 000-000-0000
| (b) | if to the Company shall be delivered or sent by mail or facsimile transmission to: |
Avanir Pharmaceuticals
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: 000-000-0000
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Procter LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile No.: 000-000-0000
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile No.: 000-000-0000
Any such statements, requests, notices or agreements shall be effective only upon receipt.
Any party to this Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.
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10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and shall be binding upon the Placement Agent, the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to
give any person other than the persons mentioned in the preceding sentence, any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions herein contained,
except that (i) the representations, warranties, covenants, agreements and indemnities of the
Company contained in this Agreement shall also be for the benefit of the controlling persons,
officers and directors referred to in Section 6(a) and the indemnities of the Placement
Agent shall also be for the benefit of the controlling persons, officers and directors referred to
in Section 6(b) and (ii) the Investors are relying on the representations made by the
Company under, and are intended third party beneficiaries of, such portions of this Agreement. The
term “successors and assigns” as herein used shall not include any purchaser of the Securities by
reason merely of such purchase.
11. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the conflicts of laws provisions thereof.
12. No Fiduciary Relationship. The Company hereby acknowledges and agrees that the Placement
Agent is acting solely as a placement agent in connection with the offering 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 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, creditors or any other person in connection with any
activity that the Placement Agent may undertake or has undertaken in furtherance of the offering of
the Company’s securities, either before or after the date hereof. The Placement Agent hereby
expressly disclaims any fiduciary or similar obligations to the Company, either in connection with
the transactions contemplated by this Agreement or any matters leading up to such transactions, and
the Company hereby confirms its understanding and agreement to that effect. The price of the
Securities set forth in this Agreement was established by the Company following discussions and
arms-length negotiations with the Investors and the Placement Agent, and the Company is capable of
evaluating and understanding, and understands and accepts, the terms, risks and conditions of the
transactions contemplated by this Agreement. The Company has been advised that the Placement Agent
and its affiliates are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and that the Placement Agent has no obligation to disclose such
interests and transactions to the Company by virtue of any fiduciary, advisory or agency
relationship. The Company and the Placement Agent agree that they are each responsible for making
their own independent judgments with respect to any such transactions. 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 or any matters
leading up to such transactions and agrees that the Placement Agent shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty claim to any person
asserting a fiduciary duty claim on behalf of the Company.
13. Headings. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
14. Amendments and Waivers. No supplement, modification or waiver of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. The failure of a party to
exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in
the future. No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any
such waiver constitute a continuing waiver unless otherwise expressly provided.
-28-
15. Submission to Jurisdiction. Except as set forth below, no Proceeding 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
and the Placement Agent each hereby consents to the jurisdiction of such courts and personal
service with respect thereto. The Company hereby waives all right to trial by jury in any
Proceeding (whether based upon contract, tort or otherwise) in any way arising out of or relating
to this Agreement. The Company agrees that a final and no-longer-appealable judgment in any such
Proceeding brought in any such court shall be conclusive and binding upon the Company and may be
enforced in any other courts in the jurisdiction of which the Company is or may be subject, by suit
upon such judgment.
16. Counterparts. This Agreement may be executed in one or more counterparts and, if executed
in more than one counterpart, the executed counterparts shall each be deemed to be an original and
all such counterparts shall together constitute one and the same instrument. Delivery of an
executed counterpart by facsimile shall be effective as delivery of a manually executed counterpart
thereof.
17. Research Analyst Independence. The Company acknowledges that the Placement Agent’s
research analysts and research department are required to be independent from its investment
banking division and is subject to certain regulations and internal policies, and that such
Placement Agent’s research analysts may hold views and make statements or investment
recommendations and/or publish research reports with respect to the Company and/or the offering
that differ from the views of its investment banking division. 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 conflict of interest that may arise from the fact that the
views expressed by its independent research analysts and research department may be different from
or inconsistent with the views or advice communicated to the Company by such Placement Agent’s
investment banking division. The Company acknowledges that the Placement Agent is a full service
securities firm and as such from time to time, subject to applicable securities laws, rules and
regulations, may effect transactions for its own account or the account of its customers and hold
long or short positions in debt or equity securities of the Company; provided, however, that
nothing in this Section 17 shall relieve the Placement Agent of any responsibility or liability
that it may otherwise bear in connection with activities in violation of applicable securities
laws, rules and regulations.
18. Entire Agreement. This Agreement, together with that certain Engagement Letter dated March
11, 2008, constitutes the entire agreement of the parties to this Agreement and supersedes all
prior written or oral and all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
19. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph,
clause or provision of this Agreement shall not affect the validity or enforceability of any other
section, paragraph, clause or provision hereof.
[Signature Page Follows]
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If the foregoing is in accordance with your understanding of the agreement between the Company
and the Placement Agent, kindly indicate your acceptance in the space provided for that purpose
below.
| Very truly yours, AVANIR PHARMACEUTICALS |
||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Name: | Xxxxx X. Xxxxxx | |||
| Title: | President and Chief Executive Officer | |||
Accepted as of
the date first above written:
the date first above written:
XXXXX XXXXXXX & CO.
By: |
/s/ Xxxxx X. Xxxxxxxxx | |||
| Title: Managing Director |
Schedules and Exhibits
Schedule I:
|
Permitted Free Writing Prospectuses | |
Schedule II:
|
Investors Excluded From Agency Fee | |
Schedule III:
|
Information to be Conveyed Orally | |
Exhibit A:
|
Form of Subscription Agreement | |
Exhibit B:
|
Form of Lock-Up Agreement | |
Exhibit C:
|
List of Directors and Executive Officers Executing Lock-Up Agreements | |
Exhibit D:
|
Matters To Be Covered In The Opinion Of Counsel To The Company | |
Exhibit E:
|
Form of Written Statement of Corporate Counsel to the Company |
Schedule I
Permitted Free Writing Prospectuses
Preliminary Term Sheet dated March 24, 2008.
Schedule II
Investors Excluded From Agency Fee
ProQuest
Investments IV, L.P.
Schedule III
Information to be Conveyed Orally
Unit price, warrant exercise price, gross offering proceeds
Exhibit A
Form of Subscription Agreement
Exhibit B
Form of Lock-Up Agreement
, 2008
Xxxxx Xxxxxxx & Co.
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
U.S. Bancorp Center
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Ladies and Gentlemen:
The undersigned understands that you, as Placement Agent, propose to enter into the Placement
Agency Agreement (the “Placement Agreement”) with Avanir Pharmaceuticals, a California
corporation (the “Company”), providing for the offering (the “Offering”) of shares
(the “Shares”) of Class A common stock, no par value per share (the “Common
Stock”), and warrants to purchase shares of Common Stock (the “Warrants” and together
with the Shares, the “Securities”), of the Company. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Placement Agreement.
In consideration of the foregoing, and in order to induce you to participate in the Offering,
and for other good and valuable consideration receipt of which is hereby acknowledged, the
undersigned hereby agrees that, without your prior written consent (which consent may be withheld
in your sole discretion), the undersigned will not, during the period (the “Lock-Up
Period”) beginning on the date hereof and ending on the date 90 days after the date of the
final prospectus (including the final prospectus supplement) to be used in confirming the sale of
the Securities, (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file (or
participate in the filing of) a registration statement with the Securities and Exchange Commission
in respect of, any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (including without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and regulations of the
Securities and Exchange Commission and securities which may be issued upon exercise of a stock
option or warrant) except for a registration statement on Form S-8 relating to employee benefit
plans, (2) enter into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise, (3) make any demand for or exercise any right with respect to, the registration
of any shares of Common Stock or any security convertible into or exercisable or exchangeable for
Common Stock, or (4) publicly announce an intention to effect any transaction specific in clause
(1), (2) or (3) above.
Notwithstanding the foregoing, the restrictions set forth in clause (1) and (2) above shall
not apply to (a) transfers (i) as a bona fide gift or gifts, provided that the donee or donees
thereof agree to be bound in writing by the restrictions set forth herein, (ii) to any trust for
the direct or indirect benefit of the undersigned or the immediate family of the undersigned,
provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth
herein, and provided further that any such transfer shall not involve a disposition for value,
(iii) with your prior written consent or (iv) effected pursuant to any
exchange of “underwater” options with the Company, (b) the acquisition or exercise of any
stock option issued pursuant to the Company’s existing equity incentive plan, including any
exercise effected by the delivery of shares of Common Stock of the Company held by the undersigned,
(c) the surrender of shares of Common Stock to the Company to pay required tax withholdings due
upon the vesting of any restricted stock awards or (d) the purchase or sale of the Company’s
securities pursuant to a plan, contract or instruction that satisfies all of the requirements of
Rule 10b5-1(c)(1)(i)(B) that was in effect prior to the date hereof. For purposes of this Lock-Up
Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more
remote than first cousin. None of the restrictions set forth in this Lock-Up Agreement shall apply
to Common Stock acquired in open market transactions.
For the purpose of allowing you to comply with FINRA Rule 2711(f)(4), if (1) during the last
17 days of the Lock-Up Period, the Company releases earnings results or publicly announces other
material news or a material event relating to the Company occurs or (2) prior to the expiration of
the Lock-Up Period, the Company announces that it will release earnings results during the 16 day
period beginning on the last day of the Lock-Up Period, then in each case the Lock-Up Period will
be extended until the expiration of the 18 day period beginning on the date of release of the
earnings results or the public announcement regarding the material news or the occurrence of the
material event, as applicable, unless you waive, in writing, such extension. The undersigned
hereby acknowledges that the Company has agreed not to accelerate the vesting of any option or
warrant or the lapse of any repurchase right prior to the expiration of the Lock-Up Period. In
furtherance of the foregoing, the Company, and any duly appointed transfer agent for the
registration or transfer of the securities described herein, are hereby authorized to decline to
make any transfer of securities if such transfer would constitute a violation or breach of this
Lock-Up Agreement.
The foregoing restrictions are expressly agreed to preclude the undersigned from engaging in
any hedging or other transaction which is designed to or reasonably expected to lead to or result
in a sale or disposition of the Common Stock even if such Common Stock would be disposed of by
someone other than the undersigned. Such prohibited hedging or other transactions would include
without limitation any short sale or any purchase, sale or grant of any right (including without
limitation any put option or put equivalent position or call option or call equivalent position)
with respect to any of the Common Stock or with respect to any security that includes, relates to,
or derives any significant part of its value from such Common Stock.
The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be
conferred and any obligations of the undersigned shall be binding upon the successors, assigns,
heirs or personal representatives of the undersigned.
The undersigned also agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common
Stock except in compliance with the foregoing restrictions.
The undersigned understands that, if the Placement Agreement does not become effective by
April 15, 2008, or if the Placement Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and delivery of the Securities
to be sold thereunder, the undersigned shall be released from all obligations under this Lock-Up
Agreement.
This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of laws principles thereof.
| Very truly yours, | ||||||
| Print Name: | ||||||
| Print Title: | ||||||
| Signature: | ||||||
| |
||||||
Exhibit C
List of Directors and Executive Officers
Executing Lock-Up Agreements
Executing Lock-Up Agreements
Xxxxx X. Xxxxxx
Xxxxxxx X. Xxxx, M.D.
Xxxxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxx, Ph.D.
Xxxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, M.D
Xxxxxxx X. Xxxx, M.D.
Xxxxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxx, Ph.D.
Xxxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, M.D
Exhibit D
Matters To Be Covered In The
Opinion Of Counsel To The Company
Opinion Of Counsel To The Company
Exhibit E
Form of Written Statement of
Corporate Counsel to the Company
Corporate Counsel to the Company
