CLEVELAND BIOLABS, INC. Common Stock UNDERWRITING AGREEMENT dated July ___, 2006 Sunrise Securities Corp. Roth Capital Partners, LLC
CLEVELAND
BIOLABS, INC.
Common
Stock
dated
July ___, 2006
Sunrise
Securities Corp.
▇▇▇▇
Capital Partners, LLC
July
___,
2006
SUNRISE
SECURITIES CORP.
▇▇▇▇
CAPITAL PARTNERS, LLC
As
Representatives of the several Underwriters
c/o
Sunrise Securities Corp.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies
and Gentlemen:
Introductory.
Cleveland
BioLabs, Inc., a Delaware corporation (the “Company”), propose to sell to the
several underwriters named in Schedule I (the “Underwriters”) an aggregate of
2,000,000 shares (the “Firm Shares”) of its Common Stock, par value $0.005 per
share (the “Common Stock”), of which 1,700,000 Firm Shares are to be issued and
sold by the Company. In addition, the Company has granted to the Underwriters
an
option to purchase up to an additional 255,000 shares (the “Optional Shares”) of
Common Stock, as provided in Section 2. The Firm Shares and, if and to the
extent such option is exercised, the Optional Shares are collectively called
the
“Shares.” Sunrise Securities Corp. (“Sunrise”) and ▇▇▇▇ Capital Partners, LLC
have agreed to act as the representatives of the several Underwriters (in such
capacity, the “Representative”) in connection with the offering and sale of the
Shares (the “Offering”).
The
Company also proposes, pursuant to Section 2(g) hereof, to issue and sell to
the
Representative for its own account and the accounts of the Representative’s
Designees (as hereinafter defined)) for an aggregate price of One Hundred
Dollars ($100.00), warrants (the “Representative’s Warrants”) to purchase up to
an aggregate of 170,000 shares of Common Stock (the “Warrant Shares”) at a per
share exercise price of $____________, which purchase shall be consummated
in
accordance with the terms and conditions of the Representative’s Warrant
Agreement substantially in the form of Exhibit 4.3 to the Registration Statement
(the “Representative’s Warrant Agreement”).
The
Company hereby confirms their engagement of ▇▇▇▇ Capital Partners, LLC as,
and
▇▇▇▇ Capital Partners, LLC hereby confirms its agreement with the Company to
render services as, a “qualified independent underwriter”, within the meaning of
Section (b)(15) of Rule 2720 of the NASD, Inc. (the “NASD”) with respect to the
offering and sale of the Shares. ▇▇▇▇ Capital Partners, LLC, solely in its
capacity as the qualified independent underwriter and not otherwise, is referred
to herein as the “QIU”. The price at which the Shares will be sold to the public
shall not be higher than the maximum price recommended by the QIU.
The
terms
Representative and Underwriters shall mean either the singular or plural as
the
context requires.
The
Company hereby confirms its agreement with the Underwriters and the QIU as
follows:
SECTION
1. Representations
and Warranties of
the Company.
The
Company hereby represents, warrants and covenants to each Underwriter as
follows:
(a) The
Company has prepared and filed with the Securities and Exchange Commission
(the
“Commission”) a registration statement on Form SB-2
(File
No. 333-131918), which contains a form of prospectus to be used in connection
with the public offering and sale of the Shares. Such registration statement,
as
amended, including the financial statements, exhibits and schedules thereto,
in
the form in which it was declared effective by the Commission under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the “Securities Act”), including any required
information deemed to be a part thereof at the time of effectiveness pursuant
to
Rule 430A under the Securities Act, is called the “Registration Statement.” Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the “Rule 462(b) Registration Statement,” and from and
after the date and time of filing of the Rule 462(b) Registration Statement
the
term “Registration Statement” shall include the Rule 462(b) Registration
Statement. Any preliminary prospectus included in the Registration Statement
or
filed with the Commission pursuant to Rule 424(a) under the Securities Act
is
hereinafter called a “preliminary prospectus.” The term “Prospectus” shall mean
the final prospectus relating to the Shares that is first filed pursuant to
Rule
424(b) under the Securities Act after the date and time that this Agreement
is
executed and delivered by the parties hereto (the “Execution Time”) or, if no
filing pursuant to Rule 424(b) under the Securities Act is required, shall
mean
the form of final prospectus relating to the Shares included in the Registration
Statement at the effective date of the Registration Statement. The term
“Statutory Prospectus” shall mean any preliminary prospectus, as amended or
supplemented, relating to the Shares that is included in the Registration
Statement immediately prior to the Initial Sale Time (as defined herein). All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Statutory Prospectus,
the
Prospectus, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System (“▇▇▇▇▇”).
(b) Compliance
with Registration Requirements.
The
Registration Statement has been declared effective by the Commission under
the
Securities Act, or with respect to any Rule 462(b) Registration Statement,
will
be declared effective upon filing. The Company has complied with all requests
of
the Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement is in effect and
no
proceedings for such purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated or threatened by the
Commission.
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Each
preliminary prospectus and the Prospectus when filed complied in all material
respects with the Securities Act and, if filed by electronic transmission
pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation S-T under the
Securities Act), was identical to the copy thereof delivered to the Underwriters
for use in connection with the offer and sale of the Shares. Each of the
Registration Statement and any post-effective amendment thereto, at the time
it
became effective and at the date hereof, complied and will comply in all
material respects with the Securities Act and did not and will not contain
any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary in order to make the statements therein not
misleading. The Prospectus
(including any Prospectus wrapper),
as
amended or supplemented, as of its date, at the Closing Date (as defined herein)
and at any Subsequent Closing Date (as defined herein), did not and will not
contain any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties set forth in the two immediately preceding sentences do not
apply
to statements in or omissions from the Registration Statement or any
post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by the
Representative expressly for use therein, it being understood and agreed that
the only such information furnished by the Representative consists of the
information described as such in Section 8 hereof. There is no contract or
other
document required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which has not been described or filed as
required.
(c) Disclosure
Package.
The
term “Disclosure Package” shall mean (i) the Statutory Prospectus, if any, (ii)
the issuer free writing prospectuses as defined in Rule 433 of the Securities
Act (each, an “Issuer Free Writing Prospectus”), if any, identified in Schedule
II hereto, (iii) any other free writing prospectus that the parties hereto
shall
hereafter expressly agree to treat as part of the Disclosure Package and (iv)
a
schedule indicating the number of Shares being sold and the price at which
the
Shares will be sold to the public. As of ___:00 [a/p]m (Eastern time) on the
date of this Agreement (the “Initial Sale Time”), the Disclosure Package did not
contain any untrue statement of a material fact or 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. The preceding sentence
does not apply to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the Company by
any
Underwriter through the Representative specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the information described as such in Section
8
hereof.
(d) Company
Not Ineligible Issuer.
(i) At
the time of filing the Registration Statement and (ii) as of the date of the
execution and delivery of this Agreement (with such date being used as the
determination date for purposes of this clause (ii)), the Company was not and
is
not an Ineligible Issuer (as defined in Rule 405 of the Securities Act), without
taking account of any determination by the Commission pursuant to Rule 405
of
the Securities Act that it is not necessary that the Company be considered
an
Ineligible Issuer.
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(e) Issuer
Free Writing Prospectuses.
Each
Issuer Free Writing Prospectus, as of its issue date and at all subsequent
times
through the completion of the public offer and sale of the Shares or until
any
earlier date on which the Company notified or notifies the Representative as
described in Section 3A(d), (i) did not, does not and will not include any
information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the Prospectus, and (ii) when taken
together with the preliminary prospectus preceding or accompanying such Issuer
Free Writing Prospectus (and information omitted in reliance upon Rule 430A
of
the Securities Act), did not, does not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were
made, not misleading. The preceding sentence does not apply to statements in
or
omissions from any Issuer Free Writing Prospectus based upon and in conformity
with written information furnished to the Company by any Underwriter through
the
Representative specifically for use therein, it being understood and agreed
that
the only such information furnished by any Underwriter consists of the
information described as such in Section 8 hereof.
(f) [Intentionally
Omitted]
(g) Distribution
of Offering Material By the Company.
The
Company has not distributed and will not distribute, prior to the later of
the
last Subsequent Closing Date and the completion of the Underwriters’
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by
the
Representative or the Registration Statement.
(h) The
Underwriting Agreement
and
Representative’s Warrant Agreement. Each
of
this Agreement and the Representative’s Warrant Agreement has been duly
authorized, executed and delivered by the Company, and the Representative’s
Warrant Agreement is a valid and binding agreement of, the Company, enforceable
against the Company in accordance with its terms.
(i) Authorization
of the Shares,
Representative’s Warrants and Warrant Shares. The
Shares to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued
and
delivered by the Company to the Underwriters pursuant to this Agreement on
the
Closing Date or any Subsequent Closing Date, will be validly issued, fully
paid
and nonassessable. The issuance and sale of the Representative’s Warrants has
been duly authorized and when issued and delivered in accordance with the terms
hereof and the Representative’s Warrant Agreement, including, without
limitation, delivery against payment therefor, shall constitute the valid and
binding obligations of the Company enforceable in accordance with their terms,
except to the extent enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar laws
affecting creditors’ rights generally and to the extent that the remedy of
specific performance and injunction or other forms of equitable relief may
be
subject to equitable defenses and the discretion of the court before which
any
proceeding therefor may be brought. The issuance and sale of the Warrant Shares
has been duly authorized, and, when duly delivered against payment therefor
as
contemplated by the Representative’s Warrant Agreement, such Warrant Shares will
be validly issued, fully paid and non-assessable, and will conform to the
description thereof contained in the Registration Statement and Prospectus.
Holders of Warrant Shares issuable upon the exercise of the Representative’s
Warrants will not be subject to personal liability solely by reason of being
such holders. Neither the Representative’s Warrants nor the Warrant Shares
issuable upon exercise thereof will be subject to pre-emptive rights of any
stockholder of the Company. The Company has reserved a sufficient number of
shares of Common Stock from its authorized but unissued Common Stock for
issuance upon exercise of the Representative’s Warrants in accordance with the
provisions of the Representative’s Warrant Agreement.
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(j) No
Transfer Taxes. There
are
no transfer taxes or other similar fees or charges under federal law or the
laws
of any state, or any political subdivision thereof, required to be paid in
connection with the execution and delivery of this Agreement or the issuance
by
the Company or sale by the Company of the Shares or the Representative’s
Warrants.
(k) No
Applicable Registration or Other Similar Rights.
Except
as
described in the Disclosure Package and the Prospectus, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly
waived.
(l) No
Material Adverse Change.
Except
as
otherwise disclosed in the Disclosure Package, subsequent to the respective
dates as of which information is given in the Disclosure Package: (i) there
has been no material adverse change, or any development that could reasonably
be
expected to result in a material adverse change, in the condition, financial
or
otherwise, or in the earnings, business, properties, operations or prospects,
whether or not arising from transactions in the ordinary course of business,
of
the Company (any such change is called a “Material Adverse Change”);
(ii) the Company has not incurred any material liability or obligation,
indirect, direct or contingent, nor entered into any material transaction or
agreement; and (iii) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of capital stock or
repurchase or redemption by the Company of any class of capital
stock.
(m)
Independent Accountants.
Meaden
& ▇▇▇▇▇, Ltd., who has expressed its opinion with respect to the financial
statements (which term as used in this Agreement includes the related notes
thereto) filed with the Commission as a part of the Registration Statement
and
included in the Disclosure Package and the Prospectus, are independent
registered public accountants as required by the Securities Act.
(n) Preparation
of the Financial Statements.
The
financial statements of the Company filed with the Commission as a part of
the
Registration Statement and included in the Disclosure Package and the Prospectus
present fairly the financial position of the Company as of and at the dates
indicated and the results of their operations and cash flows for the periods
specified. Such financial statements comply as to form with the applicable
accounting requirements of the Securities Act and have been prepared in
conformity with generally accepted accounting principles as applied in the
United States
applied
on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial statements
or
supporting schedules are required to be included the Registration Statement.
The
financial data set forth in each of the Statutory Prospectus and the Prospectus
under the captions “Summary—Summary
Financial Data,” “Selected Financial Data” and “Capitalization” fairly present,
in all material respects, the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
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(o) Incorporation
and Good Standing of the Company.
The
Company has been duly incorporated and is validly existing as a corporation
in
good standing under the laws of the jurisdiction of its incorporation and has
corporate power and authority to own or lease, as the case may be, and operate
its properties and to conduct its business as described in the Disclosure
Package and to enter into and perform its obligations under this Agreement.
The
Company is duly qualified as a foreign corporation to transact business and
is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or
to be
in good standing would not, individually or in the aggregate, result in a
material adverse effect, on the condition, financial or otherwise, or on the
earnings, business, properties, operations or prospects of the Company (a
“Material Adverse Effect”).
(p) Capitalization
and Other Capital Stock Matters.
The
authorized, issued and outstanding capital stock of the Company is as set forth
in each of the Disclosure Package and the Prospectus under the caption
“Capitalization” (other than for subsequent issuances, if any, pursuant to
employee benefit plans described in the Disclosure Package and the Prospectus
or
upon exercise of outstanding options or warrants described
in the Disclosure Package and the Prospectus). The Common Stock (including
the
Shares) and the Representative’s Warrants conform in all material respects to
the descriptions thereof contained in each of the Disclosure Package and the
Prospectus. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights
to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company other than those accurately
described in the Disclosure Package. The description of the Company’s stock
option, stock bonus and other stock plans or arrangements, and the options
or
other rights granted thereunder, set forth in each of the Disclosure Package
and
the Prospectus accurately and fairly presents, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.
(q) Quotation.
The
Shares have been approved for quotation
on the
Nasdaq Capital Market, subject only to official notice of issuance.
(r) Non-Contravention
of Existing Instruments; No Further Authorizations or Approvals
Required.
The
Company is not (i) in violation or in default (or, with the giving of notice
or
lapse of time, would be in default) under (“Default”) its charter or by-laws,
(ii) in Default under any indenture, mortgage, loan or credit agreement, deed
of
trust, note, contract, franchise, lease or other agreement, obligation,
condition, covenant or instrument to which the Company is a party or by which
it
may be bound,
or to
which any of the property or assets of the Company is subject (each, an
“Existing Instrument”), or (iii) in violation of any statute, law, rule,
regulation, 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, except
with respect to clauses (ii) and (iii) only, for such Defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company’s
execution, delivery and performance of this Agreement and the Representative’s
Warrant Agreement and consummation of the Offering and the transactions
contemplated hereby (i) have been duly authorized by all necessary corporate
action and will not result in any Default under the charter or by-laws of the
Company, (ii) will not conflict with or constitute a breach of, or Default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, or require
the consent of any other party to, any Existing Instrument (except for any
Default that would not, individually or in the aggregate, have a Material
Adverse Effect), and (iii) will not result in any violation of any statute,
law,
rule, regulation, judgment, order or decree applicable to the Company of any
court, regulatory body, administrative agency, governmental body, arbitrator
or
other authority having jurisdiction over the Company or any of its properties.
No consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency is
required for the Company’s execution, delivery and performance of this Agreement
and the Representative’s Warrant Agreement and consummation of the Offering or
the transactions contemplated hereby, except such
as
have been obtained or made by the Company and are in full force and effect
under
the Securities Act, applicable state securities or blue sky laws and from the
NASD Inc. (the “NASD”).
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(s) No
Material Actions or Proceedings.
There
are
no legal or governmental actions, suits or proceedings (including, without
limitation, any actions, suits or proceedings by the Food and Drug
Administration (the “FDA”)) pending or, to the best of the Company’s knowledge,
threatened (i) against or affecting the Company, (ii) which has as the
subject thereof any officer or director of (in their capacity as such), or
property owned or leased by, the Company or (iii) relating to environmental
or
discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely
to the Company and (B) any such action, suit or proceeding, if so
determined adversely, would reasonably be expected to have a Material Adverse
Effect or adversely affect the consummation of the transactions contemplated
by
this Agreement and the Representative’s Warrant Agreement.
(t) Labor
Matters. No
labor
problem or dispute with the employees of the Company exists or, to the knowledge
of the Company, is threatened or imminent that could have a Material Adverse
Effect.
(u) Intellectual
Property Rights.
The
Company owns, possesses, licenses or has other rights to use, on reasonable
terms, all patents, patent applications, trade and service marks, trade and
service ▇▇▇▇ registrations, trade names, copyrights, licenses, inventions,
trade
secrets, technology, know-how and other intellectual property (collectively,
the
“Intellectual Property”) necessary for the conduct of the Company’s business as
now conducted or as described in each of the Disclosure Package and the
Prospectus. Except as set forth in the Disclosure Package, (a) no party has
been granted an exclusive license to use any portion of such Intellectual
Property owned by the Company; (b) to the knowledge of the Company, there
is no material infringement by third parties of any such Intellectual Property
owned by or exclusively licensed to the Company; (c) there is no pending or,
to
the knowledge of the Company, threatened action, suit, proceeding or claim
by
others challenging the Company’s rights in or to any material Intellectual
Property, and the Company is unaware of any facts that would form a reasonable
basis for any such claim; (d) there is no pending or, to the knowledge of the
Company, threatened action, suit, proceeding or claim by others challenging
the
validity or scope of any such Intellectual Property, and the Company is unaware
of any facts that would form a reasonable basis for any such claim; and (e)
there is no pending or, to the knowledge of the Company, threatened action,
suit, proceeding or claim by others that the Company’s business as now conducted
infringes or otherwise violates any patent, trademark, copyright, trade secret
or other proprietary rights of others, and the Company is unaware of any other
fact that would form a reasonable basis for any such claim.
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(v) Patent
Applications.
The
Company has duly and properly filed or caused to be filed with the U. S. Patent
and Trademark Office (the “PTO”) and applicable foreign and international patent
authorities all patent applications owned by the Company (the “Company Patent
Applications”). To the knowledge of the Company, the Company has complied with
the PTO’s duty of candor and disclosure for the Company Patent Applications and
have made no material misrepresentation in the Company Patent Applications.
To
the Company’s knowledge, the Company Patent Applications disclose patentable
subject matters. The Company has not been notified of any inventorship
challenges nor has any interference been declared or provoked nor is any
material fact known by the Company that would preclude the issuance of patents
with respect to the Company Patent Applications or would render such patents,
if
issued, invalid or unenforceable.
(w) Intellectual
Property Licenses.
The
Company has not breached or is currently in breach of any provision of any
license, contract or other agreement governing the Company’s use of Intellectual
Property owned by third parties (collectively, the “Intellectual Property
Licenses”) and no third party has alleged any such breach and the Company is
unaware of any facts that would form a reasonable basis for such a claim. To
the
Company’s knowledge, no other party to the Intellectual Property Licenses has
breached or is currently in breach of any provision of the Intellectual Property
Licenses. Each of the Intellectual Property Licenses is in full force and effect
and constitutes a valid and binding agreement between the parties thereto,
enforceable in accordance with its terms, and there has not occurred any breach
or default under any such Intellectual Property Licenses or any event that
with
the giving of notice or lapse of time would constitute a breach or default
thereunder. Except as would not have a Material Adverse Effect, the Company
has
not been or is currently involved in any disputes regarding the Intellectual
Property Licenses. To the Company’s knowledge, all patents licensed to the
Company pursuant to the Intellectual Property Licenses are valid, enforceable
and being duly maintained. To the Company’s knowledge, all patent applications
licensed to the Company pursuant to the Intellectual Property Licenses are
being
duly prosecuted.
(x) FDA
Compliance.
The
Company is in compliance in all material respects with all applicable rules
and
regulations of the FDA, and all related applicable laws, statutes, ordinances,
rules or regulations (including, without limitation, the Federal Food, Drug
and
Cosmetic Act, as amended and the Good Manufacturing Practice regulations),
the
enforcement of which, individually or in the aggregate, would not be expected
to
have a Material Adverse Effect.
(y) Proposed
FDA or PTO Rules.
To the
Company’s knowledge and except as described in the Prospectus and the Disclosure
Package, there are no rulemaking or similar proceedings before the FDA or PTO
which affect or involve the Company or any of the products that the Company
has
developed, is developing or proposes to develop or uses or proposes to use
which, if the subject of an action unfavorable to the Company, would have a
Material Adverse Effect.
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(z) All
Necessary Permits, etc. The
Company possesses such valid and current licenses, certificates, authorizations
or permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies (“Licenses”) necessary to conduct its business, and the
Company has not received any notice of proceedings relating to the revocation
or
modification of, or non-compliance with, any such License which, individually
or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
could have a Material Adverse Effect. The Company is in compliance with the
terms of the Licenses (except where the failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect). No
registrations, filings, applications, notices, transfers, consents, approvals,
audits, qualifications, waivers or other actions of any kind is required by
virtue of the execution and delivery of this Agreement, or of the consummation
of the Offering and the transactions contemplated hereby (a) to avoid the loss
of any such License or any asset, property or right pursuant to the terms
thereof, or the violation or breach of any applicable law thereto or (b) to
enable the Company to hold and enjoy the same after the Closing Date or any
Subsequent Closing Date, as the case may be, in the conduct of its business
as
conducted prior to the Closing Date (except, in each case, for such
registrations, filings, applications, notices, transfers, consents, approvals,
audits, qualifications, waivers or other actions the failure to obtain or
complete which would not, individually or in the aggregate, have a Material
Adverse Effect).
(aa) Title
to Properties.
The
Company has good and marketable title to all the properties and assets reflected
as owned in the financial statements referred to in Section 1(n)
above
(or elsewhere in the Disclosure Package), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of
such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company. The real property, improvements, equipment
and personal property held under lease by the Company are held under valid
and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the
Company.
(bb) Tax
Law Compliance.
The
Company has filed all necessary federal, state, local and foreign income and
franchise tax returns in a timely manner and has paid all taxes required to
be
paid by it and, if due and payable, any related or similar assessment, fine
or
penalty levied against it, except for any taxes, assessments, fines or penalties
as may be being contested in good faith and by appropriate proceedings or taxes,
assessments, fines or penalties that would not have, individually or in the
aggregate, a Material Adverse Effect. The Company has made appropriate
provisions in the applicable financial statements referred to in
Section 1(n) above in respect of all federal, state, local and foreign
income and franchise taxes for all current or prior periods as to which the
tax
liability of the Company has not been finally determined.
(cc) Company
Not an “Investment Company”.
The
Company is not, and after receipt of payment for the Shares and the application
of the proceeds thereof as contemplated under the caption “Use of Proceeds” in
each of the Statutory Prospectus and the Prospectus will not be, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and will conduct its business in a manner so that it will not become subject
to
the Investment Company Act.
-
9 -
(dd) Insurance.
The
Company is insured by recognized, financially sound and reputable institutions
with policies in such amounts and with such deductibles and covering such risks
as are generally deemed adequate and customary for its business including,
but
not limited to, policies covering real and personal property owned or leased
by
the Company against theft, damage, destruction, and acts of vandalism. All
policies of insurance and fidelity or surety bonds insuring the Company or
its
business, assets, employees, officers and directors are in full force and
effect; the Company is in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the Company
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; and Company has
not
been refused any insurance coverage sought or applied for. The Company has
no
reason to believe that it will not be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not have a Material Adverse
Effect.
(ee) [Intentionally
Omitted]
(ff) No
Price Stabilization or Manipulation.
The
Company has not taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares. The Company acknowledges that
the
Underwriters may engage in passive market making transactions in the Shares
on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange
Act.
(gg) Related
Party Transactions.
There
are
no business relationships or related-party transactions involving the Company
or
any other person required to be described in the Statutory Prospectus or the
Prospectus that have not been described as required.
(hh) Controls
and Procedures. The
Company has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15 under the Securities Exchange Act of 1934,
as amended (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 the
Company, particularly during the periods in which the periodic reports required
under the Exchange Act are being prepared and (ii) are effective in all material
respects to perform the functions for which they were established. The Company
has established and maintains (i) effective internal control over financial
reporting as defined in Rule 13a-15 under the Exchange Act and (ii) a system
of
internal accounting controls sufficient to provide reasonable assurance that
(A) transactions are executed in accordance with management’s general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (C) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken
with respect to any differences.
(ii) [Intentionally
Omitted]
(jj) [Intentionally
Omitted]
(kk) [Intentionally
Omitted]
-
10 -
(ll) [Intentionally
Omitted]
(mm) Compliance
with Environmental Laws.
Except
as
otherwise disclosed in the Disclosure Package (i) the Company is not in
violation of any federal, state, local or foreign law, regulation, order, permit
or other requirement relating to pollution or protection of human health or
the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases
or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, “Materials of Environmental Concern”), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
“Environmental Laws”), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required
for
the operation of the business of the Company under applicable Environmental
Laws, or noncompliance with the terms and conditions thereof, nor has the
Company received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company
is in violation of any Environmental Law, except as would not, individually
or
in the aggregate, have a Material Adverse Effect; (ii) there is no claim, action
or cause of action filed with a court or governmental authority, no
investigation with respect to which the Company has received written notice,
and
no written notice by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs, natural
resources damages, property damages, personal injuries, attorneys’ fees or
penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company now or in the past (collectively,
“Environmental Claims”), pending or, to the best of the Company’s knowledge,
threatened against the Company or any person or entity whose liability for
any
Environmental Claim the Company has retained or assumed either contractually
or
by operation of law, except as would not, individually or in the aggregate,
have
a Material Adverse Effect; (iii) to the best of the Company’s knowledge, there
are no past, present or anticipated future actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that reasonably could result in a violation of any Environmental Law,
require expenditures to be incurred pursuant to Environmental Law, or form
the
basis of a potential Environmental Claim against the Company or against any
person or entity whose liability for any Environmental Claim the Company has
retained or assumed either contractually or by operation of law, except as
would
not, individually or in the aggregate, have a Material Adverse Effect; and
(iv)
the Company is not subject to any pending or threatened proceeding under
Environmental Law to which a governmental authority is a party and which is
reasonably likely to result in monetary sanctions of $100,000 or
more.
(nn) [Intentionally
Omitted]
-
11 -
(oo) ERISA
Compliance.
None
of
the following events has occurred or exists: (i) a failure to fulfill the
obligations, if any, under the minimum funding standards of ▇▇▇▇▇▇▇ ▇▇▇ ▇▇
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and the regulations and published interpretations thereunder with
respect to a Plan (as defined below), determined without regard to any waiver
of
such obligations or extension of any amortization period; (ii) an audit or
investigation by the Internal Revenue Service, the U.S. Department of Labor,
the
Pension Benefit Guaranty Corporation or any other federal or state governmental
agency or any foreign regulatory agency with respect to the employment or
compensation of employees by any member of the Company that could have a
Material Adverse Effect; (iii) any breach of any contractual obligation, or
any
violation of law or applicable qualification standards, with respect to the
employment or compensation of employees by any member of the Company that could
have a Material Adverse Effect. None of the following events has occurred or
is
reasonably likely to occur: (i) a material increase in the aggregate amount
of
contributions required to be made to all Plans in the current fiscal year of
the
Company compared to the amount of such contributions made in the Company’s most
recently completed fiscal year; (ii) a material increase in the Company’s
“accumulated post-retirement benefit obligations” (within the meaning of
Statement of Financial Accounting Standards 106) compared to the amount of
such
obligations in the Company’s most recently completed fiscal year; (iii) any
event or condition giving rise to a liability under Title IV of ERISA that
could
have a Material Adverse Effect; or (iv) the filing of a claim by one or more
employees or former employees of the Company related to their employment that
could have a Material Adverse Effect. For purposes of this paragraph, the term
“Plan” means a plan (within the meaning of Section 3(3) of ERISA) subject to
Title IV of ERISA with respect to which any member of the Company may have
any
liability.
(pp) Brokers.
There
is
no broker, finder or other party that is entitled to receive from the Company
any brokerage or finder’s fee or other fee or commission as a result of any
transactions contemplated by this Agreement.
(qq) No
Outstanding Loans or Other Indebtedness. There
are
no outstanding loans, advances (except normal advances for business expenses
in
the ordinary course of business) or guarantees or indebtedness by the Company
to
or for the benefit of any of the officers or directors of the Company or any
of
the members of any of them, except as disclosed in the Disclosure
Package.
(rr) [Intentionally
Omitted]
(ss)
Subsidiaries. The
Company does not have any Subsidiaries (as defined in Rule 405 of the Securities
Act). The Company holds no ownership or other interest, nominal or beneficial,
direct or indirect, in any corporation, partnership, joint venture or other
business entity.
(tt) [Intentionally
Omitted]
(uu) Statistical
and Market Related Data.
Nothing
has come to the attention of the Company that has caused the Company to believe
that the statistical and market-related data included in each of the Disclosure
Package and the Prospectus is not based on or derived from sources that are
reliable and accurate in all material respects.
The
Company acknowledges that the Underwriters and for purposes of the opinions
to
be delivered pursuant to Section 5 hereof, counsel to the Company and counsel
to
the Underwriters, will rely upon the accuracy and truthfulness of the foregoing
representations and hereby consents to such reliance.
-
12 -
SECTION
2. Purchase,
Sale and Delivery of the Shares
and
the Representative’s Warrants.
(a) The
Firm Shares.
The
Company agrees to sell to the several Underwriters the Firm Shares upon the
terms herein set forth. On the basis of the representations, warranties and
agreements herein contained, and upon the terms but subject to the conditions
herein set forth, the Underwriters agree, severally and not jointly, to purchase
from the Company the respective number of Firm Shares set forth opposite their
names on Schedule I. The purchase price per Firm Share to be paid by the several
Underwriters to the Company shall be $[___] per share.
(b) The
Closing Date.
Delivery
of certificates for the Firm Shares to be purchased by the Underwriters and
payment therefor shall be made at the offices of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇, PC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other place
as may be agreed to by the Company and the Representative) at 9:00 a.m. New
York
time, on [____________],
or such
other time and date not later than 1:30 p.m. New York time,
on
[____________],
as the
Representative shall designate by notice to the Company (the time and date
of
such closing are called the “Closing Date”).
(c) The
Optional Shares; the Subsequent Closing Date.
In
addition, on the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set forth,
the Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 255,000 Optional Shares from
the Company at the purchase price per share to be paid by the Underwriters
for
the Firm Shares. The option granted hereunder may be exercised at any time
and
from time to time upon notice by the Representative to the Company, which notice
may be given at any time within 45 days from the date of this Agreement. Such
notice shall set forth (i) the aggregate number of Optional Shares as to which
the Underwriters are exercising the option, (ii) the names and denominations
in
which the certificates for the Optional Shares are to be registered and (iii)
the time, date and place at which such certificates will be delivered (which
time and date may be simultaneous with, but not earlier than, the Closing Date;
and in such case the term “Closing Date” shall refer to the time and date of
delivery of certificates for the Firm Shares and the Optional Shares). Each
time
and date of delivery, if subsequent to the Closing Date, is called a “Subsequent
Closing Date” and shall be determined by the Representative and shall not be
earlier than three nor later than five full business days after delivery of
such
notice of exercise. If any Optional Shares are to be purchased, (a) each
Underwriter agrees, severally and not jointly, to purchase the number of
Optional Shares (subject to such adjustments to eliminate fractional shares
as
the Representative may determine) that bears the same proportion to the total
number of Optional Shares to be purchased as the number of Firm Shares set
forth
on Schedule
I
opposite
the name of such Underwriter bears to the total number of Firm Shares and (b)
the Company agrees to sell the number of Optional Shares as set forth in the
paragraph “Introductory” of this Agreement.
(d) Public
Offering of the Shares.
The
Representative hereby advises the Company that the Underwriters intend to offer
for sale to the public, as described in the Prospectus, their respective
portions of the Shares as soon after this Agreement has been executed and the
Registration Statement has been declared effective as the Representative, in
its
sole judgment, has determined is advisable and practicable.
-
13 -
(e) Payment
for the Shares.
Payment
for the Shares to be sold by the Company shall be made at the Closing Date
(and,
if applicable, on any Subsequent Closing Date) by wire transfer of immediately
available funds to the order of the Company.
It
is
understood that the Representative has been authorized, for its own account
and
the accounts of the several Underwriters, to accept delivery of and receipt
for,
and make payment of the purchase price for, the Firm Shares and any Optional
Shares the Underwriters have agreed to purchase. Each of Sunrise Securities
Corp. and ▇▇▇▇ Capital Partners, LLC, individually and not as the Representative
of the Underwriters, may, but shall not be obligated to (subject to Section
10
hereof), make payment for any Shares to be purchased by any Underwriter whose
funds shall not have been received by the Representative by the Closing Date
or
any Subsequent Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any
of
its obligations under this Agreement.
(f) Delivery
of the Shares.
Delivery
of the Firm Shares and the Optional Shares shall be made through the facilities
of The Depository Trust Company unless the Representative shall otherwise
instruct. Time shall be of the essence, and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriters.
(g) Delivery
of the Representative’s Warrants.
On the
First Closing Date, the Company will issue and sell the Representative’s
Warrants (in the form of, and in accordance with, the provisions of the form
of
Representative’s Warrant substantially in the form filed as Exhibit 4.3 to the
Registration Statement) to the Representative and/or to its designees (limited
to officers and partners of the Underwriters, members of the selling group
and/or their officers or partners, collectively, “Representative’s Designees”),
as set forth in instructions by the Representative to the Company, pursuant
to
the Representative’s Warrant Agreement that shall be executed and delivered by
the Company and the Representative on the First Closing Date. The aggregate
purchase price for the Representative’s Warrants is One Hundred Dollars
($100.00). The Representative’s Warrants and the Warrant Shares issuable upon
exercise thereof will be restricted from sale, transfer, assignment or
hypothecation pursuant to Corporate Financing Rule 2710, except to the
Representative’s Designees who agree in writing not to further transfer any
Representative’s Warrants or Warrant Shares during such period, unless otherwise
permitted by Rule 2710. Payment for the Representative’s Warrants will be made
to the Company by check or checks payable to its order on the First Closing
Date
against delivery of the certificates representing the Representative’s Warrants
in accordance with the terms and conditions of the Representative’s Warrant
Agreement. The certificates representing the Representative’s Warrants will be
in such denominations and such names as the Representative may request prior
to
the First Closing Date.
(h) Delivery
of Prospectus to the Underwriters.
Not
later
than 10:00 a.m. on the second business day following the date the Shares are
first released by the Underwriters for sale to the public, the Company shall
deliver or cause to be delivered, copies of the Prospectus in such quantities
and at such places as the Representative shall reasonably request.
-
14 -
SECTION
3. Covenants.
A. Covenants
of the Company.
The
Company covenants and agrees with each Underwriter as follows:
(a) Representative’s
Review of Proposed Amendments and Supplements.
During
such period beginning on the Initial Sale Time and ending on the later of the
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection with
sales by an Underwriter or dealer, including in circumstances where such
requirement may be satisfied pursuant to Rule 172 (the “Prospectus Delivery
Period”), prior to amending or supplementing the Registration Statement, the
Disclosure Package or the Prospectus,
the
Company shall furnish to the Representative for review a copy of each such
proposed amendment or supplement, and the Company shall not file or use any
such
proposed amendment or supplement to which the Representative reasonably
objects.
(b) Securities
Act Compliance.
After
the
date of this Agreement, the Company shall promptly advise the Representative
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 Statement
or
any amendment or supplement to any preliminary prospectus or the Prospectus,
(iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. The Company shall use its best efforts to prevent the issuance
of
any such stop order or suspension of such use. If the Commission shall enter
any
such stop order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. Additionally, the Company
agrees that it shall comply with the provisions of Rules 424(b) and 430A, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) Exchange
Act Compliance. During
the Prospectus Delivery Period, the Company will file all documents required
to
be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange
Act in the manner and within the time periods required by the Exchange
Act.
-
15 -
(d) Amendments
and Supplements to the Prospectus and Other Securities Act
Matters.
If,
during the Prospectus Delivery Period, any event or development shall occur
or
condition exist as a result of which the Disclosure Package or the Prospectus
as
then supplemented would include any untrue statement of a material fact or
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, or
if
it shall be necessary to amend or supplement the Disclosure Package or the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Disclosure Package or the Prospectus is delivered to
a
purchaser, not misleading, or if in the opinion of the Representative or counsel
for the Underwriters it is otherwise necessary to amend or supplement the
Disclosure Package or the Prospectus in order to comply with law, the Company
agrees to (i) notify the Representative of any such event or condition and
(ii)
promptly prepare (subject to Sections 3A(a) and 3A(e) hereof), file with
the Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Disclosure Package or the Prospectus,
necessary in order to make the statements in the Disclosure Package or the
Prospectus as so amended or supplemented, in the light of the circumstances
when
the Disclosure Package or the Prospectus is delivered to a purchaser, not
misleading or so that the Disclosure Package or the Prospectus, as amended
or
supplemented, will comply with law. If
at any
time following the 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 Statement or any other registration statement relating to the
Shares 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 under which they were
made
or prevailing at the time such event or development occurs or condition exists,
not misleading, the Company will promptly notify the Representative and will
promptly amend or supplement such Issuer Free Writing Prospectus to eliminate
or
correct such conflict, untrue statement or omission.
(e) Permitted
Free Writing Prospectuses.
The
Company represents that it has not made, and agrees that, unless it obtains
the
prior written consent of the Representative, it will not make any offer relating
to the Shares that would constitute an Issuer Free Writing Prospectus or that
would otherwise constitute a “free writing prospectus” (as defined in Rule 405
of the Securities Act) required to be filed by the Company with the Commission
or retained by the Company under Rule 433 of the Securities Act; provided that
the prior written consent of the Representative hereto shall be deemed to have
been given in respect of the Issuer Free Writing Prospectuses included in
Schedule II hereto. Any such free writing prospectus consented to by the
Representative is hereinafter referred to as a “Permitted Free Writing
Prospectus”. The Company agrees that (i) it has treated and will treat, as the
case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, and (ii) has complied and will comply, as the case may be, with
the
requirements of Rules 164 and 433 of the Securities Act applicable to any
Permitted Free Writing Prospectus, including in respect of timely filing with
the Commission, legending and record keeping.
(f) Copies
of any Amendments and Supplements to the Prospectus.
The
Company shall furnish the Representative, without charge, during the Prospectus
Delivery Period, as many copies of each preliminary prospectus, the Disclosure
Package, the Prospectus and any amendments and supplements thereto as the
Representative may reasonably request.
(g) Copies
of the Registration Statement and the Prospectus. The
Company shall furnish to the Representative and counsel for the Underwriters
up
to five (5) signed copies of the Registration Statement (including exhibits
thereto) and, during the Prospectus Delivery Period, as many copies of each
preliminary prospectus and the Prospectus and any supplement thereto as the
Representative may reasonably request.
-
16 -
(h) Blue
Sky Compliance.
The
Company shall cooperate with the Representative and counsel for the Underwriters
to qualify or register the Shares for sale under (or obtain exemptions from
the
application of) the state securities or blue sky laws or Canadian provincial
securities laws or
other
foreign laws,
if
applicable, of
those
jurisdictions designated by the Representative, shall comply with such laws
and
shall continue such qualifications, registrations and exemptions in effect
so
long as required for the distribution of the Shares. The Company shall not
be
required to qualify as a foreign corporation or to take any action that would
subject it to general service of process in any such jurisdiction where it
is
not presently qualified or where it would be subject to taxation as a foreign
corporation, other than those arising out of the offering or sale of the Shares
in any jurisdiction where it is not now so subject. The Company will advise
the
Representative promptly of the suspension of the qualification or registration
of (or any such exemption relating to) the Shares 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.
(i) Use
of Proceeds.
The
Company shall apply the net proceeds from the sale of the Shares sold by it
in
the manner described under the caption “Use of Proceeds” in each of the
Disclosure Package and the Prospectus.
(j) Transfer
Agent.
The
Company shall engage and maintain, at its expense, a registrar and transfer
agent for the Common Stock.
(k) Earnings
Statement.
As
soon
as practicable, the Company shall make generally available to its security
holders and to the Representative an earnings statement (which need not be
audited) covering the twelve-month period ending September
30, 2007 that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 under the Securities Act.
(l) Periodic
Reporting Obligations.
During
the Prospectus Delivery Period the Company shall file, on a timely basis, with
the Commission and the Nasdaq Capital Market all reports and documents required
to be filed under the Exchange Act. Additionally, the Company shall report
the
use of proceeds from the issuance of the Shares as may be required under Rule
463 under the Securities Act.
(m)
Company to Provide Interim Financial Statements. Prior
to
the Closing Date, the Company will furnish the Underwriters, as soon as they
have been prepared by or are available to the Company, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the
Registration Statement and the Prospectus.
(n) Quotation.
The
Company will use its reasonable best efforts to quote, subject to notice of
issuance, the Shares on the Nasdaq Capital Market.
-
17 -
(o) Agreement
Not to Offer or Sell Additional Shares. During
the period commencing on the date hereof and ending on the 180th day following
the date of the Prospectus, the Company will not, without the prior written
consent of Sunrise (which consent may be withheld at the sole discretion of
Sunrise), directly or indirectly, sell, offer, contract or grant any option
to
sell, pledge, transfer or establish an open “put equivalent position” or
liquidate or decrease a “call equivalent position” within the meaning of Rule
16a-1 under the Exchange Act, or otherwise dispose of or transfer (or
enter
into any transaction which is designed to, or might reasonably be expected
to,
result in the disposition of), or
announce the offering of, or file any registration statement under the
Securities Act in respect of, any shares of Common Stock, options or warrants
to
acquire shares of the Common Stock or securities exchangeable or exercisable
for
or convertible into shares of Common Stock (other than as contemplated by this
Agreement with respect to the Shares); provided, however, that the Company
may
issue shares of its Common Stock or options to purchase its Common Stock, or
Common Stock upon exercise of options, pursuant to any stock option, stock
bonus
or other stock plan or arrangement described in the Prospectus. Notwithstanding
the foregoing, if (x) during the last 17 days of the 180-day restricted period
the Company issues an earnings release or material news or a material event
relating to the Company occurs, or (y) prior to the expiration of the 180-day
restricted period, the Company announces that it will release earnings results
during the 16-day period beginning on the last day of the 180-day period, the
restrictions imposed in this clause shall continue to apply until the expiration
of the 18-day period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. The
Company will provide the Representative and any co-managers and each individual
subject to the restricted period pursuant to the lockup letters described in
Section 5(m) with prior notice of any such announcement that gives rise to
an
extension of the restricted period.
(p) Compliance
with ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The
Company shall comply with all applicable securities and other laws, rules and
regulations, including, without limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and use
its
best efforts to cause the Company’s directors and officers, in their capacities
as such, to comply with such laws, rules and regulations, including, without
limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(q) Future
Reports to Stockholders. The
Company will furnish to its stockholders as soon as practicable after the end
of
each fiscal year an annual report (including a balance sheet and statements
of
income, stockholders’ equity and cash flows of the Company certified by
independent registered public accountants) and, as soon as practicable after
the
end of each of the first three quarters of each fiscal year (beginning with
the
fiscal quarter ending after the effective date of the Registration Statement),
make available to its stockholders consolidated summary financial information
of
the Company for such quarter in reasonable detail.
(r) Future
Reports to the Representative.
During
the period of three years hereafter the Company will furnish to the
Representative at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇;
Attention: ▇▇▇▇▇▇
Low:
(i) as
soon as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, stockholders’ equity and
cash flows for the year then ended and the opinion thereon of the Company’s
independent registered public or certified public accountants; (ii) as soon
as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form
8-K
or other report filed by the Company with the Commission, the NASD or any
securities exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its capital stock,
in each case only to the extent such documents, reports and communications
are
not publicly available.
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18 -
(s) Investment
Limitation.
The
Company shall not invest, or otherwise use the proceeds received by the Company
from its sale of the Shares in such a manner as would require the Company to
register as an investment company under the Investment Company Act.
(t) No
Manipulation of Price.
The
Company will not take, directly or indirectly, any action designed to cause
or
result in, or that has constituted or might reasonably be expected to
constitute, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any securities of the Company to facilitate the
sale or resale of the Shares.
(u) Existing
Lock-Up Agreement.
The
Company will enforce all existing agreements between the Company and any of
its
security holders that prohibit the sale, transfer, assignment, pledge or
hypothecation of any of the Company’s securities in connection with the
Company’s initial public offering. In addition, the Company will direct the
transfer agent to place stop transfer restrictions upon any such securities
of
the Company that are bound by such existing “lock-up” agreements for the
duration of the periods contemplated in such agreements.
The
Representative, on behalf of the several Underwriters, may, in its sole
discretion, waive in writing the performance by the Company of any one or more
of the foregoing covenants or extend the time for their performance.
B. Covenant
of the Underwriters.
Each
Underwriter agrees that, unless it obtains the prior written consent of the
Company, it will not make any offer relating to the Shares that would constitute
an Issuer Free Writing Prospectus or that would otherwise (without taking into
account any approval, authorization, use or reference to such Free Writing
Prospectus by the Company) constitute a Free Writing Prospectus required to
be
filed by the Company with the Commission or retained by the Company under Rule
433 of the Securities Act; provided that the prior written consent of the
Company hereto shall be deemed to have been given in respect of any Free Writing
Prospectuses included in Schedule II hereto. Any such Free Writing Prospectus
consented to by the Company is included in the definition of Permitted Free
Writing Prospectus and will be treated by the Company as an Issuer Free Writing
Prospectus.
SECTION
4. Payment
of Expenses.
The
Company agrees to pay all costs, fees and expenses incurred in connection with
the performance of its obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all expenses
incident to the issuance and delivery of the Shares (including all printing
and
engraving costs), (ii) all fees and expenses of the registrar and transfer
agent
of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes
in connection with the issuance and sale of the Shares by the Company to the
Underwriters, (iv) all fees and expenses of the Company’s counsel, independent
registered public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each Issuer Free Writing Prospectus, each preliminary prospectus
and
the Prospectus, and all amendments and supplements thereto, and this Agreement,
(vi) all filing fees, attorneys’ fees and expenses incurred by the Company or
the Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Shares for offer and sale under the state securities or blue sky laws or the
provincial securities laws of Canada, and, if requested by the Representative,
preparing and printing a “Blue Sky Survey” or memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (vii) the filing fees incident to, and the fees and expenses of
counsel for the Underwriters in connection with, the NASD’s review and approval
of the Underwriters’ participation in the offering and distribution of the
Shares,
(viii)
the fees and expenses associated with quotation
of the
Common Stock on the Nasdaq
Capital Market,
(ix)
all transportation and other expenses incurred in connection with presentations
to prospective purchasers of the Shares, and (x) all other fees, costs and
expenses referred to in Item 13 of Part II of the Registration
Statement.
Except
as
provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
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19 -
In
addition to the Company’s responsibility for payment of the foregoing expenses,
the Company shall pay to the Representative a non-accountable expense allowance
(the “Non-Accountable Expense Allowance”) equal to three percent (3%) of the
gross proceeds of the offering of the Firm Shares. The Representative hereby
acknowledges prior receipt from the Company of Seventy-Five Thousand Dollars
($75,000), which amount shall be applied to the Non-Accountable Expense
Allowance due when, and if, such offering is closed. The balance of the
Non-Accountable Expense Allowance due shall be paid at the First Closing Date
and any Second Closing Date, as applicable. Notwithstanding the foregoing,
in
the event the offering is terminated, the Representative will not be entitled
to
retain or receive more than an amount equal to its actual accountable
out-of-pocket expenses and shall reimburse the Company for the remainder, if
any.
SECTION
5. Conditions
of the Obligations of the Underwriters.
The
obligations of the several Underwriters to purchase and pay for the Shares
as
provided herein on the Closing Date and, with respect to the Optional Shares,
any Subsequent Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section
1
hereof as of the date hereof and as of the Closing Date as though then made
and,
with respect to the Optional Shares, as of any Subsequent Closing Date as though
then made, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the timely performance by
the
Company of their respective covenants and other obligations hereunder, and
to
each of the following additional conditions:
(a) Accountants’
Comfort Letter.
On
the
date hereof, the Representative shall have received from Meaden & ▇▇▇▇▇,
Ltd., independent registered public accountants for the Company, a letter dated
the date hereof addressed to the Underwriters, the form of which is attached
as
Exhibit A.
(b) Compliance
with Registration Requirements; No Stop Order; No Objection from
NASD.
For
the
period from and after effectiveness of this Agreement and prior to the Closing
Date and, with respect to the Optional Shares, any Subsequent Closing
Date:
(i) the
Company shall have filed the Prospectus with the Commission (including the
information required by Rule 430A under the Securities Act) in the manner and
within the time period required by Rule 424(b) under the Securities Act; or
the
Company shall have filed a post-effective amendment to the Registration
Statement containing the information required by such Rule 430A, and such
post-effective amendment shall have become effective;
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20 -
(ii) no
stop
order suspending the effectiveness of the Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in effect
and
no proceedings for such purpose shall have been instituted or threatened by
the
Commission; and
(iii) the
NASD
shall have raised no objection to the fairness and reasonableness of the
underwriting terms and arrangements.
(c) No
Material Adverse Change.
For
the
period from and after the date of this Agreement and prior to the Closing Date
and, with respect to the Optional Shares, any Subsequent Closing
Date:
(i) in
the
judgment of the Representative there shall not have occurred any Material
Adverse Change;
and
(ii) there
shall not have been any change or decrease specified in the letter or letters
referred to in paragraph (a) of this Section 5 which is, in the sole judgment
of
the Representative, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Shares as
contemplated by the Registration Statement and the Prospectus.
(d) Opinion
of Counsel for the Company.
On
each
of the Closing Date and any Subsequent Closing Date, the Representative shall
have received the favorable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Rosenman LLP, counsel
for
the Company, dated as of such closing date, the form of which is attached as
Exhibit
B.
(e) [Intentionally
Omitted]
(f) Opinion
of Special Patent Counsel for the Company.
On each
of the Closing Date and any Subsequent Closing Date, the Representative shall
have received the opinion of Polsinelli ▇▇▇▇▇▇▇ ▇▇▇▇▇ Suelthaus, PC, special
patent counsel for the Company, dated as of such closing date, the form of
which
is attached as Exhibit C.
(g) Opinion
of Counsel for the Underwriters.
On
each
of the Closing Date and any Subsequent Closing Date, the Representative shall
have received the favorable opinion of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇, PC, counsel for the Underwriters, dated as of such closing date,
in
form
and substance satisfactory to, and addressed to, the Representative, with
respect to the issuance and sale of the Shares, the Registration Statement,
the
Prospectus (together with any supplement thereto) and other related matters
as
the Representative may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling
them
to pass upon such matters.
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21 -
(h) Officers’
Certificate.
On
each
of the Closing Date and any Subsequent Closing Date, the Representative shall
have received a written certificate executed by the Chairman of the Board,
Chief
Executive Officer or President of the Company and the Chief Financial Officer
or
Chief Accounting Officer of the Company, dated as of such closing date, to
the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus and any amendment or supplement thereto,
any Issuer Free Writing Prospectus and any amendment or supplement thereto
and
this Agreement, to the effect set forth in subsections (b) and (c)(iii) of
this Section 5, and further to the effect that:
(i) for
the
period from and after the date of this Agreement and prior to such closing
date,
there has not occurred any Material Adverse Change;
(ii) the
representations and warranties of the Company set forth in
Section 1
of this
Agreement are true and correct on and as of such closing date with the same
force and effect as though expressly made on and as of such closing
date;
and
(iii) the
Company has complied with all of the agreements hereunder and satisfied all
the
conditions on its part to be performed or satisfied hereunder at or prior to
such closing date.
(i) Bring-down
Comfort Letter.
On
each
of the Closing Date and any Subsequent Closing Date, the Representative shall
have received from Meaden & ▇▇▇▇▇, Ltd., independent registered public
accountants for the Company, a letter dated such date, in form and substance
satisfactory to the Representative, to the effect that it reaffirms the
statements made in the letter furnished by it pursuant to subsection (a) of
this
Section 5, except that the specified date referred to therein for the carrying
out of procedures shall be no more than three business days prior to the Closing
Date or Subsequent Closing Date, as the case may be.
(j) [Intentionally
Omitted]
(k) [Intentionally
Omitted]
(l) [Intentionally
Omitted]
(m)
Lock-Up Agreement from Securityholders of the Company.
On
or
prior to the date hereof, the Company shall have furnished to the Representative
an agreement in the form of Exhibit D
hereto
from each
director, officer and each beneficial owner of Common Stock (as defined and
determined according to Rule 13d-3 under the Exchange Act, except that a one
hundred eighty day period shall be used rather than the sixty day period set
forth therein),
and
such agreement shall be in full force and effect on each of the Closing Date
and
any Subsequent Closing Date.
(n) Listing
of Shares. The
Common Stock shall have been authorized for quotation on the Nasdaq Capital
Market, and satisfactory evidence of such actions shall have been provided
to
the Representative.
(o) Qualified
Independent Underwriter Letter.
The
Company and the Representative shall have received from the QIU a letter, dated
as of the Closing Date and in form and substance satisfactory to the
Representative that:
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22 -
(i) Such
QIU
constitutes a “qualified independent underwriter” within the meaning of Rule
2720(b)(15);
(ii) Such
QIU has
participated in the preparation of the Registration Statement and the Prospectus
and has exercised the usual standards of “due diligence” in respect
thereto;
(iii) Such
QIU
has undertaken the legal responsibilities and liabilities of an underwriter
under the Securities Act specifically including those inherent in Section 11
thereof; and
(iv) Such
QIU
recommends, as of the date of the execution and delivery of this Agreement,
a
maximum initial public offering price of [$_____] for each Firm
Share.
(p) Representative’s
Warrants. The
Company shall have issued the Representative’s Warrants in accordance with
Section 2(g) hereof.
(q) Additional
Documents.
On
or
before each of the Closing Date and any Subsequent Closing Date, the
Representative and counsel for the Underwriters shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Shares
as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions
or
agreements, herein contained.
If
any
condition specified in this Section 5 is not satisfied when and as required
to
be satisfied, this Agreement may be terminated by the Representative by notice
to the Company at any time on or prior to the Closing Date and, with respect
to
the Optional Shares, at any time prior to the applicable Subsequent Closing
Date, which termination shall be without liability on the part of any party
to
any other party, except that Section 4, Section 6, Section 8 and Section 9
shall
at all times be effective and shall survive such termination.
SECTION
6. Reimbursement
of Underwriters’ Expenses.
If
this
Agreement is terminated by the Representative pursuant to Section 5, Section
7,
Section 10 or Section 11, or if the sale to the Underwriters of the Shares
on the Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Representative
and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), severally, upon demand for all actual,
accountable out-of-pocket expenses that shall have been reasonably incurred
by
the Representative and the Underwriters in connection with the proposed purchase
and the offering and sale of the Shares, including, but not limited to, fees
and
disbursements of counsel, printing and duplicating expenses, travel expenses,
postage, facsimile and telephone charges; provided,
however,
in the
event such reimbursable expenses exceed $50,000 in the aggregate, any
reimbursable expenses thereafter shall be subject to the Company’s prior
approval. All such expenses paid by the Company in accordance with this Section
6 shall be credited against the Non-Accountable Expense Allowance.
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23 -
SECTION
7. Effectiveness
of this Agreement.
This
Agreement shall not become effective until the later of (i) the execution of
this Agreement by the parties hereto and (ii) notification by the Commission
to
the Company and the Representative of the effectiveness of the Registration
Statement under the Securities Act.
Prior
to
such effectiveness, this Agreement may be terminated by any party by notice
to
each of the other parties hereto, and any such termination shall be without
liability on the part of (a) the Company to any Underwriter, except that the
Company shall be obligated to reimburse the expenses of the Representative
and
the Underwriters pursuant to Sections 4 and 6 hereof or (b) of any Underwriter
to the Company.
SECTION
8. Indemnification.
(a) Indemnification
of the Underwriters
by
the Company.
The
Company agrees to indemnify and hold harmless each Underwriter, its directors,
officers, employees and agents, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, insofar as
such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon
any untrue statement or alleged untrue statement of a material fact contained
in
the Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A, Rule 430B or Rule 430C under
the Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in any Issuer Free Writing Prospectus,
any preliminary prospectus, the Statutory Prospectus or the Prospectus (or
any
amendment or supplement thereto)
[or any
prospectus wrapper material distributed in [foreign
jurisdiction]
[If
applicable],
or the
omission or alleged omission therefrom of a material fact necessary in order
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading, and to reimburse each Underwriter, its officers,
directors, employees, agents and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by the
Representative) as such expenses are reasonably incurred by such Underwriter,
or
its officers, directors, employees and agents or such controlling person in
connection with investigating, defending, settling, compromising or paying
any
such loss, claim, damage, liability, expense or action; provided, however,
that
the foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use
in
the Registration Statement, any Issuer Free Writing Prospectus, any preliminary
prospectus, the Statutory Prospectus or the Prospectus (or any amendment or
supplement thereto). The indemnity agreement set forth in this Section 8(a)
shall be in addition to any liabilities that the Company may otherwise
have.
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24 -
(b) Indemnification
by
the Underwriters.
Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers, and each person,
if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer, or controlling
person may become subject, insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of
or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Issuer Free Writing Prospectus,
any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, in each case to the extent, and only
to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any Issuer Free
Writing Prospectus, any preliminary prospectus, the Statutory Prospectus, or
the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company by the
Representative expressly for use therein; and to 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. The Company hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the Registration
Statement, any Issuer Free Writing Prospectus, any preliminary prospectus or
the
Prospectus (or any amendment or supplement thereto) are the statements set
forth
in (i) the fourth paragraph and (ii) the sixth and seventh paragraphs
immediately following the table in each case under the caption “Underwriting” in
the Prospectus. The indemnity agreement set forth in this Section 8(b) shall
be
in addition to any liabilities that each Underwriter may otherwise
have.
(c) Notifications
and Other Indemnification Procedures.
Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof; but the
failure to so notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b) or (c) above unless and to the extent it
did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from
any liability other than the indemnification obligation provided in paragraph
(a), (b) or (c) above. In
case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly notified,
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel satisfactory to such indemnified party; provided, however, if
the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that
there
may be legal defenses available to it and/or other indemnified parties that
are
different from or additional to those available to the indemnifying party,
the
indemnified party or parties shall have the right to select separate counsel
to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party’s election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (other than local counsel), reasonably approved
by the indemnifying party (or by the Representative in the case of Section
9),
representing the indemnified parties who are parties to such action) or (ii)
the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees
and
expenses of counsel shall be at the expense of the indemnifying
party.
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25 -
(d) Settlements.
The
indemnifying party under this Section 8 shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with
such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense 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 Section 8(c) hereof, 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 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at
least 30 days prior to such settlement being entered into, and (iii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. 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 action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent (i) includes an unconditional release of such indemnified party from
all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) Indemnification
of the QIU.
Without
limitation and in addition to its obligation under the other subsections of
this
Section 8, the Company agrees to indemnify and hold harmless the QIU, its
officers and employees and each person, if any, who controls the QIU within
the
meaning of the Securities Act or the Exchange Act from and against any loss,
claim, damage, liabilities or expense, as incurred, arising out of or based
upon
the QIU’s acting as a “qualified independent underwriter” (within the meaning of
Rule 2720 of the NASD’s Conduct Rules) in connection with the offering
contemplated by this Agreement, and agrees to reimburse each such indemnified
person for any legal or other expense reasonably incurred by them in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense results from the gross negligence or willful
misconduct of the QIU.
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26 -
SECTION
9. Contribution.
If
the
indemnification provided for in Section 8 is for any reason unavailable to
or
otherwise insufficient to hold harmless an indemnified party in respect of
any
losses, claims, damages, liabilities or expenses referred to therein, then
each
indemnifying party shall contribute to the aggregate amount paid or payable
by
such indemnified party, as incurred, as a result of any losses, claims, damages,
liabilities or expenses referred to therein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the
one
hand, and the Underwriters, on the other hand, from the offering of the Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which 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 Underwriters, on the other hand, in connection with the
offering of the Shares pursuant to this Agreement shall be deemed to be in
the
same respective proportions as the total net proceeds from the offering of
the
Shares pursuant to this Agreement (before deducting expenses) received by the
Company, and the total underwriting discount received by the Underwriters,
in
each case as set forth on the front cover page of the Prospectus bear to the
aggregate initial public offering price of the Shares as set forth on such
cover. The relative fault of the Company, on the one hand, and the Underwriters,
on the other hand, shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact or any such inaccurate
or
alleged inaccurate representation or warranty relates to information supplied
by
the Company, on the one hand, or the Underwriters, on the other hand, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The
Company and the Underwriters agree that it would not be just and equitable
if
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any
other method of allocation which does not take account of the equitable
considerations referred to in this Section 9.
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27 -
SECTION
10. Default
of One or More of the Several Underwriters.
If,
on
the Closing Date or a Subsequent Closing Date, as the case may be, any one
or
more of the several Underwriters shall fail or refuse to purchase Shares that
it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter or Underwriters agreed but failed
or
refused to purchase does not exceed 10% of the aggregate number of the Shares
to
be purchased on such date, the other Underwriters shall be obligated, severally,
in the proportions that the number of Firm Shares set forth opposite their
respective names on Schedule I bears to the aggregate number of Firm Shares
set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representative with the consent
of
the non-defaulting Underwriters, to purchase the Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the Closing Date or a Subsequent Closing Date, as the case may
be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
and
the aggregate number of Shares with respect to which such default occurs exceeds
10% of the aggregate number of Shares to be purchased on such date, and
arrangements satisfactory to the Representative and the Company for the purchase
of such Shares are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, Section 6, Section 8 and Section 9
shall at all times be effective and shall survive such termination. In any
such
case either the Representative or the Company shall have the right to postpone
the Closing Date or a Subsequent Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any,
to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As
used
in this Agreement, the term “Underwriter” shall be deemed to include any person
substituted for a defaulting Underwriter under this Section 10. Any action
taken
under this Section 10 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this
Agreement.
SECTION
11. Termination
of this Agreement.
Prior
to
the Closing Date this Agreement may be terminated by the Representative by
notice given to the Company if at any time (i) trading or quotation in any
of the Company’s securities shall have been suspended or limited by the
Commission or by the Nasdaq
Capital Market,
or
trading in securities generally on the New York Stock Exchange or the Nasdaq
Stock Market shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by federal or New York authorities or
a
material disruption in commercial banking or securities settlement or clearance
services in the United States has occurred;
or
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States’ or
international political, financial or economic conditions, as in the judgment
of
the Representative is material and adverse and makes it impracticable or
inadvisable to market the Shares in the manner and on the terms described in
the
Prospectus or to enforce contracts for the sale of securities. Any termination
pursuant to this Section 11 shall be without liability on the part of (a) the
Company to any Underwriter, except that the Company shall be obligated to
reimburse the expenses of the Representative and the Underwriters pursuant
to
Sections 4 and 6 hereof or (b) any Underwriter to the Company.
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28 -
SECTION
12.
No
Advisory or Fiduciary Responsibility. The
Company acknowledges and agrees that: (i) the purchase and sale of the Shares
pursuant to this Agreement, including the determination of the public offering
price of the Shares and any related discounts and commissions, is an
arm’s-length commercial transaction between the Company, on the one hand, and
the several Underwriters, on the other hand, and the Company is capable of
evaluating and understanding and understand and accept the terms, risks and
conditions of the transactions contemplated by this Agreement; (ii) in
connection with each transaction contemplated hereby and the process leading
to
such transaction each Underwriter is and has been acting solely as a principal
and is not the financial advisor, agent or fiduciary of the Company, or its
affiliates, stockholders, creditors or employees or any other party; (iii)
no
Underwriter has assumed or will assume an advisory, agency or fiduciary
responsibility in favor of the Company with respect to any of the transactions
contemplated hereby or the process leading thereto (irrespective of whether
such
Underwriter has advised or is currently advising the Company on other matters)
and no Underwriter has any obligation to the Company with respect to the
offering contemplated hereby except the obligations expressly set forth in
this
Agreement; (iv) the several Underwriters and their respective affiliates may
be
engaged in a broad range of transactions that involve interests that differ
from
those of the Company and that the several Underwriters have no obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (v) the Underwriters have not provided any legal, accounting,
regulatory or tax advice with respect to the offering contemplated hereby and
the Company has consulted its own legal, accounting, regulatory and tax advisors
to the extent deemed appropriate.
This
Agreement supersedes all prior agreements and understandings (whether written
or
oral) between the Company and the several Underwriters, or any of them, with
respect to the subject matter hereof. The Company hereby waives and releases,
to
the fullest extent permitted by law, any claims that the Company may have
against the several Underwriters with respect to any breach or alleged breach
of
agency or fiduciary duty.
SECTION
13. Representations
and Indemnities to Survive Delivery.
The
respective indemnities, representations, warranties and other statements of
the
Company, and of the several Underwriters set forth in or made pursuant to this
Agreement (i) will remain operative and in full force and effect, regardless
of
any (A) investigation, or statement as to the results thereof, made by or on
behalf of any Underwriter, the QIU, the officers or employees of any Underwriter
or the QIU, or the Company, the officers or employees of the Company, or any
person controlling the Company, as the case may be or (B) acceptance of the
Shares and payment for them hereunder and (ii) will survive delivery of and
payment for the Shares sold hereunder and any termination of this
Agreement.
SECTION
14. Notices.
All
communications hereunder shall be in writing and shall be mailed, hand delivered
or telecopied and confirmed to the parties hereto as follows:
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29 -
If
to the
Representative:
Sunrise
Securities Corp.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇
Low
▇▇▇▇
Capital Partners, LLC
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇
with
a
copy to:
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇, PC
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If
to the
Company:
Cleveland
BioLabs, Inc.
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇ Rosenman LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
Ram ▇▇▇▇▇▇▇▇▇▇▇,
Esq.
Any
party
hereto may change the address for receipt of communications by giving written
notice to the others.
SECTION
15. Successors.
This
Agreement will inure to the benefit of and be binding upon the parties hereto,
including any substitute Underwriters pursuant to Section 10 hereof, and to
the
benefit of (i) the Company, its directors, any person who controls the Company
within the meaning of the Securities Act and the Exchange Act and any officer
of
the Company, (ii) the Underwriters, the officers, directors, employees and
agents of the Underwriters, and
each
person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act,
(iii)
the QIU, the QIU’s officers, directors, employees and agents, and each person,
if any, who controls the QIU within the meaning of the Securities Act and the
Exchange Act, and (iv) the respective successors and assigns of any of the
above, all as and to the extent provided in this Agreement, and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
“successors and assigns” shall not include a purchaser of any of the Shares from
any of the several Underwriters merely because of such purchase.
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30 -
SECTION
16. Partial
Unenforceability.
The
invalidity or unenforceability of any Section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes)
as
are necessary to make it valid and enforceable.
SECTION
17. Governing
Law Provisions.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH
STATE.
SECTION
18. General
Provisions.
This
Agreement 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.
This
Agreement may be executed in two or more counterparts, each one of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein (express
or implied) may be waived unless waived in writing by each party whom the
condition is meant to benefit. The Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
Each
of
the parties hereto acknowledges that it is a sophisticated business person
who
was adequately represented by counsel during negotiations regarding the
provisions hereof, including, without limitation, the indemnification provisions
of Section 8 and the contribution provisions of Section 9, and is fully informed
regarding said provisions. Each of the parties hereto further acknowledges
that
the provisions of Sections 8 and 9 hereto fairly allocate the risks in light
of
the ability of the parties to investigate the Company, its affairs and its
business in order to assure that adequate disclosure has been made in the
Registration Statement, any preliminary prospectus and the Prospectus (and
any
amendments and supplements thereto), as required by the Securities Act and
the
Exchange Act.
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31 -
If
the
foregoing is in accordance with your understanding of our agreement, kindly
sign
and return to the Company the enclosed copies hereof, whereupon this instrument,
along with all counterparts hereof, shall become a binding agreement in
accordance with its terms.
Very
truly yours,
CLEVELAND
BIOLABS, INC.
By:
Name:
▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer & President
-
32 -
The
foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
SUNRISE
SECURITIES CORP.
Acting
as
Representative of the
several
Underwriters named in
the
attached Schedule I.
By:
Name:
▇▇▇▇▇▇ Low
Title:
President
▇▇▇▇
CAPITAL PARTNERS, LLC
Acting
as
Representative of the
several
Underwriters named in
the
attached Schedule I.
By:__________________________________
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Managing Director
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33 -
SCHEDULE
I
|
Underwriters
|
Number
of Firm Shares to be Purchased
|
|||
|
Sunrise
Securities Corp.
|
775,000
|
|||
|
▇▇▇▇
Capital Partners, LLC
|
775,000
|
|||
|
Maxim
Group LLC
|
150,000
|
|||
|
Total
|
1,700,000
|
|||
SCHEDULE
II
Schedule
of Free Writing Prospectuses Included in the Disclosure
Package